New report highlights the growing risks associated with earthquakes
The Insurance Information Institute has released a report predicting that losses associated with earthquakes will continue to rise in the U.S. There are many factors contributing to growing losses, including a higher degree of urban development in areas of the country that are seismically active. Older buildings are also exposed to earthquake damage due to the fact that they do not comply with current building codes. This factors are driving up the financial burden that earthquakes represent for the insurance industry.
New seismic maps identify 16 states as being at high risk for a major earthquake
The U.S. Geological Survey has updated its seismic maps recently, showing that 42 states are not considered to be at risk for significant activity, with 16 states being falling into the “high risk” category. The agency notes that seismic activity is particularly high and somewhat dangerous along the west coast. The agency’s updated maps also show that the financial risks associated with earthquakes along the east coast are growing.
Most homeowners insurance policies do not cover earthquake damage
According to the Insurance Information Institute, conventional homeowners, renters, and business insurance does not cover the damage caused by an earthquake. The organization notes that this type of coverage is sometimes only available as an endorsement or as a completely separate insurance policy. An estimated 7% of homeowners throughout the U.S. currently have any form of earthquake coverage. Uninsured homeowners could be exposed to a great deal of financial risk in the event of a major earthquake.
Earthquakes may become more expensive for the insurance industry to deal with
In California, earthquake insurance is somewhat more popular than it is in other parts of the country. The majority of the most devastating earthquakes in the country’s recent history were based in the state and homeowners are quite aware of the danger that these disasters represent. Despite awareness of earthquake damage, an estimated 12% of homeowners in the state have adequate insurance coverage. This lack of coverage may become quite problematic for the insurance industry in the future.