Midwest Earthquake Spurs Renewed Interest in Purchasing Insurance

April 23, 2008

Eastern Missouri residents are scrambling to get earthquake insurance after last week’s 5.2 magnitude trembler rattled windows and shook houses. But they are finding out there’s a waiting period for coverage, even as aftershocks shake the ground.

The state’s biggest earthquake insurance providers have imposed a 30-day moratorium on the policies after last week’s quake. Bloomington, Ill.-based State Farm Insurance, the largest provider, and American Family Insurance, the second largest, both say the moratorium is standard policy.

“You wouldn’t want to be in a situation where there was an event, and people rushed out to buy earthquake coverage for the possibility of an aftershock,” said American Family Insurance spokesman Steve Witmer. “It’s an industry principle that people spread the risk on assumptions of risk, and not wait until the event happens and then buy the insurance.”

There have been at least 22 aftershocks since last Friday’s early morning quake, which was the largest Midwestern quake in years. The U.S. Geological Survey says an aftershock Monday morning was one of the strongest yet, registering at a 4.0 magnitude.

Missouri is the third-largest market for earthquake insurance coverage in the United States, according to the Missouri Earthquake Insurance Task Force, created by Gov. Matt Blunt last year.

In 2006, Missouri homeowners and businesses spent about $75.9 million on earthquake coverage, according to the task force. Only California and Washington spent more. Most of the policies were held in eastern Missouri, where residents are worried about a cataclysmic quake on the New Madrid fault.

The fault is famous for creating massive quakes in 1811 and 1812. While modern instruments were not available to measure the quakes, they are estimated to have been at a magnitude of 8.0.

The insurance task force estimates that a 7.2 magnitude earthquake today would cause $80 billion in damages.

Both American Family and Shelter Insurance said last week’s quake created minimal damage. American Family inspected a number of homes, but didn’t find any damage that resulted from the tremors, Witmer said.

Shelter spokeswoman Alicia Robinson said the company is investigating 63 damage claims in Missouri, but could not yet estimate the total amount of damage.

Both Robinson and Witmer said they’ve seen a spike in requests for the insurance, but they wouldn’t say how many requests have been made, nor how many policies they currently hold.

About 38 percent of all homes in Missouri are covered for earthquakes. In communities around St. Louis, between 58 percent and 81 percent of homes are covered.

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