The rare magnitude 4.8 earthquake that shook the Northeast is unlikely to be an insurance event but serves as a timely reminder of the region’s earthquake insurance protection gap.
The earthquake, which had its epicenter in Lebanon, New Jersey, struck Friday morning and was felt in surrounding states.
“I was in the kitchen and all of a sudden, the windows were shaking and then I felt the walls rumbling – I thought something in the basement blew up,” Dale Krupowicz, chief operating officer and partner, Personal Risk Management Solutions, told IBA. “It was like it was building up and up and up – at the time it seems so long, but the whole thing probably lasted maybe 10 seconds.”
The high-net-worth (HNW) insurance business’ phones have been ringing all morning and afternoon since the quake struck, Krupowicz said. Fortunately, clients have all so far reported they are safe. Soon after the earthquake hit, the HNW brokerage reached out to insureds via email to share information on earthquake insurance and what may or may not be covered.
Krupowicz estimated that just 10% of the firm’s wealthy clients on the East Coast opt to buy earthquake insurance (factoring in those in condos and co-ops, the figure is closer to 40%), compared to 60% on the West Coast. That could be set to change.
“Not a lot of people purchase it, because they don't think there's any need, but as it turns out there's a big fault line that runs in our area from where I am in Westchester County to New Jersey,” Krupowicz said. “When our office is pitching to a new client, we include an earthquake analysis – and some people don't even pay attention, but I have a feeling they might now, because everybody felt this.”
Earthquakes in the eastern US are “infrequent but not unexpected”, according to the USGS. Since 1950:
Earthquake insurance is not covered as standard under most homeowners and business insurance policies, according to the Insurance Information Institute (Triple-I). Instead, the cover is sold as an endorsement or a separate insurance policy.
Homeowners in the Northeast are among some of the least likely to have coverage. A 2020 Triple-I survey found that 21% of homeowner respondents in the region had earthquake insurance.
The percentage of homeowners who said they had earthquake coverage in response to a 2020 Triple-I survey:
Rumblings from the New Jersey quake were felt in densely populated and vulnerable New York City.
Wow! A M4.8 struck in New Jersey this morning around 10:30 am local time. Shaking was widely felt from Maine to Washington D.C. Did you feel this earthquake? Share your experience here: https://t.co/xdohQbzpcq https://t.co/ADcDLsTp8b pic.twitter.com/bAjEbSgvwc
— USGS Earthquakes (@USGS_Quakes) April 5, 2024
Many buildings in the city were built before 1995, when seismic provisions were added to the Building Code. As per the NYC Hazard Mitigation Plan, many are unreinforced brick buildings, which can collapse outwards when a high magnitude earthquake hits.
Insurers may be anticipating small claims from owners of businesses such as grocery stores, where glass bottles may have fallen from shelves, but the insurance impact is likely to limited. That’s according to Janet Ruiz, Triple-I strategic communications director. She caveated that further damage may still emerge, but generally that would take a magnitude 5.0 or more earthquake or one that hits “really close to the surface”.
Like Krupowicz, Ruiz predicted an uptick in interest in earthquake insurance cover following the event.
“Especially if it's just a rider that you put on your homeowners policy, we usually see a little bit of an uptick [following an earthquake],” Ruiz said. “[In this case] it shook hard enough for people to really pay attention to it.”
In the aftermath of the quake, the American Property Casualty Insurance Association (APCIA) urged consumers to consider whether earthquake cover may be right for them.
“Earthquakes are one of the most unpredictable natural catastrophes,” said Karen Collins, vice president of property and environmental for APCIA. “Even in the most earthquake prone states, relatively few people have earthquake coverage, which creates a major gap in insurance coverage for many homeowners and businesses and leaves people vulnerable to financial disaster.”
Earlier this week, a magnitude 7.4 earthquake struck Taiwan in the West Pacific, killing at least 10 people and injuring more than 1,000.
Have you or your insurance clients felt impacts from the New Jersey earthquake? Share your experience in the comments below.
