The riots which exploded across the country in late May in response to the death of George Floyd while in police custody are now estimated to be the most expensive civil disorders in U.S. history, costing insurance companies upwards of $2 billion.
But the costs may be much higher.
According to Axios, statistics compiled by Insurance Information Institute (Triple-I) and originally provided by Property Claim Services (which has been tracking insurance claims from civil unrest since 1950), the riots occurring from May 26th through June 8th of this year have racked up $1 billion to $2 billion in losses.
While media outlets have repeatedly called the summer protests “mostly peaceful”, the economic devastation and violence that has occurred speaks otherwise.
In the Minneapolis area alone, for instance, over 1,500 businesses were vandalized, looted, and destroyed within the first few days of protests. According to the Star Tribune:
“In their wake, vandals left a trail of smashed doors and windows, covered hundreds of boarded-up businesses with graffiti and set fire to nearly 150 buildings, with dozens burned to the ground. Pharmacies, groceries, liquor stores, tobacco shops and cell phone stores were ransacked, losing thousands of dollars in stolen merchandise. Many were looted repeatedly over consecutive nights.
Other property — like gas stations, restaurants and even parked cars — was set on fire, with much of it completely destroyed.”
PCS labels anything above $25 million a “catastrophe.” The riots of this past summer have been deemed a “multi-state catastrophe event,” the first of its kind, with over 20 states suffering significant losses.
The most expensive civil unrest event prior to this summer was the 1992 Rodney King riots in LA, which cost $775 million in insurance claims (or $1.42 when adjusted for inflation). Most other catastrophes occurred during the 1960s. But, unlike the riots from this past summer, those catastrophes tended to be isolated to one city.
“It’s not just happening in one city or state,” Loretta L. Worters of Triple-I told Axios, ” – it’s all over the country. And this is still happening, so the losses could be significantly more.”
“By June 4 at least 40 cities in 23 states had imposed curfews,” reported Triple-I, “and rioting resulted in at least six deaths. National Guard were called in at least 21 states and Washington, D.C.”
The Foundation for Economic Education argues that $2 billion in losses is an underestimation of the true damage.
First, insurance losses only measure those losses coming from the insured. According to FEE, 75% of U.S. businesses are under-insured, and 40% don’t have insurance at all.
Second, over 15 people have died as a result of these riots, and others have been seriously injured. Insurance doesn’t account for personal pain and suffering.
Third, “looking at mere insurance totals fails to factor in the lost sales revenue and unpaid labor” in the days, weeks, and months to come.
And finally, insurance claims don’t take into account the extensive negative impacts that riots have on entire communities for years to come. According to FEE, areas that have been victims of rioting “face higher insurance rates, lower property values, higher prices, reduced tax revenue, and decreased economic opportunity.”
In other words, while activists are smashing windows in the name of “justice”, they are creating a worse environment for people of all ages, races, and economic status.
In the aftermath of the Rodney King riots, for instance, LA suffered a $4 billion decrease in economic activity, and a reduction in their tax revenue by $125 million.
Or, following the 1960s civil rights era, cities that experienced rioting faced “negative, persistent, and economically significant effects of riots on the value of black-owned housing” and “a 10 percent decline in the total value of black-owned property in cities.”
This isn’t to mention the fact that minority businesses have been looted, set ablaze, and vandalized in the midst of these protests for racial equality and justice.
The historic $2 billion that has been racked up so far as a direct result of riots may not threaten the integrity of the insurance industry, but it does threaten our small business owners, the health of our communities, and the well-being of our nation as a whole.