Fewer than one in 10 Americans will be receiving insurance payouts in the event of a major earthquake, according to a 2016 report from
Swiss Re. More than 90% of the country chooses to go uninsured for this major risk, even in high frequency areas like Oklahoma or high severity ones like California.
But new technology attempting to forecast seismic tremors could be key in addressing at least some of the reasons behind this underinsurance.
Seismologists have repeatedly said they cannot predict when earthquakes will strike, and the art of quake forecasting remains controversial. But, experts in the field also know that 50% of all large quakes are preceded by smaller ones – and that makes the muddled science slightly more precise.
It’s also giving rise to increased discussion of quake risk on social media, the
LA Times reported last week. The Salton Sea quake swarm – a series of more than 200 earthquakes in quick succession along the San Andreas fault – increased the chances of a 7.0 or greater quake along the fault line from one in 6,000 in any given week to as much as one in 100 during that particular week.
Like last year’s
New Yorker article detailing the effects of a major earthquake on Washington state, the Salton Sea quake swarm struck fear into the hearts of many and prompted a social media frenzy of sharing information on the risk.
And while insurance companies don’t use the information in modeling quake risk – “It’s too much like gambling,” says Swiss Re Chief Property Underwriter Monica Ningen – it can serve to educate the public on just what they’re letting go uninsured.
“From a human standpoint, the increased amount of activity in California makes people pay attention just a little bit more,” Ningen told
Insurance Business America. “An uptick into people looking into insurance is always a good thing as generally, they’re simply not aware of the risk.”
Ningen said that terminology like “a one in 100-year event” can be confusing for property owners, who may interpret it to mean a quake will not happen in their lifetime when, in fact, it could strike as soon as the next year or even earlier. Coverage on events like the Salton Sea quake swarm does much to dispel that.
Unfortunately, there is also some evidence to suggest that risk awareness alone will not lead to higher levels of coverage. After the
New Yorker article, Karl Newman, president of the Northwest Insurance Council, noted that while inquiries into quake insurance rose in Washington state, actual business did not. High premiums and even higher deductibles scared off many would-be policyholders, Newman said, and the situation is unlikely to be any different in California.
There is also a lack of options in the market, noted Joe Woods, vice president of state government relations for the Property Casualty Insurers Association.
“I think private insurance pulled back after Northridge, and is just afraid to take the risk,” Woods told
IBA. “They lost multiple years’ worth of premium in a single event. They’re pretty gun shy right now and will stay gun shy.”
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