January 28, 2022
Residents in the New Madrid Seismic Zone remain largely unprepared for a major earthquake
Missouri Department of Commerce and Insurance launches educational campaign to assist consumers to make plans for their financial recovery if a “big one” strikes
Jefferson City, MO – The Missouri Department of Commerce and Insurance (DCI) will observe Earthquake Awareness Month by launching a targeted education and awareness campaign intended to help consumers prepare for a major earthquake event. The campaign, titled “Are you ready? Do you have a plan?” encourages homeowners to prepare not only for survival, but for financial recovery if a high magnitude quake occurs in the New Madrid Seismic Zone.
The New Madrid area of Missouri experienced a series of powerful earthquakes during the winter of 1811-1812, with experts estimating the primary quakes ranging in magnitude from 7.0 to 7.5. Were an earthquake of similar magnitude to occur today along the New Madrid fault, losses would be staggering. The risk modeling firm AIR Worldwide has estimated that a New Madrid recurrence would produce insured losses of $120 billion dollars (2011 dollars). Such losses would only be rivaled by a repeat of the 1906 San Francisco earthquake, with estimated losses of $93 billion.
A joint assessment by the Mid-American Earthquake Center of the University of Illinois and the Federal Emergency Management Agency predicted that a major New Madrid event could entail total economic losses of $300 billion, surpassing the highest total economic loss of any natural disaster in US history.
DCI’s most recent Earthquake Insurance Market Report shows earthquake coverage in the highest risk areas of the New Madrid fault area of the state has hit historic lows. In the six-county New Madrid region of the state, the percentage of residences with earthquake coverage has declined by an astonishing 47 percentage points between 2000 and 2020, from 60.2 to 12.7 percent.
One of the likely culprits of this continuing fall is the sharply escalating cost of earthquake insurance in the region. In just the last 10 years, costs have increased by 102 percent in the New Madrid counties. Since 2000, costs have increased by 760 percent.
Another potential reason for the low number of homes covered can be attributed to consumers not knowing their homeowners and renters policies don’t cover earthquake losses.
A recent research project conducted by the Department of Commerce and Insurance (DCI), the Center for Insurance Policy and Research at the National Association of Insurance Commissioners (NAIC), and the University of Missouri Disaster and Community Crisis Center supports this concern. Survey responses from adults (623 people) in at-risk counties of Missouri’s New Madrid Seismic Zone indicate that nearly half (45.2%) of the homeowners surveyed (389 people) were not aware that homeowners insurance does not cover damage from an earthquake, as well as over two-thirds (69.5%) of the renters surveyed (232 people) were not aware that renters insurance does not cover damage from an earthquake.
“The southeastern quadrant of Missouri includes the New Madrid Seismic Zone, which experiences around 200 small earthquakes per year,” says Missouri Department of Commerce and Insurance Director Chlora Lindley-Myers. “Yet, the most at-risk consumers don’t seem to know their homeowner’s or renters policies don’t cover earthquake damage. We are concerned and want consumers to know where they stand before a major earthquake occurs.”
DCI has been actively working to bring awareness to the issue through education campaigns focused on consumers in the New Madrid fault area. The department, in partnership with other state and federal agencies and members of the insurance industry, is hosting an inaugural event to study and explore this issue and to bring innovative minds together to address this ongoing problem.
“DCI will be hosting the first Central U.S. Quake Strategy Summit in May and we’ll be joined by members of state and federal government and members of the insurance industry,” said Lindley-Myers. “The theme of the Summit is Closing the Gap, and we’ll be inviting leading innovators and visionaries to start conversations geared toward solving this critical issue. It is imperative that we plan our resiliency and recovery strategies before a major seismic event strikes the New Madrid region.”
Missourians are urged to consider earthquake insurance as a means to help them recover financially in the wake of a catastrophic earthquake event in Missouri. Are you ready? Do you have a plan?