Climate Change: How Extreme Weather Is Impacting Auto Claims

Climate change is no longer a distant threat. It’s here, disrupting industries worldwide, including auto insurance. For claims professionals, understanding the link between shifting weather patterns and auto claims is crucial to mitigating financial risk, refining underwriting practices, and supporting policyholders.

This blog dives into how climate change has supercharged the frequency and severity of flood, hail, and wildfire-related auto claims across the U.S. We’ll analyze trends, review data on losses, and explore the challenges these escalating events pose for the insurance industry.

The Rise of Climate-Driven Auto Claims

Extreme weather events like floods, hailstorms, and wildfires are increasing in both frequency and intensity due to climate change. For auto insurers, this has translated to a surge in weather-related claims, with vehicles increasingly caught in the path of devastation. These claims have not only become more common but also significantly more expensive to settle.

The following sections break down each type of loss and its impact on auto claims nationwide.

Floods and Auto Damages

Flooding has emerged as one of the costliest climate-related perils for auto insurers. Hurricanes, torrential rains, and overflowing rivers regularly inundate vehicles, leaving behind a trail of damage.

Frequency Trends

The data is clear: major flood events are on the rise. For instance:

• Hurricane Harvey (2017): Over 422,000 vehicles were damaged in Texas alone.

• Hurricane Ian (2022): More than 350,000 cars were potentially affected across the Southeast.

Even outside hurricanes, localized heavy rains have elevated baseline claims in flood-prone areas. These events have created an ongoing challenge for claims adjusters in high-risk regions.

Severity of Flood Claims

Modern vehicles rely heavily on electronics, which are particularly vulnerable to water damage. Once submerged, many cars are declared total losses due to the high cost of replacing electrical components. For example:

• Flooding from Hurricane Helene (2024) resulted in 138,000 vehicles declared total losses. Average payouts for these claims ranged between $20,000–$30,000.

With warming oceans fueling more frequent and severe floods, insurers are bracing for higher claim volumes and escalating payouts in the years ahead.

Hailstorms and Vehicle Repairs

Hailstorms have long been a headache for auto insurers, but recent trends suggest the problem is getting significantly worse.

Frequency Trends

The U.S. recorded nearly 7,000 major hail events in 2023, setting a new record and representing a 57% increase over the prior year. This spike in activity led to a surge in hail-related auto claims, especially in states like Texas, Colorado, and Kansas.

Hail damage now accounts for 12% of all comprehensive auto claims, up from 9% in 2020. The upward trend underscores the challenge of increasingly destructive storms.

Severity of Hail Claims

Hail doesn’t just dent vehicles; it shatters glass, chips paint, and can require extensive bodywork. Key data points include:

• Hail repair costs have risen by 15% over the last three years, reflecting both more severe damage and rising repair costs.

• Average payouts for hail claims climbed from $4,300 in 2020 to over $5,000 by 2021, with continued growth since.

These costs strain insurers, particularly in hail-prone regions where claims occur frequently. For policyholders, the rising price of coverage can also be a concern.

Wildfires and Total Losses

Wildfires, fueled by extreme heat and drought, are an increasing contributor to auto insurance losses. Historically seen as a homeowners’ insurance issue, wildfires are now firmly on the radar of auto insurers.

Frequency Trends

Devastating wildfires have become more common in the western U.S., with entire neighborhoods burned to the ground. Unfortunately, this often means the destruction of all vehicles in the affected area. For example:

• The Northern California wildfires of 2017 destroyed an estimated 4,000 vehicles in one sweep.

• Annual wildfire losses across all insurance lines rose from $84 million to over $700 million within a decade.

Severity of Wildfire Claims

Fire damage to vehicles tends to result in total losses, with payouts covering the vehicle's full cash value. Typical claim payouts range from $10,000–$20,000 per vehicle, and for newer models, the costs can go even higher.

The growing wildfire threat underscores the need for insurers to adapt quickly, particularly as more people move into fire-prone areas, increasing exposure to these events.

Rising Costs and Challenges for Auto Insurers

Over the past decade, the data has painted a clear picture of growing risks for auto insurers:

• Claim Frequency: Extreme weather events are no longer anomalies; they now occur regularly, leading to higher claims year over year.

• Claim Severity: The average cost per claim continues to climb due to more destructive events and rising repair costs.

These trends have forced insurers to reevaluate their risk models and pricing strategies:

• Rate increases for comprehensive coverage in high-risk areas have become common.

• Some insurers have limited their exposure in the most disaster-prone regions to manage risk. (No longer insuring these areas)

• New technologies, such as predictive AI modeling, are being used to improve risk assessment and pricing accuracy.

How Agents Can Support Policyholders in a Changing Climate

As weather-related auto losses rise, agents play a vital role in helping policyholders prepare and respond. Start by reviewing coverage regularly—especially in high-risk regions—to ensure clients have comprehensive coverage, rental reimbursement, and towing where appropriate. Educate customers on proactive risk reduction, like moving vehicles ahead of floods or using hail protection covers. Encourage smart preparedness before storms to minimize damage and improve claim outcomes.

When disaster strikes, agents can guide policyholders through a smoother claims experience by offering clear instructions and acting as a point of support. Help clients file quickly, document damage, and understand next steps. After the claim, assist with interpreting settlements, exploring replacement options, and adjusting coverage on new vehicles.

Agent action steps:

• Review policies for comprehensive, rental, and towing coverage

• Promote damage-prevention tips (hail covers, flood planning, etc.)

• Explain how to document losses and file promptly

• Liaise with carriers to reduce claim delays and confusion

• Support post-claim decisions and vehicle replacement planning.

Driving Resilience in an Unpredictable Climate

The relationship between climate change and auto claims is undeniable. Floods, hail, and wildfires have all become more frequent and more destructive, forcing insurers to adapt to an evolving risk environment.

For insurance professionals, understanding these trends is essential to navigating the rising tide of weather-related losses. By leveraging data, refining processes, and empowering policyholders, the industry can remain resilient in the face of unpredictable challenges.

Want to support your clientele in every claims situation? Contact us for expert assistance.