The market for earthquake insurance in Oklahoma has almost tripled in the past five years, driven by the higher numbers of quakes felt by state residents.
Oklahoma insurance companies wrote $13.1 million in premiums for earthquake coverage in 2013, up from $4.8 million in 2009, according to the Insurance Information Institute.
About 15 percent of homeowners in Oklahoma now carry earthquake insurance, which is either a separate policy or an endorsement to existing coverage. That’s up from an estimated 1 percent in 2011.
“More Oklahomans have purchased coverage in the last few years given what’s going on,” said Insurance Commissioner John Doak. “But the earthquake claims filed have been low, even with all this activity. And the payouts have been low.”
In 2013, 128 earthquake claims were filed in Oklahoma, according to the state Insurance Department. Payouts totaled $82,000. In 2014, 75 claims were filed through Aug. 1, with payouts totaling $22,000.
Coverage decreasing nationally
A recent survey by the Insurance Information Institute found just 7 percent of homeowners nationwide had earthquake insurance. That’s down from 10 percent in 2013.
Regionally, the residents in the West had the highest rate of earthquake coverage at 10 percent. Midwest residents were at 7 percent and South residents were at 6 percent. The Northeast had the lowest rate at 2 percent.
Even in California, home to some of the strongest earthquakes, just 12 percent of the state’s residents purchased earthquake coverage, the institute’s survey said.
As the market in Oklahoma has expanded, so has the need for reliable earthquake insurance information for consumers, Doak said.
“Be educated and learn what earthquake insurance could do for you,” Doak said. “We want Oklahoma consumers to have more insurance than what they need. These coverages are available for catastrophic risk.
“In Oklahoma, we don’t have much tall-building exposure; it’s mainly foundational risk in rural and urban areas. It’s much different than the multi-billion dollar property market in California.”
Earthquake coverage isn’t covered under standard homeowners’ or renters’ policies. It has to be purchased separately or added as an endorsement to existing coverage.
Following a 5.6-magnitude earthquake in Lincoln County in 2011, Doak said many affected homeowners were surprised their property wasn’t covered for earthquake damage under standard policies.
“You really need to read through the policies to understand what they will and won’t cover,” Doak said. “Most consumers never read their policies until they have a loss. Then they find out what some of those words mean. It’s a legal contract between you and your insurance company.”
Earthquake insurance deductibles are different than regular homeowner’s insurance deductibles. For earthquakes, the deductible is typically 1, 2, 5, or 10 percent of the property’s value. Some policies won’t cover damage to exterior masonry.
Earthquake policies also have a moratorium where coverage can’t be added within a certain period of time after an earthquake in the area. Those periods vary by company and by earthquake magnitude, Doak said.
“The best thing to do is to leave your name with your agent and tell them when they can write coverage, to find coverage for you,” Doak said. “As soon as their company tells them they can write coverage, the moratorium is lifted.”
To help spread awareness, the Insurance Department has proposed a change in its rules to require the 100,000 licensed brokers and agents in the state to take a one-hour class on earthquake coverage as part of their continuing education.
“The industry has embraced it and understands that it’s needed,” Doak said. “These are professional business people who want to do the very best job for their clients. An additional hour of training to emphasize the policy and what’s available is in the best interests of the state of Oklahoma.”
Oklahoma earthquake insurance
Direct premiums written for earthquake coverage: