Recent Policy & Rate Changes
Why did CEA Change its rates?
CEA is required to base our insurance rates on the best available science and to ensure that our rates are actuarially sound.
In September 2021, the California Department of Insurance (CDI) approved a 2.9% rate increase, which went into effect on April 1, 2022.
Why are CEA Policyholders Experiencing a Premium Increase?
If the insured's premium has gone up, it may be due to one or more of the following factors:
- A slight overall rate increase of 2.9%, to ensure CEA rates remain actuarially sound. This increase applies to all existing CEA policies upon renewal.
- If the reconstruction cost of the insured's home has increased (as indicated by the insured value on the residential policy), the CEA earthquake insurance premium will also increase.
What Do the Changes Look Like?
Although the actual dollar increase will vary from policy to policy, the average annual dollar impact will be an increase in annual premium of:
- $26 for a homeowners policy,
- $12 for a condo-unit owners policy,
- $4 for a mobilehome owners policy, and
- $1 for a renters policy.
What Can I Do To Reduce My Insured’s Premium?
- Choose a higher deductible (up to 25%).
- Adjust or eliminate the amount of coverage for things like personal property.
- If they have the standard Homeowners policy, consider advising them to select CEA’s Homeowners Choice policy which allows them to separate their coverages, or just cover the dwelling itself, which will keep the premium cost down.
- If the insured has a pre-1980 home on a raised foundation, encourage them to apply for the Earthquake Brace + Bolt (EBB) program to receive up to $3,000 toward a seismic retrofit, which could then qualify them for a premium discount ranging from 10% to 25% from CEA (depending on the house’s age).
- If your policyholder lives in an older home, consider advising them to strengthen their older house that was not built to current seismic building codes to receive a premium discount of up to 25% from CEA—although this does cost money up front, in the long term it makes their house safer and strengthens it against damaging earthquakes.
- For mobilehome owners, consider recommending they install an earthquake-resistant bracing system (ERBS) or an approved foundation system. Mobilehomes with an approved ERBS qualify for a discount of 21%.
- Use our Premium Calculator tool to run through the flexible coverage and deductible options, to see how changes in coverage and retrofit discounts can affect your insured’s premium cost.
If none of these options fit their needs, you may wish to consider other insurers that offer earthquake insurance policies. What we care most about is that your insureds are protected against earthquake damage and prepared for the future.
Why did CEA raise rates for 2022?
By state law, CEA is required to establish rates that are actuarially sound, i.e., that we collect enough premium to cover expected costs, thereby maintaining the necessary financial strength to meet our promises to our policyholders.
To have the necessary financial strength to insure all our policyholders, CEA builds claim-paying capacity from many sources, which includes purchasing reinsurance (insurance for insurance companies) and other sources of financial risk transfer.
Due to the exposure growth of CEA (both the number of policyholders and the cost to reconstruct the homes of existing policyholders) over the last few years, CEA has increased the amount of reinsurance it purchases to maintain the necessary financial strength. Additionally, due in part to major catastrophes around the world, the price for each dollar of catastrophe reinsurance purchased has been rising. The combination—needing more reinsurance dollars and increasing prices per dollar—has put upward pressure on CEA rates.
CEA does not receive any state or federal backing (unlike many other government-related natural catastrophe insurance entities); so, we must pass on these cost increases directly to our policyholders in the form of a slight rate increase.
How CEA Rate Changes are Approved
The California insurance commissioner must approve all earthquake insurance products and rates.
CEA is a Not-for-Profit Company
When the California Legislature created CEA in the wake of the devastating Northridge earthquake, legislators mandated that:
- We offer earthquake insurance to all Californians, regardless of their earthquake risk.
- We use the best available scientific information to set our rates.
- Our rates and rate changes are reviewed and approved.
And that we be:
- Publicly managed by a governing board, which includes the Governor, Treasurer and Insurance Commissioner.
- Privately financed, in part by our participating residential insurers when they join our organization, and by premiums we receive from our policyholders.
These requirements allow us to remain financially strong and ensure a firm commitment for us to be careful stewards of our policyholders' funds—we ensure pricing is fair to all policyholders and is tied to their specific earthquake risk.