Quakes Causing Curiosity About Additional Insurance

by Paul Gatling ([email protected]) 92 views 

What is the market for earthquake insurance in Northwest Arkansas?

Conventional wisdom says there shouldn’t be much of one. Outside of California, where, according to a report in the Insurance Journal, about 64 percent of the country’s written earthquake premium originated in 2009, many homeowners don’t spend much time worrying about suffering damage because of a seismic shift.
In fact, the Federal Emergency Management Agency lists Benton and Washington counties as being on the outskirts of a hazard area that, at worst, might one day experience shaking of moderate intensity resulting in slight damage. Slight damage is defined as some heavy furniture moved and some fallen plaster.
However, recent activity in neighboring Oklahoma has led to increased activity among those in the insurance industry.

Despite the seemingly minimal effects, homeowners have been spurred to at least inquire about adding an earthquake insurance endorsement to their existing homeowners coverage.
“People [in Northwest Arkansas] felt the quake this time,” said Steve Brown, a claims manager for Shelter Insurance in Springdale. “When they see things shake and move, they start thinking about protecting their home and their foundation. The foundation is critical. That can be expensive to repair.”
In the less-than-two weeks immediately following those quakes, “we had probably 20 or so people inquire about it and 10 of those who bought [earthquake] insurance,” said Brad Bridgers, vice president of Rogers Insurance in Rogers. “Those were all existing customers.”
The company is Northwest Arkansas’s oldest insurance agency, and while his response no doubt reflects a miniscule percentage of its customers, Bridgers said the market in the two-county area is changing.
“With the quakes we’ve had recently, it’s definitely worth thinking about,” he said. “I didn’t feel either one of them, but it’s something I am considering adding.”
Rick Peterson, a Rogers-based representative with MetLife Insurance, has 24 years of industry experience, all in Northwest Arkansas. The Oklahoma tremors went unnoticed from his home in Lowell.
“I felt cheated,” he joked.
Peterson said the curiosity level in earthquake insurance is a lot higher than it was two years ago, especially within his company.
And since the quakes, his office has received “a lot of interest” about the coverage.
“The uptick has been noticeable by far,” he said. “Very much so. Probably a 300 percent increase in interest.”
Peterson estimated about half of those who inquired went ahead and added coverage to their existing homeowners policy.
He said the first question from just about everyone is a simple one.
“How much is it?” he said.
Annual premiums, on average, can run about $200, Peterson said.
Insurance against earthquake damage is not part of a standard homeowners policy. In most cases when homeowners insurance is purchased, an earthquake exclusion form must be signed.
“A lot of the companies we represent require that,” Bridgers said.
Added Peterson, “More and more people are not signing it,” opting instead to go ahead and take the necessary steps to make sure their home is covered against earthquake damage.
Danielle Verhelst, an Allstate Insurance agent in Siloam Springs, said the earthquake-related phone calls to her office have slowed considerably following the tremors.
“Talking with other agents around here, everybody saw a jump right after it happened,” she said. “The first week we had a jump and then people kind of forgot about it. Out of sight, out of mind, I guess.”
Verhelst said of the customers who called her office, “probably 90 percent we’ve written a policy on. They do have a high deductible, but the coverage is very inexpensive.”
A single-story, brick home valued at $300,000 with a 10 percent deductible would cost roughly $150 in annual premium, Verhelst said.
The phone calls from customers living in Arkansas or Oklahoma was about a 50-50 split, she added.
About 5 percent of Verhelst’s existing customers carry earthquake coverage.

Sooner State Shake
The largest quake in Oklahoma history — measuring a 5.6 magnitude on the Richter scale — occurred just before 11 p.m. on Saturday night, Nov. 5, near Sparks, Okla., approximately 40 miles northeast of Oklahoma City.
There were reports of multiple aftershocks in its immediate wake, including one measuring 4.7 that rumbled the same area two days later.
Some in Northwest Arkansas noticed the events, to varying degrees. A few common reports were a rattled picture frame, a saltshaker being toppled from the kitchen table, or dishes clanging.
Scott Comiskey said he was initially unaware of the Nov. 5 tremor.
“If I [felt it], I didn’t know it,” said Comiskey, an agent with Shelter Insurance in Bella Vista. Comiskey said he was driving on Interstate 540 at the time of the first quake. “I thought I heard something that may have been a clap of thunder.”
Brown had just returned home from an out-of-state trip during the first quake and also did not feel any movement.
“But several people in our office told me they got a little shake,” he said.
Adding an earthquake endorsement can be as simple as placing a phone call to an agent, assuming a carrier hasn’t put a 30-day or 60-day moratorium in place against such actions, a common step for some following an earthquake.
A homeowner can get a quote based on the construction — framed vs. brick — of the building to be insured, the year it was built, number of stories, etc.
Earthquake coverage generally has a different deductible than that of a homeowners policy.
The deductible usually ranges from 5 percent to 10 percent of the coverage limit. A homeowners policy usually has a deductible of one flat dollar amount
With an earthquake endorsement, a home valued at $100,000 at 5 percent would have a $5,000 deductible.
The other side of that coin, the side some agents say keeps consumers from doing much more than inquiring about an endorsement, are the houses in the $300,000 range or even in the $500,000 range.
A 10 percent deductible on a $500,000 home would put the homeowner on the hook for the first $50,000 worth of repairs in the event of an earthquake.
“That’s something that steers a lot of people away from getting the insurance,” Bridgers said. “It would take a major quake to do some damage like that.”
Basic earthquake coverage provides a benefit for the home structure. Separate structures, such as pools and guesthouses, are not included.
A home’s contents are typically covered up to a certain dollar amount.

A Good Value?
Before beginning his insurance career that is approaching its 16th year, Comiskey was a risk manager for 11 years for two different companies.
That experience gives him a unique take on the topic.
“When you add up the dollars and the possibility of [filing] a claim, I just don’t see it as a good value for around here,” Comiskey said. “That’s just my personal opinion. It’s what we call ‘sleep-well-at-night’ insurance. [The premium] is not that expensive, but I think the risk is negligible.”
But Brown did note one Shelter Insurance customer with earthquake insurance has filed a claim in connection with the Oklahoma quakes.
The homeowner reported several cracks in a vaulted ceiling in his Springdale home. Brown said an adjuster has been to the unidentified man’s home.
“If there’s the possibility of an earthquake, the next step is to hire a structural engineer to determine if that was the cause,” Brown said.
Other agents contacted reported no claims have been filed through their office, and agreed that would be a rare step — about as rare as a localized earthquake.
According to the Arkansas Geological Survey, there were 767 earthquakes reported in Arkansas in 2010, ranging in readings from 0.2 to 4.0 on the Richter scale.
Nine of those events came in Benton and Washington counties.  The most notable occurred within three weeks of each other in April and May. Both were in Benton County and both were in the 2.6 range on the Richter scale.
There has never been an earthquake in Northwest Arkansas’s recorded history to cause significant damage.