California can make earthquake insurance cheaper by reducing risk

Californians know another major earthquake is coming.The only question is when.Scientists believe that there is more than a 99 percent chance of one or more major earthquakes hitting California in the next 30 years.

Yet only about 13 percent of California homeowners carry earthquake insurance.Approximately two thirds of California’s residential earthquake insurance market is served by the California Earthquake Authority, with the remaining one third served by private insurers.That gap between the risk we face and the protection we have should concern every Californian.The challenge is not that Californians do not understand earthquakes can happen.

It is that many families struggle to justify the cost of coverage while balancing the many expenses of everyday life.Decades can pass without a major earthquake, creating a false sense of security.

Combined with high premiums and significant deductibles, that leaves too many homeowners without coverage.Earthquake insurance is expensive because earthquake risk is expensive.California law requires rates to be actuarially sound and based on the best available science.

The challenge is not to ignore that reality, but to build a system that provides meaningful protection while remaining financially strong.California learned an important lesson after the 1994 Northridge earthquake.The scale of the disaster caused many insurers to pull back from the homeowners market, prompting the creation of the California Earthquake Authority to help stabilize earthquake coverage.

Nearly three decades later, that experience still offers an important lesson: we should do everything possible to prevent insurance market failures before they happen.Affordability cannot be measured by premiums alone.Deductibles matter.

Coverage matters.Families need confidence that when the ground stops shaking, the policy they purchased will actually help them rebuild.For some homeowners, earthquake insurance comes with deductibles that can leave them res...