The worst year for tornadoes

If you look at the history books, May has always been the worst month for tornadoes. But the first four months of the year have already broken most records - not something we should be proud of. Just in case you've been living in a cave, cut off from the world since Thanksgiving, we've just had one of the worst winters and now tornado seasons since records began. There were more tornadoes in April than in any other month in US history with the third worst death count - let's pray we never see a repeat of April, 1932 when 747 people died. The modern warning systems do work. When you put the wind alongside the rain and the wildfires, we see the mid-West and South in chaos. There's massive flooding because the rainfall has been above average and then some. Except the areas affected by drought have also been expanding. As a result, 1.8 millions acres have been burned to a crisp (including quite a few homes). Why is this happening?

The science guys who study our weather are easy with explanations. It seems there's been a lot of low pressure over the West while more warm, wet air is coming up from the South and on to the Plains. The result is likely to be more violent storms across the Plains States. So it's not over for us yet as the jet-stream is still pulling cold air across the top. The Storm Prediction Center has red flags all over the map.

Yet if you ask the insurance industry whether the rates will be going up, they all shake their heads. So how are rates set? Let's look at the current problems. It's going to take months for everyone to get their claims in. Remember we still have some states partly underwater as the Mississippi and other rivers overflow the levies and flood defenses. Some 3 million acres of farmland are affected in Louisiana alone, threatening food supplies across America. Commercial buildings are damaged. Stock has been lost. It will be the end of the year before we begin to have a complete picture of the losses caused the first four months of 2011. Only then can we measure whether the current level of funding is adequate. Ah, but you're pointing to the rate rises already announced for this year and you'd be right. In some states, Insurance Commissioners are agreeing to rate hikes of more than 20%. Except these reflect the level of claims made two or three years ago.

is not something that reacts quickly to current events. Think about news coming in about snow melting more quickly than expected on a nearby mountain range, yet nothing seems to happen to river levels. At least not for a few weeks. Then the floods come. So the actuaries and accountants take their time to crunch the numbers, slowly watching how the inflow of premium revenue matches the number of successful claims. It's not in anyone's interests to make knee-jerk changes to the premium rates. The home insurance industry sells itself by providing a quality service at reasonably stable and predictable prices. Obviously, it doesn't always work out in practice. But premium rates only rise when unavoidable.