Missouri’s Department of Insurance recently issued a news release on the state’s insurance market readiness should an earthquake occur in the New Madrid area. It came to the conclusion that the state is not prepared for such a large scale disaster.
The report comes after the recent quake that struck California made headlines, forcing experts to review the preparedness of Americans living near areas associated with seismic activity. A post-disaster review of California’s earthquake preparedness suggested that less than 18% of the population had proper earthquake insurance coverage.
Missouri is the third largest market for earthquake insurance in the US, behind only California and Washington. Much of the state’s earthquake risk is centered on the New Madrid fault area, which runs through the Southeast Quadrant of the state.
During the winter of 1811-1812, the New Madrid area experienced a series of powerful quakes ranging in magnitude from 7.0 to 7.5. A joint assessment by the Mid-American Earthquake Center of the University of Illinois and the Federal Emergency Management Agency has projected that if a similar earthquake event occurred in the New Madrid fault area today, it could lead to total economic losses of $300 billion – a figure that surpasses the total economic loss of any natural disaster in US history.
Despite the very real threat of tremors, the state insurance regulator has found earthquake coverage in Missouri wanting.
According to the department’s release, Missouri’s earthquake insurance market has “significantly contracted” over the past 20 years. Many insurers that previously offered earthquake coverage have left the market entirely. Some maintain earthquake insurance policyholders, but refuse to issue new policies. Even the few insurers still willing to sell earthquake coverage have stricter underwriting standards that make certain dwelling types ineligible for coverage.
To make matters worse, as the number of insurers has gone down, the price of coverage has surged. The department said that over the last 15 years, earthquake insurance in some counties has increased more than 500%.
“We are very concerned about the state of our earthquake insurance market in Missouri,” commented Missouri Department of Insurance, Financial Institutions and Professional Registration director Chlora Lindley-Myers.
Other key findings of the department include:
- On average, earthquake premiums in the six counties that comprise the New Madrid area have increased by nearly 700% between 2000 and 2018; one county saw a staggering 1,000% jump in premiums over the period.
- In 2000, over 60% of residences in the New Madrid area had earthquake insurance. By 2018, the rate of coverage had declined to fewer than 14% – a decrease of 46 percentage points.
- In other high risk areas outside of the New Madrid zone, take-up rates also substantially decreased, from 67.6% to 46.3% over the same period.