California Earthquake Authority Targets $5 Million to Help Agents Sell Earthquake Insurance

New Zealand’s 6.3 magnitude Christchurch earthquake is expected to be one of the costliest global insurance events since 2008, with total insured losses ranging between $3 billion and $12 billion. And it’s not unthinkable to expect an earthquake of the same 6.3 magnitude to shake California — although most people in Christchurch have earthquake insurance while most Californians do not, according to Glenn Pomeroy, CEO of the California Earthquake Authority.

“I worry about the day a big event like that happens in California, where 90 percent of the homes have no earthquake insurance,” he said. “People’s life’s savings in the form of their assets in their home — whether they are a homeowner, renter, mobile home owner, or condominium dweller — could be wiped out. Our hearts go out to friends and counterparts in New Zealand, and the event there redoubles our resolve to keep working at this here in this state to help get more people into a position where they can protect their most valuable assets.”

As part of that resolve, the CEA has launched a new insurance agent marketing program with a goal to sell 15,000 new earthquake insurance policies by August 1. The 2011 insurance agent Marketing Value Program (MVP) is designed to enhance relationships between the CEA and its participating-insurer (PI) agents to help more Californians get “The Strength to Rebuild” their homes with earthquake insurance.

“It’s a very comprehensive program that recognizes that our agents are where this all begins, in terms of being able to give the consumers the information they need to make an informed choice about whether to protect their home against an earthquake,” Pomeroy said. “Agents in the private sector are our boots on the ground and have the interface with customers.”

Pomeroy said the $5 million marketing program should give the agents of the companies that participate with the CEA greater support in terms of providing the materials they need to more effectively communicate with and better service their customers about earthquake risk and the need for earthquake insurance.

The majority of Californians live within close proximity of one of the couple thousand known faults throughout the state, he said. Moreover, when an earthquake strikes, it comes without warning, and the damage that it can cause can be severe.

“We think it is very important for people to, on an individual basis, spend some time reflecting on their own financial and family situation and reach their own decision about whether they wish to continue to go unprotected or not,” Pomeroy said.

Thus, the marketing program that will take off on March 7 is divided into three tiers, or what the CEA is calling “flights,” when each insurance agent can send to consumers 200 direct mail pieces about earthquake insurance. At the same time, the customer could see advertising in mainstream media that raises consumer awareness about earthquake risks; the CEA will be spending $2 million on a media campaign to focus the customer’s attention on the topic of earthquakes.

The agent direct mail pieces paired with the consumer targeted ad campaign is “a nice way of bringing these efforts together to create the maximum opportunity for [earthquake policy] sales to occur,” Pomeroy said.

The first flight requires registration no later than May 1. It allows licensed agents who are appointed by CEA participating insurers to participate in the MVP and receive the postage-paid direct mail pieces that they then can send to their existing policyholders who do not have a CEA policy. Agents can register for the MVP on the CEA’s Web site, www.EarthquakeAuthority.com/MVP.

The second flight, which has a registration deadline of July 1, requires agents to complete the CEA’s two-hour earthquake insurance training course before they can receive 200 additional direct mail pieces to send to their customers. Training can be completed via the CEA’s Web site, or in person.

“To help a consumer make a decision about whether to purchase earthquake coverage or not, we feel that their trusted agent should be fully up to speed in terms of our policy and what it covers,” Pomeroy said. While CEA training is not required before selling a policy, currently about 3,000 PIs have completed CEA training. He suspects some of those agents might need a refresher on any policy changes since the last time they took the course, and he hopes that number will grow to 5,000 trained agents.

The third flight requires registration by September 1 and coincides with the Great California ShakeOut earthquake safety drill in October — agents are encouraged to mail cards out to correspond with the media campaign. To participate, agents must have sold three new CEA policies, effective March 1 through August 1, before they can receive an additional 200 direct mail pieces.

“By the time (agents) make it to the final round, they’ll have sold three policies during the course of the marketing push,” Pomeroy said. “We’re incentivizing training and rewarding production.” If CEA reaches its goal of selling 15,000 new policies, that could generate $1 million in CEA new-policy sales commissions for PI agents. Reaching that figure also would increase the CEA’s capital strength with additional revenue.

As an additional incentive to sell policies, the CEA will provide free earthquake preparedness starter kits to the first 15,000 new CEA policyholders through the MVP and reported on the CEA’s Web site. The kits may include such items as a gas shut-off valve, furniture straps, putty to secure contents, etc.

“At no cost to them, agents will be able to hand over to their consumers handy preparedness starter kits. It’s a really nice way of linking up awareness with an opportunity for the consumer to begin protecting their home and for the agent to sell a policy, and of helping to cement the agent’s relationship with the customer who is concerned about earthquake preparedness,” Pomeroy said. He noted that agents’ customer lists will remain their own; the CEA will provide agents with the postage paid materials. “All they’ll need to do is slap the mailing or address label on the marketing piece, and drop it in the mail.”

Ultimately, the CEA hopes that with insurance agents’ help, consumers will really consider whether or not they’re comfortable having no earthquake insurance protection. “Our goal to sell 15,000 new earthquake insurance policies is both ambitious and realistic,” Pomeroy said. “In a state of 35 million people where the take-up rate of earthquake insurance is very low, selling 15,000 new policies isn’t going to turn the world upside down, or go all the way in terms of fully preparing California for the ‘big one.’ But it’ll be a terrific step in the right direction.”