Please, No Earthquakes in My Backyard
By John Millrany - March 6, 2001If there’s no earthquake in your backyard, should you have to worry about property damage issues?
What appears to have been purely coincidental, President Bush has proposed a new disaster insurance policy—on the same day of Seattle’s major earthquake that has cost $2 billion and climbing.
As far as California is concerned, Bush’s proposal should be pitched on the slag heap of bad ideas.
The Bush plan would effectively require public buildings to be covered by disaster insurance, or face the loss of eligibility for disaster aid. That could save the Fed millions of dollars per year, suggests U.S. Senator Dianne Feinstein (D-CA).
Many analysts have long maintained that, given California’s vulnerability to killer-size quakes, Golden State cities from San Diego to Crescent City will always be subject to aid, whether it’s government or private insurance. For example, Tim Ransdale, executive director of the California Institute of Federal Policy Research, said no insurers are willing "to step up to the plate" to write earthquake insurance.
At least nine insurance companies bailed out of earthquake insuring following the 1989 Loma Prieta quake that ripped parts of San Francisco, Oakland and the Santa Cruz Mountains and resulted in dozens of deaths and billions in property damage dollars. Things got even worse after the 1994 Northridge quake—the costliest natural disaster in American history with over $40 billion damage.
Part of the dilemma: the lack of availability causes prices to go through the roof. In just one projection by the University of California, coverage for the far-flung educational institution would cost at least $12 million annually to cover its buildings.
The Bush plan was disclosed Feb. 28 in the president’s budget outline and essentially projected an initial annual savings of $83 million if implemented.
But a lot of Californians just aren’t buying it. Such a plan by the Fed, according to Dallas Jones, Director of the state Office of Emergency Services, would clobber local taxpayers, forcing payment for new and unpredictably costly premiums. Plus, there seems to be a tidal wave of cynicism for buying earthquake insurance in the first place because (a) it’s bloody expensive and (b) the Fed has always "been there" to give that extra needed hand.
Stay tuned. Californians may be chatting away on the grapevine with the likes of, say, Missourians—don’t they face a lot of floods?—Oklahomans with their tornadoes?—Floridians and their hurricanes?
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