Earthquakes – Not Always a Natural Disaster
Recent news of the September 3rd earthquake triggered a wake-up call for many geological agencies across the nation. The good news is that since the 5.6 magnitude earthquake occurred about 15 kilometers from Pawnee, a lower population area, no deaths or serious injuries were reported. There is, however, substantial property damage that must be dealt with.
What makes this earthquake so unusual is that it did not occur near a fault line and investigations are underway to determine if the quake was induced by drilling rather than mother nature. The U.S. Department of Energy even has a term for this suspicious activity; Induced Seismicity. Simply put, induced seismicity is earthquake activity that results from human activity rather than historical activity.
What it Means to Residents
If your home in Oklahoma or any other state for that matter is damaged or destroyed by an earthquake, does it really matter to you that mother nature caused it or that drilling caused it? No, what matters to you is that your home is repaired or replaced by your insurer. In order for this to happen, you must have earthquake insurance along with homeowner’s insurance.
There are many unanswered questions regarding wastewater disposal wells causing earthquakes, and the investigations are ongoing. Suffice it to say for now, if your home is in an area that has historical earthquake activity or there are wells located in the area, you should be concerned.
Is Induced Seismicity New?
According to an article published May 17, 2016, by PHYS.ORG, humans have been causing earthquakes since the 1920s. This article clearly concludes that induced seismicity has been going on for quite some time. In fact, according to Cliff Frohlich, a senior research scientist at the Institute for Geophysics at the University of Texas, “the earthquakes are caused by oil and gas operations, but the specific production techniques behind these quakes have differed over the decades.” Also, the article states that since 2008, Texas’ rate of earthquakes that are greater than a magnitude 3.0 has increased from two to twelve per year. The article goes on to conclude that the additional earthquakes are happening in areas that are about one to three kilometers from petroleum production disposal wells.
For now, homeowner’s should accept that well drilling may very well lead to earthquakes, they probably have for a long time, and will most likely continue into the future. Although we should understand that there may be differing opinions on the issue, we should accept the fact that the risk is real and present and not put off taking action until the final verdict is delivered.
The Agent’s Response
Certainly, every agent or broker that holds themselves out as a trusted advisor has a duty to approach the subject of earthquake coverage with every client that owns their residence or commercial property. The agent’s responsibility is quite simple but critical nonetheless. They must identify the need and offer an affordable solution to their client or prospective client.
In order to effectively transfer your client’s everyday risk to an insurer you represent, you must first convince your client that the risk exists. This can be accomplished by offering relevant information and then applying it to each client’s individual situation. It makes perfect sense to use news articles to paint a picture that will help the client understand a risk that they may have given no thought to. It also makes sense to let your client know that most homeowner’s who have experienced earthquake damage may have never experienced fire damage, and yet they always insure against loss from a fire and not an earthquake because they aren’t located near a fault line.
For those client’s and prospective clients who believe their government (FEMA) will help them with earthquake damage, it’s critical to dispel this myth. FEMA may help them get an emergency loan for a portion of the cost to rebuild, but the result will be two mortgages instead of one. Yes, in some areas, earthquake insurance can be expensive, but when you compare the annual premium with the cost of rebuilding without insurance, the price problem should be a non-starter for the agent that sells value and benefits rather than price.