Earthquake insurance premiums to rise 15.5%

Earthquake insurance premiums on households are expected to rise by an average of 15.5% from July 2014. The reason for the increase is due to the growing risk of another major earthquake. Also, the insurance industry saw a surge in payouts following the Tohoku earthquake which has drained the reserve fund. 

The average annual premium on a concrete or steel-framed residence with 10 million Yen coverage in Tokyo would increase from 16,900 Yen to 20,200 Yen. In disaster-hit areas in Iwate and Fukushima Prefectures, premiums may rise by as much as 30%. Meanwhile, some areas such as Yamagata Prefecture may see premiums fall.

To provide some relief, discounts on premiums may increase to as much as 50%. These discounts may apply to buildings built to high earthquake resistant standards.

The current planned increase does not take into account the revised estimates of damage predicted from a Nankai trough earthquake, which is forecast to cause 220 trillion Yen in damage. It is possible that there may be another increase in premiums in 2015 to account for this revised estimate.

The last two hikes in earthquake premiums occurred in 1980 (two years after the Miyagi earthquake) and 1996 (one year after the Great Hanshin earthquake). 

Sources:
Jiji Press, March 26, 2013.
The Nikkei Shimbun, March 26, 2013.
The Sankei Shimbun, March 26, 2013.

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