Inducing the Private Purchase of Earthquake Insurance through the Involvement of the Insurance and Mortgage Finance Industries: An Overview of Potential Problems

Private procurement of earthquake insurance is often advocated as a preferred means to mitigate the economic consequences of severe earthquake damage. For recognized reasons, a large majority of residential property owners have demonstrated a marked reluctance to purchase earthquake insurance. Suggestions that the property damage/casualty insurance industry and/or the mortgage finance industry act as catalysts to stimulate widespread private acquisition of earthquake insurance protection have not been embraced by either industry for a number of understandable reasons. Nonetheless, interest in, and the potential for, such intervention remains strong, and many current obstacles might prove surmountable. One such obstacle is the risk of antitrust violations arising in the course of the interactions which might be necessary if either or both referenced industries actively engaged in creating a widespread demand for earthquake insurance. Legal counselling by antitrust specialists could permit such a risk to be largely avoided and substantially diminished.