Power Outages Cause Billions in Hidden Losses That Insurance Models Miss

Major winter storms routinely leave hundreds of thousands of homes and businesses without electricity, yet the true economic toll of those outages may be far larger than what insurers and regulators currently measure. A new analysis from RMI argues that traditional loss-estimation methods focus too heavily on physical damage while overlooking compounding outage-driven losses that expand well beyond the blackout footprint.

For claims professionals, the findings mirror post-event realities. Food and medicine spoilage, prolonged business interruption, transportation shutdowns, and delayed recoveries often escalate after power remains out for hours or days. These impacts rarely fit neatly into standard catastrophe models, which frequently rely on metrics like the Value of Lost Load that underestimate duration-based and system-wide effects.

The report highlights that after Hurricanes Sandy and Harvey, business interruption losses were measured at eight to nine times higher than physical property damage. Even conservative assumptions suggest tens of billions of dollars in annual US disaster losses are missing from official tallies. That gap has direct implications for claim reserves, sublimits, extra expense disputes, and how outage-related losses are anticipated before storms strike.

Researchers point to refined tools developed by Lawrence Berkeley National Laboratory and the University of Southern California that better account for outage duration, customer class, and economy-wide disruptions. However, they stress that insurers and utilities still need forward-looking data that reflects climate-driven grid stress rather than relying on backward-looking surveys.

For adjusters, the takeaway is practical. As outages become longer and more frequent, claim severity increasingly hinges on power restoration timelines, access to backup generation, and regional infrastructure resilience. Better outage valuation may ultimately support more accurate pricing, clearer coverage expectations, and stronger justification for mitigation investments that reduce future claim volatility.