Oklahoma residential property owners will have to be the ones to check to make sure their property insurance policies include earthquake coverage.
The House of Representatives Insurance Committee voted 7-4 Thursday not to pass House Bill 2863, which would have required insurance agents to notify new and existing policyholders whether their insurance policy covers damage caused by earthquakes.
“There's responsibility on the side of consumers,” said Rep. Charles Key, the committee chairman. “There wasn't demonstrated a real need to require the insurance agent or the company to make notification beyond what they're required to do today.”
Requiring insurance companies to provide an information form to policy holders on whether their coverage includes damage from earthquakes would be an added cost to insurance companies, which would pass them onto consumers, said Key, who is also an insurance agent.
“There's a cost associated with it,” said Key, R-Oklahoma City. “The best way to allow transactions between people to occur is to allow freedom, which also requires responsibility.”
Insurers criticize bill
Dan Ramsey, president and chief executive officer of the Independent Insurance Agents of Oklahoma, said property insurance policies clearly state what isn't covered.
“It's not hidden away,” he said. “The consumer has a responsibility. They should read their policy.
“The notification requirement — all that does is create additional paperwork and administrative requirements on insurance agents,” said Ramsey, whose organization represents about 500 independent insurance agencies in Oklahoma.
Rep. Mike Shelton, the bill's author, said his bill ran into opposition from insurance companies. Three committee members who are insurance agents voted against his bill.
“They don't want people to know that their policy does not cover earthquakes,” said Shelton, D-Oklahoma City. “They do not want the transparency and ultimately they don't like paying out claims.
“Keeping an ignorant consumer benefits insurance companies.”
Shelton had toned down his bill since he first presented it last week to the Insurance Committee. His original proposal would have required insurance agents to notify homeowners about the availability of earthquake insurance; those declining coverage would have to sign a waiver.
Quakes rattle state
More than 90 percent of the property owners whose homes or businesses were damaged by a series of earthquakes in November had no viable insurance to cover the losses, according to state officials. The largest of the quakes — a 5.6-magnitude tremor that struck Nov. 5 — was the strongest ever recorded in Oklahoma.
Damage to residences in and around Lincoln County consisted mainly of wall damage, cracked and shifted foundations and toppled chimneys. State officials said the earthquakes destroyed six structures and left another 21 homes and businesses with damage requiring lengthy repairs.
‘A good idea'
Rep. Marty Quinn, a committee member and an insurance agent, said “a vast majority of” insurance agents do a good job of discussing what is and isn't covered with policyholders.
“He had a good idea,” said Quinn, R-Claremore. “But I think the companies that do business in Oklahoma ought to have that right to decide if they want to do that because, in the end, if they don't do a good job that's what the legal system is for. They would love to sell earthquake insurance, but people realize that there's not a lot of risk for that.”