Quake Insurance? California Wants People To Say Yes To Coverage Almost 90 percent of Californians do not have earthquake insurance. That worries state officials and quake experts, who are renewing the push to boost insurance coverage.
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Quake Insurance? California Wants People To Say Yes To Coverage

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Quake Insurance? California Wants People To Say Yes To Coverage

Quake Insurance? California Wants People To Say Yes To Coverage

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MARY LOUISE KELLY, HOST:

If you live in California, there is a chance you participated today in the Great ShakeOut. This is an annual earthquake preparedness event. It is meant to encourage people to run safety drills and update emergency supplies as well as plans with your family and schools and employers. But while residents may be ready to drop cover and hold on, there's concern they may not be prepared for what comes after. Nearly 90 percent of Californians do not have earthquake insurance. NPR's Eric Westervelt reports.

ERIC WESTERVELT, BYLINE: The 6.7-magnitude Northridge quake in 1994 violently rattled North Central Los Angeles. Homes, businesses and parts of freeways cracked or collapsed. TV coverage captured some of the chaos.

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UNIDENTIFIED PERSON #1: It was just a total nightmare.

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UNIDENTIFIED PERSON #2: That first pile right there were that guy's standing, right there where my roommate's standing.

WESTERVELT: In all, at least 57 people were killed. The quake cost some 40 billion in today's dollars for property losses, half of that to homes. But 24 years is a long time maybe. Near the epicenter in Northridge close to where an apartment complex pancaked crushing 16 people, there's little sense of urgency about the next temblor. Sixty-four-year-old homeowner Nicoli - she didn't want her last name used - lives just down the street from where the apartment collapsed. She doesn't have quake coverage for her large one-story home.

NICOLI: The deductible's so high on a house like this. It would be probably 250,000. So I would rather save that money, actually. I just don't think it's an adequate insurance for the money that you're going to spend on it.

WESTERVELT: Today the state's quake insurance market is still living with the fallout from Northridge and the perception that quake insurance is an overpriced luxury at best. Many companies simply stopped writing policies after getting stung with nearly 20 billion in Northridge payouts. And for the companies that remained, consumer prices soared for limited coverage. Faced with expensive barebones policies and high deductibles, many homeowners simply walked away.

GLENN POMEROY: Every time there's a natural disaster, we have to learn again the cold reality that the federal government isn't in the business of rebuilding homes.

WESTERVELT: That's Glenn Pomeroy, the CEO of the California Earthquake Authority. The publicly managed not-for-profit was set up by the state legislature after insurance companies bailed in the wake of Northridge. By backstopping risks, the authority has helped dramatically lower rates by more than 50 percent while substantially increasing coverage and flexibility. You can now decide what deductible you want from as low as 5 percent up to 25 percent.

But the agency is still having a hard time getting enough Californians to take a second look at coverage. Overall, Pomeroy says, if you take into account homeowners who've paid off their mortgages and don't have to get insurance at all, barely 10 percent of homes are covered for a quake.

POMEROY: The fact that about 90 percent of the homes in California are in that unprepared state is a great concern. Seventy-five percent of the nation's earthquake risk is right here in California. Scientists say that we're going to get hit again. It's a certainty.

WESTERVELT: Some of the authority's 90 percent problem is from messaging woes of its own making. There were those quake insurance ads with the incongruously soothing music or the ones with the tagline California rocks, featuring forests and sunny beaches.

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UNIDENTIFIED PERSON #3: And always have sunscreen at the ready.

UNIDENTIFIED PERSON #4: Like preparing for the possibility of an earthquake - earthquake insurance from the California Earthquake Authority.

WESTERVELT: About one-fifth of the nation's mortgage debt is held in California, so the nation's economy - big banks as well as the federal mortgage giants Fannie Mae and Freddie Mac - could face enormous hits. Experts caution insurance is only one part of protection, but they agree it'll help mitigate potentially devastating losses. After years of not really trying to scare people into action, the nonprofit Earthquake Authority has pivoted with a new message. The risk is real. Will you be ready? Eric Westervelt, NPR News.

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