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[SEAOC] CA earthquake insurance rates for 1997

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     The local section of the Fri L.A . times  had a story on a homeowner in
Ventura that had his earthquake insurance rate increase from $300 to $2200
per year. He is one of the first of a coming wave of protests since rates for
this area are $5.50 per $1000.00 of insured value with the new CA earthquake
authority.
     I believe this is an opportunity for engineers to educate the public and
insurance companies and protect the public from earthquake exposure. It is
not fair for all types of houses to be lumped into a single risk category. A
new house built to the L.A. city wood frame requirements with structural
observation by the engineer of record should be expected to perform better
than a ten year old house that used standard framing, drywall shear panels,
3.5 to 1 height to width ratio 3/8" plywood shear walls , and no site vist by
the engineer of record. Also , different configurations are more or less
likely to have damage: large amounts of windows, split levels, heavy roof,
etc.
     In comparison to car insurance, the car insurance rate is adjusted
depending on area, cost, as well as car type ( Ford Taurus vs, Porsche). The
insurance companies now have earthquake rate areas but have no system to rate
house types. Thats were engineers are needed instead of adjusters in Indiana
( according to the article the rates are based on someone there).
     I have been contacted by homeowners of small insurance companies over
the last year saying that if an engineer provided a report the rates would
remain the same and not double ( i imagine this assumes a favorable report )
.
     Since the increase amounts are so large, i believe it is now feasable to
provide a report to reduce rates for houses of good construction techniques,
especially when comparing the increase over the life of the house or even a
decade:in the newspaper example $1900 per year:
(2200.-300.)10years=$19,000/decade + increases. versus a one time report for
say $500 to $3000 depending on type, size of house. So if the rate went up
only 50% (950 ) , the owner would make this up in the first to third year or
so and save after that . The insurance company could benefit by more
accurately predicting risks and more people will buy insurance. The newspaper
example is for a $500,000. house and a more typical 200,000 to 300,000.
average for this area would take longer to make up the costs for an
engineering report.
     On area that concerns me is that the higher deductibles( 15% ), lower
interior coverage and living expenses ($5000. each ) are way above what most
people can cover themselves, especially if the are out of the house for 6 to
12 months while it is being rebuilt. The above example would be $75,000 +
6mo.($2000) + contents over $5000.=over $87,000.. I guess we assume the
federal goverment will bail us out again. Actually i expect a much smaller
percentage to buy insurance at the higher rates partly because of this.
     Overall , my thought is that engineering expertise can benifit this
situation and promote the engineering profession by helping people get a fair
insurance rate. We will be hearing much more on this issue as people get
their renewals over 1997 and we should be prepared to help with suggestions
and solutions. I would value suggestions on how to implement this idea.
     Please post your thoughts on this issue. 

     Tom Harris , SE
     Thousand Oaks, CA


     
      
     

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