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2005
Insurance Reference Manual
Personal Insurance Federation of California Insurance Reference Book
NORTHRIDGE EARTHQUAKE:
THE FACTS ABOUT INSURANCE INDUSTRY CLAIMS HANDLING
The Personal Insurance Federation of California (PIFC) represents insurers that sell nearly 50 percent of the earthquake insurance in California. This includes insurers that now sell earthquake insurance both inside and outside the California Earthquake Authority (CEA). The member companies include:
State Farm Insurance Companies, Farmers Insurance Group, SAFECO Insurance Companies, 21st Century Insurance Companies and Progressive Casualty Insurance Companies.
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On January 17, 1994 a quake struck Northridge, California with a magnitude of 6.7 on the Richter Scale. In a matter of 40 seconds 60 people died, 12,000 were injured, 200,000 homes and apartments were destroyed or damaged, another 114,000 buildings were damaged, destroyed or left uninhabitable, thousands of vehicles were destroyed or damaged, and several major roads and bridges were left defective. Claims filed reached 600,000 according to the Institute for Business and Home Safety and the National Geographic, April 1994.
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Within hours of the quake, thousands of claims adjusters from throughout the United State were on their way to the San Fernando Valley in California. They joined hundreds of insurance agents and California insurance industry personnel from over 100 companies in the search for insured earthquake claimants. Working around the clock with disaster teams from organizations and state and local government, insureds were found and the claims process was quickly underway.
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The initial insurance estimate of damage ranged from $1 to $1.5 billion. By October, 1994, the Property Claims Services (PCS), a division of the American Insurance Services Group, estimated the insurance losses at more than $9 billion. One year later the estimate was at $12.5 billion and today, the total insured losses from the Northridge earthquake have reached $15.3 billion making it the most costly insurance disaster in U.S. history.
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NOTE: As of today, it is estimated that more than 99.9 percent of the near 600,000 Northridge insurance claims totaling more than $15.3 billion have been settled. Claimants in Northridge have full access to legal redress because failure on the part of an insurer to properly pay claims is subject to first-party bad faith claims.
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From 1968 to 1994, PIFC member companies collected approximately $1.8 billion in earthquake premiums. These five companies have handled 208,468 Northridge insurance claims resulting in settlements of $7.2 billion, which represents almost half of the $15.3 billion paid for the entire disaster and $5.3 billion more than was collected in premiums.
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PIFC's member companies have approximately .1 of 1 percent of their total number of claims remaining to be settled. Its member companies are working with the few remaining claimants to complete repairs.
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The Senate Insurance Committee's Northridge earthquake website has received fewer than 200 complaints. This is a .032 percent complaint ratio. Out of the 600,000 claims filed, it is estimated that there are less than
1 percent outstanding claims industry-wide for the Northridge earthquake. If you compare this complaint ratio with the number of claims paid in the Oakland Hills fire in 1991, the remaining percentage of claims from Northridge would equal less than one complaint from the total number of victims of the Oakland Hills fire.
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