Photograph by FEMA News, January 17, 1994
It’s hard to believe that it’s been twenty-five years since California was rocked by the infamous M6.7 Northridge Earthquake that struck in the early morning hours of January 17, 1994, and was the strongest North American earthquake ever recorded in an urban area. It destroyed thousands of homes, displacing about 22,000 people and causing $20 billion in residential damage alone.
Insurance companies were overwhelmed by the huge financial losses, and most of them representing homeowners in California severely restricted or stopped offering new policies because the law required them to also offer earthquake coverage. In response to this homeowners-insurance market crisis, the state created the California Earthquake Authority (CEA) as a publicly managed, privately funded organization to give home insurers a new way to continue offering earthquake coverage.
Flexible Policy Options Make It Easier than Ever to Provide Financial Security
When CEA opened its doors in December of 1996, it offered a single, bare-bones “mini-policy” designed to provide basic coverage. Longtime agents may recall the caps and limitations of those early policies.
Fast-forward 23 years, and the earthquake insurance landscape looks very different. CEA now offers robust policies with several pricing options to appeal to the unique needs of all your clients, from those seeking only catastrophic coverage, to those who want to cover every type of associated loss. Whether your insureds own or rent, and whether they live in single-family dwellings, multi-unit buildings, or mobilehomes, there’s a CEA policy that’s right for them.
CEA has also grown extensively since Northridge and today has more than 1 million policyholders, who now benefit from more coverage choices, deductible options and affordable rates. In addition, CEA offers financial strength with more than $16 billion in claim-paying capacity and an “A– (Excellent)” financial strength rating from A.M. Best Co. If the Northridge earthquake were to reoccur today, CEA could easily cover the more than $6 billion in damage claims from our policyholders.
CEA’s mission also includes mitigation, and through our Earthquake Brace + Bolt program we offer financial incentives of up to $3,000 for the seismic retrofitting of older houses in select high-hazard ZIP Codes statewide. More than 7,200 of those retrofits have been completed so far for California residents regardless of whether they have a CEA policy. For those who are CEA policyholders and have properly retrofitted, they can receive up to 20 percent off their CEA policy premium.
Use the Anniversary to Get the Word Out
Despite all of these improvements, many residents have still not learned the lessons of Northridge. If a Northridge-magnitude earthquake were to strike California again—which scientists say is a near certainty—too many Californians could be on their own to rebuild their houses, and to live and eat elsewhere until important repairs were completed.
Today, the area affected by the Northridge earthquake is home to about 2.6 million homes that were built before 1980, when seismic building codes were put in place statewide. During past earthquakes, such as the Northridge quake, older, unretrofitted homes have performed poorly—suffering significantly more damage than retrofitted or newer ones. Older houses that have not been braced or bolted to their raised foundations are at risk for toppling off their foundations when the ground shakes.
Glenn Pomeroy, CEA’s CEO, remembers the aftermath of the Northridge earthquake, and knows the importance of making California more earthquake-prepared.
“Many of the hardest hit areas became known as ‘ghost towns’ when residents abandoned entire neighborhoods because building owners could not afford the cost to rebuild,” he says. “We need to double down on our commitment to earthquake resilience to ensure the ghost towns never return.”
For more about the 25th anniversary of Northridge, be sure to watch Glenn’s video remembrance.
It’s important to remember the Northridge earthquake, which affected so many lives. But it’s not enough to commemorate this tragic event. Instead, use the anniversary as a conversation starter to talk with your clients about seismically retrofitting their older house, the value of earthquake insurance, and the need to protect their financial assets against upcoming earthquake damage.
Visit the agent store for the tools you need to educate your clients about earthquake risk, and help them find the policy that’s right for them.