Regulators rule quake insurance market 'noncompetitive'Reprints
(Reuters) — Oklahoma regulators faced with a surge in small earthquakes linked to oil and gas production ruled on Tuesday that the state's market for earthquake insurance was not competitive, saying prices charged to consumers were "excessive" after recent rate hikes.
As a result of the ruling, insurance companies will be required to submit proposed changes to earthquake coverage premiums and deductibles to the Oklahoma Insurance Commission. Commissioner John Doak may challenge the rate changes if he deems them "inappropriate," the commission said in a news release.
The policy shift comes after a Reuters examination last month found that several Oklahoma providers of earthquake insurance, including some market share leaders, hiked rates or exited the market altogether amid concerns about growing risk.
Oklahoma, which experienced just a few quakes of magnitude 3.0 or higher through 2009, had more than 900 last year. Officials and scientists link the growing seismic activity to growth in wastewater injection into deep underground caverns by the oil and gas industry as production boomed in recent years.
While the quakes have been relatively small and caused little serious damage, homeowners have rushed to insure their property, increasing insurance companies' exposure to potential damages should a "big one" occur.
At a hearing late last month, Mr. Doak warned insurers that the Commission was concerned about competitiveness and disclosed that the top seven players held 66.5% market share.
In the commission's ruling, Mr. Doak wrote that he has "recently received several filings by insurers seeking to increase the cost and decrease the availability of earthquake coverage.
"Insurers making such filings have not substantiated their need for increased rates based on objective criteria, such as adverse experience," Mr. Doak wrote. "The relationship of insurers' cost to revenue... demonstrates that current rates appear to be excessive."