California Earthquake Authority Chief Talks About 1 Million Policies

By | January 18, 2018

Glenn Pomeroy, CEO of the California Earthquake Authority, is as enthusiastic of an earthquake policy salesman as you’ll find anywhere.

Pomeroy has headed the state’s privately funded, publicly managed seller of earthquake policies for the past 10 years.

Since Pomeroy, a former North Dakota Insurance Commissioner, has been at the helm of the CEA, the organization has seen rapid growth, recently reaching just over 1 million policies in force.

Pomeroy was attending a recent meeting of the California Insurance Wholesalers Association in La Jolla when he agreed to speak with Insurance Journal about the CEA’s growth and earthquake insurance in general. This has been edited for clarity and brevity.

Insurance Journal: You recently made an announcement that the CEA has surpassed a million policies. Can you tell us a little bit about that?

Pomeroy: We’re real pleased. I’ve been working for a long time to reach a pretty exciting benchmark for us, where now we can say that we insure over 1 million households throughout the state of California. The CEA was formed a little better than 20 years ago, at a time when most of the private insurance market didn’t want anything to do with earthquake insurance for homes anymore.

That left the state in a lurch, and the state’s response was to create the California Earthquake Authority as a facility for insurance companies to join, and then they could offer earthquake insurance, going forward, by offering a policy that we bore the risk for. That’s how the CEA is structured.

It took us a couple of decades to gradually work away at it, lowering rates wherever possible, because we’re not a for profit organization, improving our product options dramatically, beginning in 2016, offering a wide range of deductible choices now, and a number of other good options for consumers to choose from.

Slowly, but surely, even during the tough economic times of the recession a few years back, our policy count would continue to grow. Each year, over the past 10 years, we grow about 6,700 policies into the next year.

Beginning in 2016, when we rolled out all these new product choices, we grew by 52,000, and then 2017, the year just concluded, by the time we get our books all closed for the year, we’re going to grow almost 90,000 policies last year.

We’re pleased that after a couple of decades, with our experience and hard work, and trying to meet the needs of California consumers, we’re pretty confident that we have the product now flexible and priced accordingly, for people to choose the policy that meets their own needs and budget. They’re responding by insuring as never before.

IJ: You mentioned new products, what kind of products are we talking about?

Pomeroy: When the CEA was formed, we were formed just to offer the bare bones, what’s called the mini policy, just a stripped down set of benefits that a company has to offer, in order to be in the homeowners market.

Really, the mini policy is pretty minimum, not much. 5,000 bucks for personal property coverage, $1,500 for additional living expense coverage, for example, the reconstruction costs of the home, the coverage amount for the homeowners policy, that’s matched in the CEA policy, but the other benefits that are contained were pretty minimum.

Now we offer up to $200,000 worth of personal property coverage in a CEA policy, up to a $100,000 worth of loss of use, and now a wide range of deductibles for people to choose from.

It used to be, they only could get a 15 percent deductible, which a lot of people thought was too high. Now, the consumer can choose a deductible all the way down to 5 percent, or up to 25 percent. Five, 10, 15, 20, 25 percent is the range of choices, that the size of the deductible will determine the amount of premium they pay.

IJ: We haven’t had an earthquake in a while, and we know people have a short memory. Does this mean you have to work harder to sell policies?

Pomeroy: Earthquakes are a tough risk for everyone, to manage themselves personally, to take on as a company, because they don’t happen very often. They’re infrequent, but when they occur, they can be devastating.

It’s important, because of their infrequency, to always be getting the word out, “Remember folks, this is still earthquake country, and just because we haven’t had a really big earthquake in a decade or two, doesn’t mean earthquakes have sort of forgotten about California.”

California is home to two thirds of that nation’s earthquake risk. Scientists say there’s a 99.3 percent chance of a 6.7 earthquake occurring sometime in the next 30 years. 6.7 is the size of that big North Ridge earthquake that occurred back in the early 1990s.

I think even a little more troubling, those same scientists say there’s actually a 75 percent chance of a 7.0 occurring during that same span, and a 7.0 is three times stronger than North Ridge.

Part of our mission is to continue to get the word out to Californians in all formats, to remind folks, not to cause them to live in fear, because we don’t need to live in fear, but just to remind everybody that we live in earthquake country, and we need to be prepared.

IJ: You mentioned that live in earthquake country. We also live in wildfire country, and we’ve had a recent spate of wildfires. Has this done anything to policy sales, or inquiries into earthquake policies?

Pomeroy: When natural disasters occur around the world, even if they’re not in California, it does tend to result in an awareness blip, that Californians pay more attention to natural catastrophe risk.

We had a horrible fall, beginning in late August, when there was a series of devastating, deadly earthquakes in Mexico, followed by the hurricanes that slammed into the Gulf Coast of the United States, and now the deadly wildfires that raze through California, both north and south, over the last few months.

All of those things combined have led, in our opinion, to a bit of an increased awareness that Californians have, about the need to manage their risk per natural catastrophe. We think that is contributing to the really unprecedented growth we’re seeing in our policy sales.

Listen to the full interview below:

Topics California Catastrophe Natural Disasters Wildfire

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