In Obsessed to a Fault, Liam Pleven explains what the last “big one” did to California — and to the insurance industry:
The map on the computer screen inside GeoVera Holdings Inc.’s headquarters here glows red and orange to mark where the San Andreas Fault ruptured 100 years ago today, killing at least 3,400, knocking down city block after city block and spawning fires that burned down much of San Francisco.The 1906 quake did $235 million in damage — worth nearly $5 billion today — wiping out the U.S. insurance industry profit for the preceding 47 years, according to Swiss Re, a major reinsurer. Today, the disaster insurance market in California is in many ways broken down. Some experts think a repeat of the 1906 quake could lead to damages of far greater than Hurricane Katrina, which cost insurers about $40 billion. Yet less than 15% of California homeowners own quake insurance. Many find coverage too expensive and are willing to take their chances.
Of course, it’s difficult to sell people disaster insurance:
“There’s a real problem because we tend to bail people out if they don’t buy insurance,” says Richard Zeckhauser, professor of political economy at Harvard University.