The concerns that led Oklahoma Insurance Commissioner John Doak to declare the market for earthquake coverage noncompetitive are not unique to the state. Elsewhere in the South, prices are on the rise as quakes increase in frequency and severity.
Doak called the market noncompetitive in June, allowing him and the Insurance Commission to review rising earthquake rates, after the department saw massive, 300% increases in premiums. While the region has certainly experienced a surge in quakes – and some increase in the total amount of claims paid – Doak does not believe the increases reflect the reality of risk.
Now he will take a more active role in the market, requiring companies to submit rate increases for review rather than having the premium hikes go into effect immediately.
It was not an easy decision, Doak told Tulsa World.
“You won’t find any regulator in the US that’s anymore free market than myself,” he said.
While no other insurance commissioner in the South has declared their state’s earthquake market noncompetitive, rising rates are a reality throughout the region. Angela Kirby, an underwriter with Myron Steves in Houston, said markets for earthquake coverage – even on a surplus basis – are “very slim.”
Written on an individual basis through Lloyd’s, the policies can be expensive.
“I usually don’t get many requests for it, but when there’s been an event, people call in,” Kirby told Insurance Business America. “Once I got as many as 80 phone calls in two days.”
Few people can afford the policies, however. The base premium is $2,750, and Kirby says policies can reach total insured values of up to $2.5 million with a 5% deductible per occurrence.
“I did have one policy in Amarillo for eight years, but it didn’t get renewed this year,” she recalled.
Yet Texans have a reason to seek coverage. North Texas recorded more than 100 tremors in the past eight years, according to the United States Geological Survey, which plans to raise the official earthquake risk level in the state.
As in Oklahoma, these events used to be rare – and insurance coverage correspondingly cheap. Now, however, quakes are increasing and some are tying the rise to the presence of fracking operations throughout the South.
“The concern is that the volume of water being injected into wells has continued to accelerate for several years now,” said USGS earthquake researcher William Ellsworth.
Oil industry groups and regulatory bodies are more skeptical about the link, saying nothing is conclusive yet.
Whatever the cause, proper coverage is advisable – if home and business owners can afford it.
