Nevermind common sense. The California Earthquake Authority created shock waves of its own this month by approving an insurance rate structure that makes sense only in the spreadsheets of actuaries crunching numbers with secret mathematical formulas. The new rates, set to take effect Dec. 1, defy reasonable explanation and threaten to undermine public faith in an agency established to right an insurance industry knocked out by the Northridge earthquake.
The San Fernando Valley would take a particularly hard hit under the new rate structure. Residents could expect to pay 40% more for insurance than the rest of the city. It makes sense, at first glance, given that two major earthquakes have struck the Valley in the past 30 years. Yet residents of Palmdale, which sits atop the San Andreas fault, would pay much less. So would San Fernando and Sylmar residents. For instance, the owner of a house in the Valley could pay $1,540 per year in premiums. The same house could be covered for $540 in Sylmar, $960 in Hollywood and $360 in Palm Springs.
The dividing lines? ZIP Codes that split neighborhoods into arbitrary risk zones. No one disputes that residents who live in high-risk communities should pay more. But it's nonsensical for neighbors to pay drastically different rates because they live on different sides of imaginary lines. Earthquakes don't differentiate between 91344 and 91321 the way actuarial tables do.