Oil-Related Materials Claims Exposure Varies Broadly Across US

Oil prices are giving claims costs a hit, and depending on the part of the country, the exposure for replacement and repair costs of roofing, synthetic flooring or vinyl siding may be considerable and vary broadly, a new report shows.

Verisk identified three “petroleum-intensive material categories” that account for the largest share of oil-related claims exposure.

The national average for a gallon of regular gas has risen nearly 37% since the war with Iran began, effectively closing the Strait of Hormuz for shipping. The war, which has contributed to the short-term performance of major players in the oil market, pushed oil to $120 per barrel at one point.

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Though prices are far off that, the price of oil and the war has affected economies around the world. Japan lowered its growth forecast for the current fiscal year to 0.9% from in January estimates, affected by rising oil prices linked to tensions in the Middle East, while in Australia it has impacted consumer prices from milk to Uber rides.

In the U.S., oil-related price fluctuations are messing with claims exposures literally all over the map.

While the report illustrates the far-reaching impact of the war, it also shows how claims costs can be affected by these big price swings and how dramatically different their effect can be regionally.

According to the report, claims costs for various materials are broadly varying, depending on what the area of the country: vinyl siding claims are most impacted across parts of the Midwest, while roofing-related costs are big in storm-prone southern states.

Wind and hail accounted for roughly half of all property claims over the past five years, making them the primary drivers of exterior losses and petroleum-linked claim costs, the report shows.

The report’s authors looked five years into the past to drill down into where the volatility lies.

“So, five years of data really is allowing us to smooth out any weather variations and really pinpoint what areas of the country are going to be more impacted when you’re looking at these key material types like roofing or vinyl siding or synthetic floor coverings like your carpets your laminates your vinyls,” said Heather Ault, principal claims consultant, Verisk Property and Restoration Solutions.

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The West Coast and New England tend to see a greater share of interior losses, increasing the price of oil’s impact of synthetic flooring costs.

Texas recorded the highest five-year replacement cost value totals for petroleum-based roofing ($6.6 billion) and synthetic flooring ($631 million), while Missouri led the nation in vinyl siding losses ($166 million), the report shows.

Most claims departments know what materials are impacted in which areas, but the report enables them to put data behind their assertions, Ault said.

“I would say really the regionality is the key take away,” she said. “Not to toot to our own horn here, but we do sit on a very unique data set. Their pricing data and everything that encompasses that — going even as deep as policyholder decision making and psychology — that’s all incorporated in our claims data. And so, if you’re a claims professional, you may look at that map and kind of heuristically know, ‘Well yeah, there’s a lot of vinyl siding in the Midwest,’ but being able to come back to our data and center it around facts and numbers and say that you may have felt this way but here’s your proof, this is really, I think, what makes this analysis really unique.”