Big shake highlights dwindling earthquake insurance market in Missouri

Millions of Americans will participate in The Great Tremor on October 21, the day dedicated to earthquake education and awareness. The Great Shakeout, held annually on the third Thursday in October, encourages schools and workplaces to practice earthquake safety techniques.

The Great Shakeout is a reminder of the importance of having earthquake insurance, particularly in eastern Missouri, where residents face greater risks due to the New Madrid seismic zone. The approximately 150-mile-wide fault zone covers much of southeastern Missouri. It leaves the state wheel on the Mississippi River to the St. Louis metropolitan area at the highest risk.

The New Madrid region last experienced strong earthquakes during the winter of 1811-1812. Experts estimate that the earthquakes ranged between 7.0 and 7.5. Today’s earthquake of the same magnitude would result in $120 billion in insured losses, according to risk modeling firm AIR Worldwide.

Despite the significant danger the NMSZ poses to Missouri, the state has experienced a rapid decline in the uptake and availability of earthquake insurance coverage over the past two decades. The 2020 Missouri Department of Commerce and Insurance (DCI) report found that only 12.7% of homes in the New Madrid area are covered by earthquake insurance, compared to 60.2% in 2000.

In 90 of Missouri’s 116 counties, less than 20% of dwellings have earthquake coverage. In just four counties, at least half of all dwellings are insured from earthquake damage, including Cape Girardeau, St. Charles, St. Louis and Jefferson, all of which are in the New Madrid region.

The cost of earthquake insurance has risen 760% since 2000 as insurance companies increasingly withdraw from high-risk areas of the state or subject these areas to more stringent underwriting standards.

According to the DCI Missouri Residential Earthquake Coverage Report, approximately 20% of the New Madrid earthquake market does not offer coverage with a discount of less than 25% of the value of the insured property.

Less than 2% of the market offers policies with discounts as low as 5%, compared to 43% of the seismic market in the rest of the state.

Insurers require insureds to keep a deductible, or the amount of property damage that the insured must pay, before insurance coverage becomes available. Earthquake policies often specify the deductible as a percentage of the property value insured.

Only 1.8% of the market in the New Madrid area offers policies as low as 5% off, while 67.2% of the market offers policies as low as 10%.

According to DCI, earthquake insurance covers:

Repairs needed due to damage to the dwelling caused by an earthquake (other structures not attached to a dwelling, such as a garage, may cover personal property against earthquake damage (increased costs of meeting existing building codes and costs of stabilizing the ground under a residence) may cover the cost of debris removal. Additional living expenses that people may incur while rebuilding or repairing their place of residence.

Earthquake insurance usually does not cover fire, ground, vehicle, pre-existing or external water damage.

Topics disaster natural disaster trends market Missouri earthquake

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