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San Diego Could Face $40B In Earthquake Damage. So Why Are So Few People Insured?

This map shows the Rose Canyon Fault that cuts through the heart of the city of San Diego, stretches across La Jolla and continues north along the coast.
This map shows the Rose Canyon Fault that cuts through the heart of the city of San Diego, stretches across La Jolla and continues north along the coast.
San Diego Could Face $40B In Earthquake Damage. So Why Are So Few People Insured?
San Diego Could Face $40B In Earthquake Damage. So Why Are So Few People Insured? GUEST: Janiele Maffei, chief mitigation officer, California Earthquake Authority

San Diego got an eye-opening report about its earthquake risk. San Diego's Rose Canyon fault, could trigger a 6.9 magnitude quake, resulting in 2000 counties and $40 billion of property damage. There is a low mobility earthquake anytime soon, but even a small chance that a major disaster, tends to gain attention. Considering how much the risk of earthquakes is part of the person living in California, most of us have homes by quake insurance, but we don't. Only about 12% of Californians with home insurance policies have quake insurance. We wanted to find out how earthquake insurance works in California, and why more people don't have it. Me is Jamil, chief mitigation officer with the California earthquake Authority. Welcome.Hello.Can you give us background on the California earthquake Authority. I know 20 years ago, homeowners could buy earthquake insurance insurer,. To earthquake insurance, it was in the 1980s when the state legislature passed a law that said if you write a homeowners policy in California, you must offer earthquake insurance. A policy is a separate policy, many people think it's included in their homeowners policy but it is not. Many homes were insured prior to the great, the losses were devastated. Insurance companies were going to leave the state. Insurance and a mortgage crisis. The California earthquake Authority was created after that Northridge quake, to softback crisis. It's comprised of private companies, dissipating insurance, and who are part of the CEA, when you buy a policy, you are buying a CEA policy. There are other firms writing insurance policies for earthquakes,. To a lot of people don't get earthquake insurance because they say FEMA will step in after a natural disaster. What is the difference between what FEMA would do and what insurance would do?The important thing to understand is that FEMA steps in when there is a natural disaster declaration made by the accident. It has to be a large disaster. They are actually providing immediate response funding to help people with immediate needs. If you have the wherewithal, her name is submitted to the SBA for low interest loans. They cap out at about $20,000. So you can imagine in California, with the prices of reconstruction, that wouldn't go far. FEMA, the average was a $3000 payment. For these large disasters, we saw in Hurricane Katrina and we are seeing in Florida and Texas, frankly, Congress has to step in with the large appropriations bills. That kind of funding, it comes late, sometimes in small parcels, meanwhile, you are looking for a place to stay, immediately, with family. Well, still paying a mortgage.There are areas in the country where flood insurance is mandated for homeowners. Why is it because it's mandated?The nature of the mortgage industry and bundling and selling mortgages might be one of the reasons I think that, certainly if we were to go the other way and create a demand, and the population, that would take an understanding that it could happen to us. I think sometimes we think, cliques happen, but they happen to someone else, it's not going to happen to me. We just saw the devastation of two hurricanes, obviously we are seeing others heading our way, figure 2, three, four days notice, in California, we have to be ready every day. Because the reality is, the uncertainty of a quake happening somewhere in California is 99%. Really, there is a community in California that's at risk for a damaging earthquake. We all need to recognize, it could be us.Has California earthquake Authority paid out claims?Yes. Damaging earthquakes. The San Simeon, nap earthquake and other earthquakes, obviously and the large, they've been moderate, so they don't affect a huge area, but that California earthquake Authority has financial strength cover very large earthquakes. That is our charge and our responsibility, we are ready for that.Is earthquake insurance too expensive? Is that what people don't have a?I think people are sometimes going on information that they learned a while back, or perhaps erroneous information, they would like them to go on our website, we have a premium calculator, where you put in your information about where you live, some information about your home, and you'll get an opportunity to use a calculator, where you can tailor the insurance policy to your needs and your financial needs. People will find that we now have to practice from 5% to 25%, and many choices. Really are portable options for Californian space to a new study that I talked about, that raises the stakes about the quake at risk here in San Diego, does that mean that after your group sees the study, San Diego homeowners will see the means increase?We set our rates on the latest science. Every six years, was a working group in California develops models that forecast earthquakes in California. Those models make their way into maps. Take the lost portfolios, we are currently taking the 2014 maps and putting them into our models, we will be making rate adjustments, there may be areas in the state that go up slightly, there may be areas that go down, understanding seismology and California earthquake science is an ongoing process, so we are constantly using every opportunity is best available science to properly develop rates and understanding of the expected loss in California .Thank you very much.

San Diego got an eye-opening report last week about its earthquake risk. The Earthquake Engineering Research Institute reported that San Diego's Rose Canyon fault could trigger a 6.9 magnitude quake, resulting in up to 2,000 fatalities and $40 billion in property damage.

The study underscored the ever-present risk of a major earthquake in Southern California. But despite that risk, only 12 percent of Californians with home insurance or rental insurance have earthquake protection.

Unlike floods, there is no national, government-backed program to insure people against earthquake damage. And there are no requirements from mortgage lenders to get it.


RELATED: San Diego Researchers Estimate Damage From ‘Big One’ Along Rose Canyon Fault

More people used to buy earthquake insurance before the 1994 Northridge quake, when companies that offered home insurance were required to sell earthquake protection too. But after paying out $12.5 billion in claims, many companies cut back on home insurance entirely.

The California legislature eventually created the California Earthquake Authority, a state-run non-profit, that creates earthquake insurance policies which are sold by private insurance companies. Until last year, CEA only had plans with 10 percent and 15 percent deductibles. Now, they offer plans with deductibles of 5 percent, 20 percent and 25 percent. Higher deductible plans have lower premiums.

Before that change, the average annual earthquake insurance premium was about $800. Consumer advocacy group United Policyholders said homeowners with 15 percent deductible plans were not likely to see a payout unless a truly catastrophic earthquake hit.

California Earthquake Authority’s chief mitigation officer, Janiele Maffei, joined KPBS Midday Edition Thursday to discuss how earthquake insurance differs from federal disaster aid and how that Rose Canyon study could affect San Diego insurance rates.