June 09, 2016

Half million Missouri homeowners now at risk as earthquake insurance market continues to shrink

Missouri DIFP releases new earthquake insurance data

Jefferson City, Mo - More than a half million Missourians are at risk because of the contracting earthquake insurance market, Missouri Department of Insurance Director John M. Huff stated Thursday, June 9 during Denton's Heartland Insurance Symposium in Kansas City, Mo. 

Huff discussed the near record level of excess capital in the global reinsurance market and the reinsurance industry's stated desire for writing more catastrophe risk.  He contrasted that to the contracting earthquake insurance market in Missouri.  While the reinsurance market is willing to take additional risk, direct writing insurance companies continue to withdraw or restrict their earthquake insurance business.   

"Less than one in five homes in Missouri's New Madrid area had earthquake coverage in 2015," Huff said.  "This means more than a half million Missourians are at risk of catastrophic financial loss following an earthquake. Without the insurance industry fueling recovery and rebuilding efforts, Missouri could also suffer an economic catastrophe."

The department recently released a supplement to the 2015 Earthquake Report that indicates Missouri's earthquake insurance market continues to shrink while premiums continue to rise. 

The six-county New Madrid area that is most susceptible to earthquakes has seen a 510 percent increase in premium costs since 2000. In 2000, a homeowner could expect to pay just $57 a year for earthquake insurance coverage but by 2015 that amount jumped to $348.

The percentage of residents with earthquake coverage in the New Madrid area dropped another two percentage points between 2014 and 2015. More than 60 percent of homes in the New Madrid area had earthquake insurance coverage in 2000.  But by 2015, that number plummeted to less than 18 percent.

Many insurers no longer write new earthquake insurance policies while others have significant underwriting restrictions, making many types of homes ineligible for coverage.

Traditional homeowners' insurance policies do not cover earthquake damage and many consumers are under the false belief that FEMA will help them recover should an earthquake hit. Under FEMA's Individual Assistance program, the maximum grant award is $32,900, far less than what most homes are worth. 

To help Missourians find coverage, the department provides an online list of insurance companies that offer earthquake insurance. The department also debunks common earthquake insurance myths in a video aimed to educate Missourians about coverage.

Consumers with questions about earthquake coverage are encouraged to call the Insurance Consumer Hotline at 800-726-7390 and visit insurance.mo.gov/earthquake.