U.S. Senators Dianne Feinstein and Barbara Boxer (both D-Calif.) introduced legislation to lower the cost of earthquake insurance for Californians and individuals who purchase coverage from a non-profit, state-run earthquake-insurance program.
The Earthquake Insurance Affordability Act allows non-profit insurance programs, including the California Earthquake Authority (CEA), to access federal loan guarantees and more effectively and efficiently capitalize for catastrophic earthquakes. This will allow them to provide lower rates to homeowners and empower more Californians to purchase protection in anticipation of California’s next major earthquake.
“The tragedy and devastation of the recent earthquake in Japan was a real wakeup call,” said Senator Dianne Feinstein. “We cannot prevent an earthquake, but we must do everything we can to prepare for one by ensuring homeowners have access to affordable earthquake insurance coverage.
This legislation will allow homeowners to get back on their feet and recover more quickly in the event of a significant earthquake.”
Senator Boxer said, “I am proud to join with Senator Feinstein to introduce legislation that would help homeowners in California access affordable earthquake insurance, which is critical to helping residents and communities recover and rebuild after the devastation of an earthquake.”
In the first five years this legislation is in effect, nearly half a billion dollars in reinsurance costs would be saved and passed along to consumers in the form of lower rates. The California Earthquake Authority could cut premiums by 30 percent or deductibles by 50 percent. This could allow at least 700,000 additional California homeowners to be covered by earthquake insurance.
The entire cost of the loan guarantees and the administration of the program will be borne by the participating state programs and will come at no cost to federal taxpayers.
Following major disasters, the federal government spends billions of dollars in response efforts. By enacting the Earthquake Insurance Affordability Act and increasing the number of individuals with insurance, the cost of disaster recovery to the federal government could be substantially lower.
FEMA cannot make payments to individuals who have insurance coverage; therefore every family that purchases earthquake insurance as a result of this bill is one less family that FEMA may have to supplement when disaster strikes.