Insurers Expect Significant Losses from Los Angeles Earthquake

Strategic Insights -

Allstate Corp., the second largest insurer of California homes, announced Tuesday that it expects an estimated $350 million in losses from claims related to the January 17 Los Angeles earthquake. The company has received over 25,000 claims and has deployed 540 employees and set up seven mobile claims facilities in the affected areas. State Farm Mutual Automobile Insurance Co. has also revised its estimate of earthquake claims it expects to receive from 115,000 to between 90,000 and 95,000.

Key Takeaways:

  • Allstate Corp. expects an estimated $350 million in losses from claims related to the January 17 Los Angeles earthquake.
  • The company has received over 25,000 claims and has deployed 540 employees and set up seven mobile claims facilities in the affected areas.
  • State Farm Mutual Automobile Insurance Co. has revised its estimate of earthquake claims it expects to receive from 115,000 to between 90,000 and 95,000.
  • The majority of State Farm's quake insurance policies in California contain a 5 percent deductible, which may increase the average claim payout.
  • State Farm's average payout is also expected to be higher due to the inclusion of a $2,000 benefit for extended living expenses if the home becomes uninhabitable.
  • Insurers have estimated that about 25-40% of homeowners in the affected areas have earthquake insurance.
  • State Farm has lifted a moratorium on writing new quake policies in the eastern parts of Riverside and San Bernardino counties.
  • State Insurance Commissioner John Garamendi has issued an emergency directive preventing insurers from non-renewing or canceling policies in the affected area until March 18.

Statistics:

  • Allstate Corp. expects to receive over 25,000 claims.
  • State Farm Mutual Automobile Insurance Co. has received 74,000 claims, including 4,000 from auto policies.
  • The estimated cost of the Loma Prieta earthquake in 1989 was $140.3 million in claims.
  • Early estimates suggest that 40,000 structures sustained damage in the earthquake.
  • State Farm's largest catastrophe loss came two years ago with 160,000 claims following Hurricane Andrew, with a payout of $3.6 billion.

Sources:

  • "Allstate Expects $350 Million Loss from Quake" by the Associated Press (UPI Business Writer DAVE McNARY, LOS ANGELES)
  • Spokesman William Sirola of State Farm Mutual Automobile Insurance Co.
  • State Insurance Commissioner John Garamendi