How Do Insurance Companies Evaluate Earthquake Risk?
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Structural Stability versus Ground Motion
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When insurance companies assess the risk for earthquake damage, they compare how well a structure is able to deal with the motion of the ground during the earthquake and the damage that results from this motion. Things that affect how much damage a structure will sustain include the height of building, non-structural additions attached to the building, code used in the original design and the kind of structural system.
Damage Estimates
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Projecting the damage that can result from the relationship between the structure type and how it handles an earthquake can be challenging. The structural types of buildings, how they are designed and their location are all part of a survey that is done of a larger geographical area that has a history of earthquakes. When this data is compiled for several areas, there is more data to base projections on.
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Damages and Losses
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The potential for financial losses for any building also depends on how many people live in or use a building, the local costs for labor and materials to construct it and if the building is a business or a personal residence. These factors can mean projecting a higher loss for a business owner than for an individual who lives in a house by himself. The amount of time to make repairs and get a building safe for use again can also have an impact, especially with a business. A closed business due to an earthquake not only has structural damage and damage to contents, but also lost income due to having to close for a period of time.
Considerations
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Projecting earthquake damage is challenging and not an exact science. Insurers will take into account new building methods, materials, codes and variables that come up in the future. This will help to make damage projections more accurate and reliable for the consumer.
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