The California Earthquake Authority voted yesterday to decrease
earthquake insurance rates 22.1 percent for policy holders in 85
percent of the state.
Hollister – The California Earthquake Authority voted yesterday to decrease earthquake insurance rates 22.1 percent for policy holders in 85 percent of the state.
The proposal will now go to the state insurance department for investigation and approval.
“The department wants to provide relief for consumers,” said insurance department spokesperson Norman Williams. “This proposal is being given the highest priority and we will get to work on it right away.”
While Williams said it would be difficult to estimate a time frame for approval, he did say that if the proposal is approved, consumers will see changes by July 1 at the latest – the time of year when most policies are renewed.
According to the CEA and Department of Insurance, only 14 percent of California homeowners have an earthquake insurance policy. With the average policy costing a homeowner just over $550 a year, many choose to pass. While this is substantially more affordable than fire or flood insurance, the CEA is hoping rate cuts will encourage sales.
“Our goal is to make this insurance available to all Californians,” said Stan Devereux, Director of Government and Public Affairs for the CEA. “Everyday in California is earthquake season. It’s not like in Florida, where you can predict when a tropical storm is coming. It can happen at any time. We want to do our part to help people protect themselves.”
According to Devereux, the proposed rates were determined by a set of new formulas that take into account variables such as the age of the building and whether the structure has multiple levels. A series of experiments were also done with an earthquake model developed by the EQECAT company for the CEA’s use, to simulate the actual damage done to different types of structures. The studies and experiments took place over a three-year period, with the goal of settling on rates that were practical for both homeowners and insurers.
“The best of new geoscience has allowed us to get a realistic sense of the risk in this state, and offer lower rates to 85 percent of our customers,” said Devereux. “However, studies have also show that some parts of the state pose an increased risk that we weren’t aware of before.”
For the 15 percent that won’t get reductions, consumers can expect to see a rate increase of around $10 a month. Devereux named the Humboldt area and the Inland Empire as high-risk areas, though he was quick to point out that high-risk areas existed all around the state. Interestingly San Benito County, once proclaimed the “Earthquake Capital of the World,” is on the list of regions that will be enjoying the rate decrease, should it be approved. Whether or not locals will choose to take advantage of the reduction remains to be seen.
“I can tell you that in all the transactions I’ve closed, not one person has accepted it (earthquake insurance),” said local Realtor Cassandra Cook. “And that includes myself. Most of the homes in our area are newer and built to withstand earthquakes. We have tougher building codes than in other areas. But I think more people would consider it if it wasn’t so cost prohibitive.”
Established through the California Legislature in 1996, the CEA was established as a privately financed, publicly managed entity to address the unique risks of living in earthquake country. Nineteen major insurance companies have chosen to help finance the board, and as such are authorized to sell CEA earthquake policies.
