Biggest Insurance Claim Payouts

Over the years, insurance providers have paid out massive sums of money to insurance-holders for the likes of loss of life, significant building damage, company collapse and natural disasters amongst more, but the like of payments in two, three or four figures are nothing in comparison to some of the biggest. We decided to delve into the world of claims and find out what truly has been the biggest insurance claim payouts of all time. You’d be surprised the end sum paid out for some of these claims.

Note: $ = USD

10. China Earthquake 2008 – $1 billion

Back on 12th May 2008, China was hit by an 8.0 magnitude earthquake that killed over 69,000 people and injured another 374,175, destroying over 80% of all buildings in the zone of the earthquake. The damage was so severe that $20 billion in damage was caused, but only $1 billion was paid out through insurance claims due to the lack of citizens with insurance plans set in place. Many without such a plan were left looking towards the government for assistance, with 4.8 million people left homeless and predictions anywhere up to 11 million.

9. Hurricane Ike – $20.5 billion

Hurricane Ike hit America in September 2008, grinding North America’s infrastructure to a halt and demolishing prime agriculture, buildings and causing flooding across the lands of Cuba, Texas and Haiti amongst other areas. Ike cause 195 deaths either indirectly or directly; 113 of which were in the United States. The damage caused saw 131,000 insurance claims filed in the first few days of the storm in Ohio alone, with an estimate of over $553 million to have been paid out to that state. In Texas, 44,000 flood and 800,000 windstorm claims were submitted costing up to nearly $12 billion.

8. Northridge Earthquake – $20.6 billion

On January 17th 1994, an earthquake hit a Los Angeles neighbourhood in the San Fernando Valley with a magnitude of 6.7. Over 8,700 were injured and 57 were killed, with the damage being so significant it was the costliest earthquake in US history – damaging more than 40,000 structures and buildings. Altogether, around $20.6 billion was paid out with some insurance companies having to stop offering or restricting earthquake insurance within the state of California and its hotspots.

7. Hurricane Andrew – $25 billion

The year of 1992 saw a category 5 hurricane hit the US with a high wind of 175mph, severely leaving a path of damage in Louisiana, Florida and the Bahamas. Forming on August 16th, Hurricane Andrew took 65 lives and injured many more, with 930,000 Floridian policyholders losing coverage after 11 insurance companies went bankrupt in attempt to pay out the 600,000 insurance claims filed.

6. Tohoku Earthquakes & Tsunami – $35 billion

On 11th March 2011, the fourth most powerful earthquake ever to be recorded hit Japan with a magnitude of 9.0 and consequently triggered a tsunami with waves up to 40.5 metres high. Killing 15,894 people, injuring 6,152 and causing 2,562 people to be missing or unaccounted for, this shocking event was one of the most difficult to manage the aftermath of, with complete collapse of the coastal roadways, infrastructure and 129,225 buildings. Although the damage totalled around $210 billion, only $35 billion was insured and covered.

5. Hurricane Sandy – $36 billion

The 2012 Atlantic hurricane season saw Hurricane Sandy sweep in and cause damage of up to $75 billion with 233 fatalities affecting the Bahamas, Eastern Canada and most of the Eastern side of the US. Thousands of homes and surrounding infrastructure was destroyed, with many sending in claims to their insurance providers – to a sum of $36 billion. Unlike any other event, Hurricane Sandy was rife with insurance fraud claims with thousands of homeowners being denied flood insurance based upon fraudulent engineer reports. An engineer who was carrying out inspections pointed out that at least 175 of his inspections had been doctored by managers of the firm, in an attempt to reduce or deny flood claims and save the insurance providers millions in cash. Texas trial lawyer, Steve Mostyn, managed to win hundreds of millions of dollars fighting the insurance companies on behalf of the homeowners through class action racketeering lawsuits.

4. 9/11 – $40 billion

The September 11 attacks, in which saw terror across America and killed 2,996 people whilst injuring over 6,000, caused $10 billion in property and $3 trillion in total costs. $38 billion was paid out to the victims of the atrocity as compensation and many insurance providers have since removed automatic cover from terrorism from their plans.

3. The Lehman Brothers – $100 billion

The Lehman Brothers were the United States’ fourth largest investment bank behind Goldman Sachs, Morgan Stanley and Merrill Lynch before declaring bankruptcy in 2008. Payouts were rife after the bank declared bankruptcy; paying the creditors, taxpayers and those that have had money invested in the bank.

2. Hurricane Katrina, Rita & Wilma – $130 billion

Records show that 2005 Atlantic hurricane season was the most active season recorded in history, seeing storms with winds up to 185mph and a total of 28 storms altogether – with 15 hurricanes and 3,913 fatalities. The cost of the damage caused was around $158.9 billion, with approximately $130 billion paid out as insurance. $45 billion of which was paid out for damage caused by Hurricane Katrina alone.

1. 2008 Financial Crisis – $21 trillion

The 2008 financial crisis is seen as the worst financial crisis since the Great Depression, causing a global economic downturn and recession across the country. Massive bail-outs were rolled out to protect financial institutes and policies were triggered to prevent a collapse of the financial system. The financial crisis showed that many insurance providers had a lack of adequate capital holdings to back the financial commitments they were making. AIG, for example, the world’s largest insurer, nearly went bankrupt after collateralised debt obligations it had during the crisis. Other providers had to freeze paying out money after fearing that they’ll end up with not enough to cover their own obligations.

Ensure you’re covered

From some of these biggest insurance claim payouts above, you might notice that the value of the damage is in some much more significant than that paid out in the insurance claims. This can be down to various factors, but the most prominent one is that many lack of the necessary insurance to cover them under such event. The likes of a hurricane, earthquake or financial crisis isn’t something we all expect to happen and so a lot of us are left unprepared for them – this must change. Sometimes the most “out there” options we can add to our selected insurance policies might just be the one we need. This doesn’t mean we should get insurance on everything, but it does mean we should look at what disasters we could encounter depending on our place of residence.

At Ashburnham, we offer a whole host of insurance products – from landlord insurance, to land insurance and business insurance.

Be sure to explore our options.

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