Issues and Resources

Data are limited, making it difficult to verify or test hypotheses about consumers’ choices.

• Results from a consumer research survey in the central U.S. point to a number of variables affecting uptake rates. For example, consumers who consulted an insurance agent when making decisions about insurance were more likely to have earthquake insurance than those who didn’t use an agent. See Addressing the New Madrid Seismic Zone Earthquake Protection Gap: Insights into Homeowners and Renters Earthquake Insurance Uptake from Comprehensive Primary Data (CIPR-NAIC 2022).
• A previous study published in CIPR’s Journal of Insurance Regulation advances the view that attitudes (shaped by culture), rather than issues such as affordability, could be the more important factor affecting people’s decisions about earthquake insurance. In particular, the authors suggest that people in the U.S. are less likely than people in Canada to purchase earthquake insurance, because U.S. residents are more likely to expect that they will receive financial help from the government following a disaster. The authors caution, however, that this finding must be considered conjectural, as there is currently insufficient primary data available to validate it. The Earthquake Insurance Protection Gap: A Tale Of TwoCountries.
• A survey of insurance regulators and insurance professionals in the western U.S. sums up a range of possible factors.

“Uptake” refers to the percentage of policyholders (e.g., people with homeowners or renters insurance) who have also purchased earthquake coverage. It is difficult to know how many people in the U.S. have earthquake insurance, because very few state regulators collect this information from insurance companies. The uptake figure also doesn’t include people who don’t have homeowners or renters insurance.

Review uptake data for:

• California: Residential and Earthquake Insurance Coverage Study (data collected annually).
• Missouri (data collected annually).
• Oregon (2017).
• Washington (2017).

The Insurance Information Institute (iii) polled consumers to ask if they have earthquake coverage. The resulting uptake rates were 23% overall and 28% percent in the west in 2020. In a later poll conducted by iii and Munich Re (2023, see p. 8), 37% of respondents in the west said they have earthquake coverage. These figures are higher than expected given the data collected by state insurance departments in California, Missouri, Oregon, and Washington. It is possible that some of those polled answered in the affirmative because they mistakenly believe that their standard homeowners policy covers earthquake damage. A consumer survey conducted by the National Association of Insurance Commissioners indicates that such a misapprehension is common (see pp. 37 and 41 of the NAIC report).

Earthquake Insurance summary.

iii consumer poll 2020.

iii/Munich Re consumer poll 2023.

NAIC consumer survey report.

 

Parametric earthquake insurance is currently available in three states: California, Oregon, and Washington. It is sold through a surplus lines broker. Parametric insurance insures the policyholder against an earthquake by paying a set amount if an earthquake occurs that fulfills specified parameters (e.g., peak ground acceleration reaches a defined threshold in the geographical area where the insured property is located). This determination is based on seismic data from an independent authority (e.g., USGS). The payout is dependent on the event, not on the damage it causes, so there is no claims adjustment process.

A New Option for Disaster Insurance: Parametric (United Policyholders).

Parametric Insurance for Disasters, a Wharton Risk Center Primer. Rohini Sengupta and Carolyn Kousky. September 2020.

Parametric Disaster Insurance (National Association of Insurance Commissioners).

Earthquake insurance is regulated at the state level. The insurance codes of most states don’t include laws that specifically address earthquake insurance. Insurance companies are not required to offer earthquake insurance. California is a notable exception:

California Insurance Code §§ 10081 et seq. (earthquake insurance “Mandatory Offer”) requires that all insurers who sell residential property insurance must also offer earthquake insurance with every policy sold), and 10089.5 et seq. establishes the California Earthquake Authority, an instrumentality of the state through which participating insurers offer earthquake insurance policies. These codes apply to residential earthquake insurance only.

An overview of earthquake insurance as a resilience tool.

NAIC Center for Insurance Policy & Research also maintains an online library, which contains some materials relevant to earthquake insurance.

This informational page is part of the Emergency Management, Risk Management section of FEMA’s website. Some of the content is useful for a public audience; other content outlines issues (such as uptake rates) that help emergency preparedness professionals understand challenges associated with earthquake insurance as a resilience tool.

• Informational articles about earthquakes and earthquake insurance (for consumers).
• Resilience Accelerator site (currently focused on weather-related perils, but iii plans to include earthquakes).

This USGS page is instructive, but perhaps a little daunting for consumers in the absence of additional guidance.

Insurance Information Institute’s Facts + Statistics page for earthquakes and tsunamis.

Oregon Seismic Safety Policy Advisory Commission: OSSPAC Publication 18-01. Results of an inquiry (via stakeholder meetings and testimony), offering recommendations regarding the earthquake insurance market for homeowners in Oregon, including “ways to improve the uptake of earthquake insurance, and mitigation strategies to increase the resilience of Oregon and allow people to stay in their residences after a major earthquake.”