The Ottawa-Quebec border experienced a minor, Magnitude-4.6 earthquake on May 17, but that wasn’t enough to get brokers’ clients to start buying up earthquake insurance.
Some brokers said they received some more inquiries about earthquake coverage after the quake, which was felt in Montreal, Toronto and Waterloo. But a lot of inquiries revealed that people were not covered for earthquakes as part of their standard homeowners’ policies (it is available separately from the standard homeowner’s policy).
For the very few consumers who asked their brokers to cost out the policy, the price point for earthquake coverage in the Ottawa area is simply too high, brokers say.
“It’s definitely pricing,” Chris Armstrong of Rhodes & Williams replied, when asked to identify the major impediment to brokers selling earthquake insurance in Ottawa. “When you talk to a consumer on coverage that is going to add 50% to 75% to their existing premium, it really gets them to pause and take a second look.”
Brokers estimated that consumers in the Ottawa area can expect to pay anywhere between $200 and $400 or more for earthquake cover. That may seem like peanuts compared to prices such as $2,000 to $3,000 for earthquake cover in B.C., but brokers in the Ottawa area say the relatively benign history of recorded earthquakes in the Ottawa-Montreal corridor has most consumers taking a pass on the coverage.
The Ottawa area has seen approximately three noteworthy – if minor—earthquakes over the past 10 years, the largest being a Magnitude-5.0 quake in 2010.
Research published in November 2010 by Lloyd’s of London and the Institute for Catastrophic Loss Reduction (ICLR), a research institute established by Canada’s property and casualty insurers, indicated “a 5% to 15% chance that a damaging earthquake will strike in southern Quebec or eastern Ontario in the next 50 years. This region includes Montreal, Ottawa and Quebec City.” This compares to a 30% chance that a major earthquake might hit the Vancouver area.
Looking at these odds, many consumers simply choose to play the percentages.
“At [a premium of] $200 or $300 a year, if you’ve bought [earthquake insurance] for 25 years and you haven’t made a claim, you might not be making a claim in your lifetime,” said Lee Mandigo of Carr & Company Insurance Brokers. “I’m not a seismologist, so I can’t say. I can only go by what the history has been, and people just don’t seem terribly interested in it. They ask about flood more, because they’ve had that happen to them.”
And if pricing isn’t an issue, high deductibles definitely are, brokers add.
“When we talk about deductibles, some consider them high,” Armstrong said. “Some are opting out to self-insure. But it’s a scary situation, because when they choose that route, my sense is they don’t have a full appreciation of the kind of damage an earthquake can do.
“So your deductible is $10,000 or $15,000, in comparison to no longer having a home. It’s just a misunderstanding. I think brokers might be at fault for not taking the time to break it down.”
Most brokers say it’s a tough battle to sell earthquake insurance in eastern Ontario and Quebec, even when brokers are proactive.
“We have included on our renewal letters a blurb about earthquake coverage, because most people don’t realize that it’s not included in their regular package and that it’s extra,” said Jenny DesRoches of Tanner Insurance Services Ltd. “But no matter how proactive you are, you always tend to get the reactive side of people, which is to act after something has happened.”
