Earthquake Didn’t Scare Up New Business, Insurers Say

Despite the temblor that shook the Palm Springs area on Tuesday, insurers in Southern California say that the earth isn’t exactly moving for them with consumers demanding earthquake insurance.

Several companies reported that they are receiving more phone calls than usual about earthquake insurance, adding that consumer interest in such policies always rises after a quake.

But most said it is still too early for the typical “deluge,” which can mean a 20% or 30% jolt in calls in the weeks following an earthquake.

“We almost always do (get more calls) when there’s a shaker,” said John Gillmore, deputy regional vice president of operations in the Costa Mesa office of State Farm. “At this point, we haven’t been inundated and, fortunately, we haven’t had that many claims reported either.”

Tuesday’s earthquake, which was centered in a sparsely populated part of the Coachella Valley about 12 miles northwest of Palm Springs, measured 6.0 on the Richter scale.

At Twentieth Century Insurance Co. in Woodland Hills, consumer inquiries about earthquake insurance have increased “significantly,” even outside the earthquake area, said Rick Dinon, vice president of corporate relations.

But at Allstate Insurance, “we haven’t seen an upsurge, but it usually takes two or three days,” spokesman Dick Duran said. And Jerry Clemans of Farmers Insurance said: “There’s a natural increase in interest in earthquake insurance, but we haven’t been inundated.”

Jennifer Nicholson of the Western Insurance Information Service, a Santa Ana-based consumer education group supported by the property-casualty insurance industry, said that most insurers she has talked to reported some increase in consumer interest while one noted a “dramatic” jump in calls.

But insurers point out that telephone calls don’t always translate into business because earthquake insurance is relatively expensive.

Nicholson said premiums range between $1.50 to $3 per $1,000 of coverage, depending on where the house is and the size of the deductible, which is generally 5% or 10% of the insured building’s value. In Los Angeles and Orange counties, where premiums run between $1.50 and $2, insurance on a $100,000 wood-frame house could be $150 to $200 a year.

And because of a so-called capacity problem in the insurance industry, in which insurers have trouble finding companies in the ailing reinsurance market to help share the risk, many companies are in effect not writing policies even though a state law requires all insurance carriers who offer homeowners insurance to also make earthquake insurance available. Insurance companies, particularly in the San Francisco area, will write the earthquake policy as required but will fail to renew the homeowner’s insurance the next year, industry officials said.

Only about 15% of California’s homeowners have earthquake insurance, said Richard Roth of the California Department of Insurance.

Many homeowners and businesses who do buy a policy don’t keep them very long, Nicholson said.

“People start thinking, ‘I really need to get some earthquake insurance.’ Then a year passes and the earthquake doesn’t happen and they don’t renew their policies,” Nicholson said. “When the earthquake doesn’t occur, they forget how scared they were.”