GLORIA PENNER (Host): Let’s, speaking of homes, it takes us to our next subject, those unsettling aftershocks after Sunday’s 7.2 earthquake in Mexico and the cost in California alone predicted to exceed $100 million reminds us that we need to get ready for the big one but do we really need to get ready? And what does get ready really mean? So, Kent, the North County Times ran a piece on Tuesday about how few homeowners in California have earthquake insurance, about 12% only. Why is that?
KENT DAVY (Editor, North County Times): Well, partly because earthquake insurance, which is run by a state earthquake insurance pool, is a – kind of hard to assess whether it makes sense or not. Originally, there were questions in the port (sic) of many people’s mind on whether or not the fund itself would have enough assets to cover in the event of a major earthquake, in other words, was the pool really big enough? Now the Earthquake Authority folks insist that they’ve got plenty of assets behind them so the question becomes for an individual homeowner, does it makes sense or not. Premiums in San Diego for a replacement value of, say, $300,000, $350,000 amount to about $250, I think, a year, which is fairly low.
PENNER: In San Diego?
DAVY: In San Diego.
PENNER: It’s more expensive elsewhere, isn’t it?
DAVY: It depends entirely on where you are. We – San Diego in general sits on a granite block so it is at less risk of catastrophic damage than some other places. If you’re in, you know, in Long Beach, for instance, you’ve got considerably more risk because it’s softer ground.
PENNER: All right, let me ask our listeners about that. Are you prepared in case you are a homeowner and do you have earthquake insurance? Are you ready for the big one? I mean, we keep talking about the big one, so the assumption is the big one will come somewhere perhaps in our lifetimes. Call us at 1-888-895-5727. Let us know how you are preparing for the big one. Kent, you wanted to add to that?
DAVY: Yeah, there’s two other issues of preparedness that you might think about. One is whether you’re personally prepared and, two, is whether the governments are prepared or not.
PENNER: All right.
DAVY: And I think both of those are interesting.
PENNER: Well, Tom, the idea of earthquake coverage underwritten by a nonprofit Earthquake Authority authorized under state law and headed by a board of the governor, the insurance commissioner and the state treasurer, it makes it all sound very public minded. But if the insurance isn’t affordable or the coverage isn’t adequate, what’s the point?
TOM YORK (Contribuing Editor, San Diego Business Journal): Well, I think the reason why this was set up was because the private insurers got out of the market after a couple of severe earthquakes in Los Angeles and the Bay Area. It’s just very costly when you have a major earthquake to go in and cover everybody who’s been injured or who’s been damaged. And so, you know, this is an attempt to sort of overcome that but I think in a really large earthquake, that would be, you know – I’m not even sure what a really large earthquake would be. The damage would be overwhelming. I don’t think there’s any agency that would have enough reserve funds to cover all the…
PENNER: Oh.
YORK: …cost that would be involved in bringing things back to where they were before the earthquake.
PENNER: Scott.
SCOTT LEWIS (CEO, voiceofsandiego.org): Yeah, and I think that’s one of the issues. Picture a major catastrophe the way that we’re talking about.
YORK: Correct.
LEWIS: And then compare it to what it we’ve seen in other parts of the country. Katrina, for example, the same sort of issue was there.
DAVY: Right.
LEWIS: There was – Nobody insures floods so there – and nobody had flood insurance so what happens? Well, you’re going to see, if there was some type of major catastrophe, the government has a basic deal out now where it just swoops in and starts fueling money to the affected area. And I could see somebody who had spent all this money on earthquake insurance being frustrated by the fact that everybody who hadn’t was being taken care of. We’ve created a moral hazard where there is an expectation that when there’s a major catastrophe in an area that the federal and state government will somehow marshal up the funds to swoop in. Now, do you want to count on that? Do you want to gamble on that? Probably not but on the other hand, earthquake insurance is exorbitant in its cost and there’s a reason for that.
PENNER: Is $250 a year exorbitant? Or are we talking about the fact that the deductible is so high?
DAVY: Deductible, that’s…
PENNER: That you have to cover maybe the first $50,000…
DAVY: Yes, that’s…
PENNER: …or maybe more, is that…
DAVY: That’s the reason. That’s the real reason people avoid it, I think, is because the deductible’s so high. You’ve got to have basically catastrophic damage before you’re going to cover anything.
PENNER: Tom.
YORK: Well, that brings up an issue that I think that all homeowners should look at, is that they should be prepared. They should bolt the foundations of their homes to the – or bolt the homes to the foundations, they should make sure that their property is at least ready to withstand a major shaking and not rely on the federal government. I mean, here we are 5 years later after hurricane Katrina and things are still not right in that area.
PENNER: Well, I think that’s a question I had and that is since so many of our buildings are now built to earthquake code, why should we be concerned about them being destroyed?
LEWIS: Well, you know, you…
PENNER: Scott.
LEWIS: …talk about have we learned our lessons, I think that, you know, there’s one lesson that I don’t know we have learned. Look at, in 1933 there was an earthquake in Long Beach and it destroyed 230 schools. And after that they passed the Field Act, which made it so that schools themselves from K-to-14, I think, including community colleges, had to create facilities that were according to this standard. And now ever since then not a single school in a major earthquake has been either partially destroyed or collapsed or totally collapsed. And so have we learned our lesson? I’m not sure because downtown we’re building this new library and in order to be able to pay for that library, we are – we decided we needed to stick a school inside…
PENNER: Wait, wait, wait, not building it yet.
LEWIS: It’s – The bid’s coming this month, yeah. It looks like it’ll probably break ground in August or something.
PENNER: All right, go ahead.
LEWIS: So in order to finance this, they decided they wanted to put a school inside of it but they couldn’t put an elementary school because they can’t put that on the top floor so they put a high school but they decided they couldn’t put a high school because it doesn’t conform to these earthquake protections and so they put a charter high school that could be exempt for that. So have we learned our lessons? I’m not sure that we have because we’re continuing to provide facilities that aren’t according to these standards that have been proven to have saved lives.
PENNER: Well, maybe we’ve learned our lessons but we’ve also learned how to get around those lessons, which is another level of learning.
LEWIS: Right. And in 2006, the Seismic Safety Commission decided—and declared—that lives had been saved by this standard and yet now we’re about to put a brand new high school downtown without that standard.
PENNER: Tom.
YORK: Well, we looked at – I was going to say statewide we looked at retrofitting and rebuilding hospitals or building new hospitals to replace the existing ones that don’t meet these seismic standards and what we found is that the cost is exorbitant. The hospitals really couldn’t afford them so they’ve pushed the deadlines out and so many hospitals are, you know, vulnerable to the next big quake because we just can’t afford to do what we need to do to make it safe.
DAVY: Which segues into one of the very interesting problems of a disaster like an earthquake. You really need to keep your hospitals open and do you do that? You really need to have water. Can we get water given that all of – most of our water supplies comes from elsewhere? You really need the power to stay on to pump it out of the reservoir if that’s the plan.
PENNER: So that really needs to be our final question: How prepared are San Diego’s utilities, emergency rescue services, major service providers like hospitals for a major quake and its aftermath?
DAVY: I think that’s a question that the event will tell us ultimately.
YORK: Yes.
PENNER: All right, then, individually, I’ve got to bring it down to that, are we finding that people are meeting the basic things that they should be doing, stockpiling water, making disaster plans, reinforcing their homes, is there any sign that Sunday’s earthquake is pushing people into those kinds of activities, Kent?
DAVY: Well, I think – Sure, I think I saw some stories that people are going and – some people are going and making provision like that. But I suspect most people aren’t ready for it.
PENNER: Well, I sure hope our listeners are not among those people who aren’t. And I want to thank Kent Davy, editor of the North County Times and Tom York, contributing editor for San Diego Business Journal, and, of course, Scott Lewis, the CEO of voiceofsandiego.com (sic). This has been the Editors Roundtable. I thank our listeners and our callers. I’m Gloria Penner. Have a good weekend.
