Availability of Earthquake Insurance Increasing in Oklahoma

Two managing general insurance agencies have increased earthquake insurance coverage in Oklahoma in the aftermath of the 5.6 magnitude tremblor that occurred near Sparks on Nov. 5.

The Oklahoma Insurance Department said Midlands Management Corp. of Oklahoma City, which already offers standalone earthquake coverage for commercial risks, is adding earthquake deductible buy-down insurance as a means of making the cost of recovering from earthquake damage more manageable for property owners.

Oklahoma Insurance Commissioner John Doak had previously reported that Texas-based managing general agency, Van Wagoner Companies, would begin selling “monoline” commercial earthquake insurance as a surplus line in Oklahoma. Van Wagoner’s earthquake insurance is available in Oklahoma through selected independent agents.

Doak said that a common complaint he has heard from property owners is that the high deductibles sometimes associated with earthquake coverage are prohibitive.

“While the annual premiums for earthquake insurance can be very affordable, some consumers who considered coverage in the past said they decided against it because of the deductibles,” Doak said in announcing the new coverage offered by Midlands Management.

Earthquake insurance deductibles are typically calculated as a percentage of the insured property’s value. Some companies set that deductible as low as 2 percent of the property’s value, but other companies are quoting deductibles of 10 percent or even higher, the insurance department noted.

Doak said that despite a high deductible, earthquake insurance could still be a wise financial choice. The owner of an insured home worth $100,000 would be out-of-pocket $10,000 for the deductible if the home was considered a total loss after an earthquake, but without any coverage the entire $100,000 loss would be borne by the homeowner.

The new coverage being quoted by Midlands Management is supplemental insurance for property owners who already have earthquake coverage through any company, and could mitigate a policyholder’s out-of-pocket cost for the deductible at a time of loss. Customers who purchase coverage through Midlands can opt to reduce their deductible to as little as 1 percent.

Any licensed agent in Oklahoma can contact Midlands Management Corp. to write the coverage. Midlands Management President and CEO Charles Caldwell said the coverage offered by Midlands will be written through A-rated carriers and probably will appeal most to those with commercial properties or more expensive homes.

The minimum premium begins at $250, which can be higher than the cost of annual earthquake coverage itself on many moderately priced homes.

Doak said that while earthquake deductible buy-down insurance might not be suitable for all consumers, its availability fulfills one of his major goals for improving the state’s insurance market by giving options to Oklahoma consumers.

The 5.6-magnitude quake that struck Oklahoma Nov. 5 was the strongest ever recorded in the state. The epicenter was located near the Lincoln County community of Sparks, about 44 miles northeast of Oklahoma City. The quake damaged at least 40 homes, buckled a highway and caused a tower at St. Gregory’s University in Shawnee to collapse.