Spurred by news of recent earthquakes that rocked New Zealand and Chile, as well as tumblers felt in the United States, State Farm has been raising their rates for earthquake coverage. The recent wave of tremors in Arkansas has provoked the insurer to make the first significant raise in its rates in the state in 15 years. The premiums were unchanged from 1997-2007. Adjustments were made in 2008 and again in 2010, but were relatively minor.
Spokesman for State Farm, Gary Stephenson, says that insurance premiums change all the time. Earthquakes pose a significant risk as they are highly unpredictable. There is a certain level of anticipation that comes with storms as they are typically anchored to seasonal effects. Earthquakes are not influenced by the climate and there are no indicators as to when one will strike.
According to Stephenson, another factor that is driving up premiums is the rising costs of labor and materials used in rebuilding efforts. He says that insurers have to keep up with the costs if they want to stay viable in a competitive market and still make a profit.
In Arkansas, most insurers do not provide earthquake insurance to homeowners. Instead, coverage must be obtained through a third party. Nationwide is the only other insurer besides State Farm that offers the coverage.
Whether rate increases are directly tied to the occurrence of earthquakes is highly speculative. Insurers are assuring policyholders that they are not privy to any information regarding earthquakes that their customers do not have access to.
