Oklahoma regulators grappling with a massive increase in small earthquakes in the state linked to growing oil and gas production said on Tuesday they were concerned with spiking rates for earthquake insurance coverage and diminishing competition among insurers.
At a public hearing on the rate hikes, Oklahoma Insurance Commission officials warned they may begin requiring companies to submit proposed rate hikes for prior Commission approval due to heavy market concentration, a proposal opposed by insurance industry representatives in attendance.
“We think that, at present in Oklahoma, the competition is not sufficient or adequately regulated,” said Gordon Amini, the Commission’s senior attorney.
Oklahoma, which used to have a couple of earthquakes above magnitude 3.0 a year prior to 2009, is now struck with two a day or more. Officials blame the increased seismic activity on oil and natural gas disposal wells.
Most of the hundreds of quakes that now strike the state each year have caused relatively little damage but homeowners have been rushing to insure property.
The hearing comes as concerns about earthquake risk exposure has prompted several insurers, including some market share leaders, to either hike rates or stop covering earthquakes.
As insurance levels rose, 12 companies filed rate increases of between 4 percent and 300 percent since 2011, and “market concentration has significantly increased,” said the Commission’s chief of market regulation Brian Gabber.
While that is a small portion of the 119 companies actively writing earthquake insurance in Oklahoma in 2016, the market share held by the top seven players has grown to 66.5 percent in 2015 from 62.8 percent in 2012, data presented at the hearing showed. The total number of companies writing earthquake insurance had also fallen from 140 in 2014.
The Commission did not identify the 12 companies that had raised rates but regulatory filings seen by Reuters show that as No. 2 earthquake provider Farmers Insurance’s market share steadily increased to 17.5 percent in 2015, concerns about risk exposure prompted it to hike premiums and deductibles in 2014 and 2015.
Travelers Indemnity, the No. 1 writer of earthquake insurance between 2010 and 2012, saw its market share shrink dramatically after it stopped offering new earthquake coverage in 2014, a move filings show was based on concerns about earthquake exposure. Travelers’ retreat helped boost the market shares of Farmers and market leader State Farm.
Since 2010, homeowners have filed 1,094 earthquake claims, though most were not paid as often they were for less than their deductibles. (Reporting by Heide Brandes; Writing by Luc Cohen in Houston.)