“The Big One” is coming – are your clients protected?

“The Big One” is coming – are your clients protected? | Insurance Business

“The Big One” is coming – are your clients protected?
British Columbians were understandably shaken by a recent New Yorker article forecasting a major earthquake measuring 8.7-9.2 on the Richter scale – but the source of the disaster may be even more upsetting.
 
While it has long been thought that the San Andreas Fault would be responsible for “The Big One,” seismologists now believe that the Cascadia Fault, which extends into Vancouver Island, could be the ticking time bomb for earthquakes. In fact, some researchers are now estimating the likelihood of such a quake occurring in this area in the next 50 years as one in three.
 
Despite this prominent danger, only about 50% of British Columbia residents have earthquake insurance policies either as standalone coverage or as an add-on to homeowners’ insurance. Brokers can help to alleviate that gap, however, by clarifying many of the misconceptions surrounding earthquake protection.
 
The first is that such a disaster would not be unprecedented for Western Canada.
 
“There are hundreds of earthquakes that happen throughout the year in British Columbia. Most are small, but there have been a few in the past couple of years that registered over 6 on the Richter scale,” said Daniel Mirkovic, president and CEO, Square One Insurance Services.
 
While most of these transpired in uninhabited coastal areas, Mirkovic believes it’s only a matter of time before one arrives in a populated region of British Columbia. Although 56% of surveyed Canadians believe that the government will provide financial assistance in such an event, the reality is that federal and provincial programs exclude losses when related insurance is widely available, and earthquakes qualify as such.
 
“Right now we believe that about 50% of British Columbia residents are buying earthquake insurance,” he said. While premiums can be pretty pricy, or about $332 per year for a $300,000 house in Vancouver or $515 for the same in Richmond, it still packs quite a punch when compared with its American counterpart.
 
“In California, you would receive considerably less coverage while paying at least double,” Mirkovic said. Policyholders there often pay between $600-1000 for partial coverage of property and limited protection for belongings inside it.
 
“Not only will insurance companies here pay to repair or rebuild the home and compensate for damages of the contents inside it, but they also cover the cost of staying in temporary accommodations while those repairs are being conducted,” he said.
 
This provides a valuable opportunity for brokers to explain that benefit, as well as debunk the lingering myth that a devastating earthquake would cause insurance companies to go bankrupt and unable able to pay on overdue claims.
 
“There are numerous safeguards in place to make sure insurance companies don’t go bankrupt, including the fact that they are heavily regulated by both provincial and federal governments, and that the Property and Casualty Insurance Corporation would protect consumers regardless and pay out on all valid claims,” he said.
 
And while he sympathizes with the cost, he believes that brokers have a duty to iterate the importance of this coverage, particularly for anyone whose primary residence falls in high-risk areas.
 
“If anyone feels like they can’t obtain policies because of a financial or monetary basis, try to think of how much it costs in relation to other things we spend money on, like coffee at Starbucks,” he said. “From that perspective, it can actually be quite affordable.”