New Report Shows A “Dramatic Drop” In Earthquake Insurance Policyholders Near New Madrid Fault

Jul 29, 2019

Premiums are up and coverage is down for earthquake insurance in southeast Missouri, according to a new report released by the Missouri Department of Insurance.

Director of market relations, Angela Nelson says the Earthquake Insurance Market Report is a reflection of the findings on earthquake insurance near the New Madrid fault over the past year.

“The issue of earthquake insurance is something that the department has historically monitored very closely, just because of the scope of a potential event and how that would impact the state, particularly the southeast area,” she says.  

In the bootheel area, the department reports over 60% of residences had earthquake coverage in 2000 while only 14% had it in 2018. This, Nelson says, is a “very, very dramatic drop.”

 

Credit Missouri Department of Insurance

Although the problem is likely multifaceted, one factor could be residents’ lack of concern regarding a seismic event, since nothing has happened in such a long time.

“There starts to be a false sense of security,” says Nelson. “One of our main purposes for getting this information out to the public and to policymakers is to make everyone aware of this very, very great exposure our state faces economically.”

By not purchasing insurance, Nelson says residents are “taking a risk.” While rates have gone up roughly 700%, they are still “relatively affordable”: amounting to around $40 a month. 

Insurance companies consider earthquakes a “low frequency, high severity,” meaning they don’t happen often, but when they do, they are “extremely catastrophic.”

This has led some companies to stop writing coverage, but Nelson says she hopes providers will continue in order to help give consumers options on their insurance. The differences between seismic events and the inability to predict when an event might arise causes problems for some insurance policy writers.

“That makes it very difficult for them to be able to predict what a future event will look like, and how do they price for that, and that’s the central question,” she says.

Director Chlora Lindley-Myers says they remain concerned about the state of Missouri’s  earthquake insurance market, and they’re working to build awareness. 

“We want everyone to prepare not just for an earthquake event, but for a successful recovery afterward,” says Lindley-Myers.