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California is Shaking — Confusion & Quake Coverage

Posted By Administration, Tuesday, July 16, 2019

There is some confusion about earthquake insurance in California. First some background.

As you know, over the Independence Day/July 4th holiday weekend Southern California experienced its first major earthquakes in 20-years.

On the 4th a 6.4 magnitude quake hit near Trona and a day later, Ridgecrest experienced a 7.1 shake. Both areas are about 150 miles North of Los Angeles. Highways have damage, natural gas lines burst and there were fires and damages to homes and other properties.

Thousands of aftershocks came after. Some of them are fairly significant. Worse. The shaking continues.

Experts say the state got off lucky. The quakes could have hit the Los Angeles area itself and caused billions in damages instead of just a few million.

It is at this point that earthquake insurance and the confusion comes into play.

The major shakes and aftershocks have gotten the attention of a public pretty much disinterested in earthquake insurance. Many are just now learning their homeowners insurance will not cover an earthquake. As a result, California Earthquake Authority CEO Glenn Pomeroy said visits to the authority’s website has jumped 10-times of normal.

On any average four-day period Pomeroy said the site will get 17,600 hits. During the four-day period after the earthquakes the CEA website had 151,000 visitors.

Pomeroy expects that number to increase.

As an aside, only 11% of Californians have earthquake insurance. In the Ridgecrest area that figure is 20%.

Pomeroy and other California officials expect the number of sales of earthquake insurance policies to rise. It is in those sales that the confusion lies.

California Insurance Commissioner Ricardo Lara says disturbing reports are coming to his department from consumers. They’re saying some insurers, and some agents and brokers are saying there is a moratorium on the sale of earthquake insurance.

At a news conference with Pomeroy, the commissioner said there is no such moratorium and he is ordering insurers, agents and brokers to sell said insurance.

“Our first major earthquakes in years have Californians asking if earthquake insurance is right for them. I am concerned about reports that some insurers and agents are telling consumers there is a moratorium, when in fact you can buy earthquake insurance today,” Lara said. “While we have Californians’ attention, insurers should not create barriers to homeowners or renters who want to protect their assets from earthquakes.”

Pomeroy said insurance is available but there is a caveat.

“CEA policies can be purchased anywhere in California, at any time, and by anyone who has a home insurance policy with one of our participating insurers,” he pointed out. “However, for new policies purchased after an event, we do not provide coverage for the next 360 hours, or 15 days, for earthquakes that are seismically related to the initial event.”

Lara and Pomeroy believe the agent, broker and insurer confusion may be because of the 15-day waiting period. Both say they’ll continue to work to keep Californians informed and prepared.

“If you do not have earthquake insurance, now is the time to look into getting it,” Lara added. “A standard homeowners’ policy will not cover earthquake damage. Without specific earthquake coverage, you are responsible for all costs to repair, rebuild or replace your home and personal property.”    

Here is the list of the insurers dominating the earthquake insurance market and where agents can go if they have clients interested in purchasing EQ insurance:

   California Earthquake Authority — 41.2% of the market

   Zurich — 8.7%

   Chubb — 5.3%

There are — however — other insurers in the state that sell earthquake insurance. These are just the major players.

Another concern now is the price of earthquake insurance. Currently, somewhere around 250,000 Californians have made an EQ insurance purchase. They’re now likely to see a price hike that could double or even triple.

How much the price goes up will depend — of course — on location. Those living in Northern California — where experts say a larger quake is not likely to happen anytime soon — will pay around $300 a year. In the Los Angeles area and other parts of Southern California those rates will be somewhere around $2,000.

The average price statewide is $800.

Source links: The California Department of Insurance, Insurance Journal, PropertyCasualty360.com, CBS News

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