The Threat To American Homes Not Enough People Are Talking About

Hail damage is becoming increasingly common, adding extra strain on homeowners and insurance companies.

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Almost everything related to hail has gotten bigger over Said Ahmad's 18 years in the Denver roofing business. Denver is in the most hail-prone swath of the US, which includes Colorado, Nebraska, and Wyoming.

"We are getting storms right now every other year that we used to get, like, once every 10 years," he told Business Insider.

The damages to homes have gotten worse, too. Ahmad said he's regularly worked on homes that needed not only a new roof but also siding, windows, and gutters, a project that can easily cost $60,000.

"When I first got into the business, if you had a $10,000 claim, that was considered big. Now, all of them are almost at least that," Ahmad said.

The US insurance industry is experiencing a crisis as extreme weather events increase in severity and frequency. Since 2013, the United States has recorded 178 billion-dollar disasters, five times the amount recorded in the 1980s.

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California wildfires and Florida hurricanes may grab headlines for good reason. Still, multiple experts tell Business Insider that hail is quietly becoming the biggest climate concern within the insurance industry, fueling a rise in premiums and scaled-back coverage.

"It's been eroding balance sheets for the last 10 years," Max McClure, chief insurance officer at insurance startup Steadily, which provides plans to landlords, told Business Insider.

Hail is causing a headache for insurers, leading to higher premiums

Part of the problem is that the insurance industry does not understand hail as well as other extreme weather events, McClure told BI.

With wildfires, for example, it's relatively straightforward for an insurance company to predict a home's risk by assessing the amount of brush near the house or its proximity to a high-risk hillside.

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Hail, by comparison, is more of a mystery.

Insurance companies can't predict exactly where severe hail storms will fall or how big the stones might be. That uncertainty, combined with the escalating cost of payouts for previous hail storms, has made some companies raise homeowners' premiums.

"They don't really understand why or how to fix it, and so uncertainty makes it worse," McClure said of insurers.

As premiums rise, coverage is shrinking, putting a squeeze on many homeowners. In the past, insurance companies would be more likely to pay for the entire replacement of a roof, no matter how old it was. Now, it's more common for them to only cover the cash value of the roof or limit their coverage based on the roof's age, McClure said.

He added that homeowners in these areas should be scrutinizing their plans more than ever. "Make sure they understand how their roof is covered," McClure said.

Climate change is likely to make hailstones bigger

Climate change isn't helping the matter because it creates bigger hailstones, said Victor Gensini, an environmental professor at Northern Illinois University.

Hail forms when warm air on the ground during a storm creates an updraft, which pushes raindrops towards colder parts of the atmosphere, freezing them, and creating hailstones. Warmer air, therefore, leads to bigger stones.

"That warm, humid air basically serves as gasoline," Gensini said.

In recent years, storms in Alabama, Colorado, and Texas set new records for the largest hailstones in each state's history, all over 4 inches. A study Gensini and his colleagues published last year predicted a 15% to 75% increase in large hailstones — which measure around 1.5 inches — in the coming years.

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The insurance industry's concern over the increasing intensity of storms has prompted a breakthrough moment for hail.

Gensini plans to unveil a center dedicated to studying hail by August. Anchored at Northern Illinois University and the University of Wisconsin-Madison, it would bring together 25 researchers and professors to form a "Shark Tank" for hail, with academics across environmental studies, statistics, computer sciences, and actuarial sciences pitching research projects to the insurance industry.

He said 12 insurance and reinsurance companies have signed up to support the center with funding.

The plan is that the participating researchers will embark on one-year projects to help the industry model worst-case scenarios for hail and correctly price premiums.

"It's up to us to try to figure out the answer," Gensini said.