Malia and Aram, Oakland, CA

We hella love Oakland.  OK I know, that’s totally cliche, but what we love is having friends from all walks of life.  We pretty much had our head in the sand about earthquakes until the lady in the apartment upstairs was telling told me about how after the 89 quake the building down the block was closed for 3 months – the building itself was OK but there was a hazardous pipe breakage or something.  Anyway all the people in that building had to find another place to stay and keep paying rent, or the landlord would rent the apartment to someone else!  That got me thinking…having a little extra cushion after an earthquake is going to make the difference between being able to stay local and be part of the recovery process with our friends and community, or having to move back to Reno.  I guess we can take our head out of the sand now!

Jennifer and Caleb, Santa Rosa, CA

I work as a commercial real estate broker and my husband is a construction project manager, so there’s going to be a lot of work for both of us after an earthquake.  We love Caleb’s daycare but frankly we have no idea if it’s going to be open.  Even if the building is OK, what if the staff can’t come to work because they’re taking care of their own lives?  If we have to hire a babysitter it will cost 3 times as much.  Day care is already as expensive as our rent – it would be a scramble to find that much extra money.

Rick and Susan, Lafayette, CA

Almost Retired

We lived here when Loma Prieta stuck in ’89.  Our relatives in Australia called to see if we were OK – they had the impression that the whole city was in flames and there was mass destruction like in the movies.  But of course the news was only showing the drama like the freeway collapse and the fires in the Marina.  In fact, most everyone’s houses were intact and livable, including ours.  And I expect that’s how it will be in the next earthquake, too – just minor repairs.  And I’m willing to accept those costs as a natural consequence of living in the Bay Area.  But now we’re moving into retirement and god willing we’ll be around for another 30 years.  I would hate to have to draw down our retirement savings for repairs.  Luckily with Jumpstart we won’t have to – it’s like a custom-purpose savings vehicle.

Kristin, Ventura, CA

My life has changed many times over the years.  And there are two things that have made the difference between whether a life change ended up being good or bad: 1) whether I had the support of my friends and family, and 2) whether I had enough money.   After the next big quake I have no idea what will happen but there’s one thing I know for sure – my life will change again.  I will have another “new normal.”   With Jumpstart at least I’ll have the money side of things taken care of.  Hopefully my friends and family will all be rallying, too.

Mick and Nick, Palo Alto, CA

Weekend Warrior

I chose this picture because it’s right before our first century that we rode together.  The previous year I bonked but that year we were together and we crushed it.  I think that’s a metaphor for what’s going to happen after the next earthquake.  We’re going to bind together, in our families, our workplaces, our circles of friends, and find a way to crush it.  (except not literally, you know, since it’s after an earthquake.)  Anyway, all that’s to say I’m not convinced by the fear factor.  We take a pretty rational approach to our finances.  Yes, in all probability the earthquake will happen, but at least as far as we’ve figured out, “total destruction” is fiction except the most isolated cases.  We’re much more interested in an instrument that pays for what’s most likely rather than protecting against the worst possible case.

Disposable Cities? What Christchurch taught us about Resilience

Quake strikes!  You’re safe, your building is standing.  No damage is visible, but soon you learn it has to be torn down… What?

Now think back to that minor crash in your 10-year-old car.  Only a small dent, but your insurance says it’s ‘totaled’ – repair costs exceed the car’s remaining value.  Your payout is the remaining value and you put it toward a new car (or not).

Something similar happened after the M6.3 earthquake in Christchurch, New Zealand five years ago today.  Buildings with as little as 10% damage were torn down instead of being repaired.  Downtown Christchurch was cordoned-off, parts of it for years, with no public access.  Nearly 70% of inside the blockade were demolished.  Recovery and rebuild will now take a generation.

Is this mentality of ‘disposable buildings’ acceptable for our cities?

Chch aerial

Here’s a specific example of the ‘total loss’ of Christchurch’s tallest building, the 26-story Grand Chancellor hotel.  Built with modern anti-seismic building codes, it experienced a noticeable tilt due to major damage in a segment of wall that supported several floors above the open-air drive lane.  An irregular structural layout put particular stress on that column, but all occupants stayed safe.

A formal engineering report points to causes and future-looking building code improvements.

I’m aware of a private engineering study that suggested the damage would be feasible to fix, with repair costs a fraction of the total building value at the time.   So why was it torn down?  It had become a marketing nightmare.  Customers would remember the photos for years.  They would be nervous about safety in aftershocks.  They would avoid the whiff of catastrophe at any cost.

This wasn’t an isolated example.  To the shock and dismay of the public, many Christchurch buildings with only minor damage are now demolished for similar reasons of public visibility.  The EERI post-earthquake report states it succinctly: “significant damage to critical elements was visible in a number of buildings.” (emphasis added)

Nor is the notion of disposable cities unique to Christchurch.  Throughout the US, even in a place like San Francisco where building standards are strictest, we could be in for a major after-shock at the number of buildings ‘totaled’ after the next big quake.

Granted, this isn’t quite the same ‘totaled’ as for car-insurance, but it begs the same question, and at a larger scale: Isn’t it wasteful?  In the long-run, maybe.  But modern-day developed-world construction requires a short-term mentality because of speculative financing.  What’s the right balance?

For many Christchurch buildings, the value of preserving reputation exceeded the cost difference between repair and rebuild.  Perception trumped scientific evidence: in this case, perception of safety.

Lesson: The gap between public expectation and reality means losses can spiral far beyond damage.  This is important not just for the construction industry but also policy and finance.  Closing the gap requires greater resilience – in our infrastructure, but also in our social and economic structures, as well as our individual decisions.

A call to ‘greater resilience’ doesn’t mean always ‘preparing for the worst.’  Building codes, for example, should continue their main goal to protect life-safety, and not necessarily expand to preserve property values.  But developers need ‘eyes wide open,’ first to know about, and then deliberately weigh the consequences of a disposable building, a disposable city.

At the civic level, we need to quantify and communicate future consequences of decisions otherwise pressured by a short-term outlook.  Standardized metrics of sustainability and resilience are an important first step.

As individuals, increasing resilience means giving ourselves options in how we respond.  For some of us, this might mean getting to know our neighbors so we can share resources if needed.  For others, it might mean greater savings or financial products that make it easier to pick up and start again.

Over to you:

Do you expect our cities to be ‘disposable’?  Is that OK?

What steps would build resilience at civic and individual levels?

What’s the Chance Your Insurance Will Pay Out after a Quake?

This is the second post in a two-part series.

In the last post, we saw that home damage is typically ‘all or nothing,’ and your fate depends on only a few factors.

Once you answer that, you might wonder how likely it is to ever see an insurance payout after a quake.  Here I’m talking about conventional insurance, not Jumpstart’s automatic-payout approach, which will pay out regardless of physical damage.

There’s now a user-friendly and scientifically-credible app that helps with this calculation.  With Temblor, you simply open the app, make any needed adjustments to the default location or other data about your home, and Voila!  You see a break-down of your seismic risk – specifically, your chance of exceeding certain damage thresholds.  It’s no coincidence that Temblor uses thresholds equal to common quake insurance deductibles: 5% and 15% of the replacement value. (and also 65%, which could be considered a ‘total loss’ requiring rebuild)

temblor screen shot

For my house in Oakland, Temblor got the location and the square footage (approximately) correct, and it uses a reasonable replacement cost ($300/square foot).  It doesn’t know that the wall around our crawl space is retrofitted, so I adjusted the ‘Year Built or Retrofitted’ from ‘Before 1975’ to ‘After 1976.’

Conveniently, as I was writing this post, Temblor added a new feature describing the likelihood of receiving a payout from an insurance policy that has a 15% deductible.  It tells me a 1 in 11 chance in 30 years, which is about 9%.  Roughly, this is 0.3% chance per year (9% / 30 years).  (This is not statistically precise, but it works for the sake of argument.) In other words, an earthquake policy on my house would pay out on average once in 300 years (1 / 0.3%).

Wait, what?  We know the earthquake will happen, but there’s only a tiny possibility of a payout?

What about a smaller deductible, say 5%?  From Temblor’s output chart, over 30 years I have a 6 in 10 chance of ‘no’ structural damage (I interpret this to mean less damage than a loss of $30,000, which would be a 5% deductible).  So the chance of exceeding a 5% deductible is 40% over 30 years (100% minus 60%).  Roughly, this is a 1.3% chance per year (40% / 30 years).

The next obvious question is, ‘Is this worth it’?

Continuing with the 5% deductible, I should then expect premiums to be about 1.3% of the potential payout.  Using the CEA premium calculator, and a $600,000 rebuild cost, premiums at my house would cost about $3,000 per year.  From this I can infer a $225,000 expected payout ($3,000 / 1.3%), which means expected losses of $255,000 ($225,000 plus $30,000 deductible).  This is more than 40% of my rebuild cost!  But per the previous post, my house should only experience a 40% loss if I have a major vulnerability.

What about a 15% deductible?  This would be a $1,600/year premium for my house.  And along the same lines, $1,600 / 0.4% chance per year = more than $400,000 of damage.  Either way, CEA seems to think my house will be a total loss.

What this means, to me at least, is that conventional insurance is ‘worth it’ only if you think a total loss is possible.

And total losses are typically limited to houses with a known vulnerability. (Refer to Part 1 in this series.)

Here’s another perspective: Temblor also tells me the chances of a total loss (>65%) are 1 in 29 (3.4%) over 30 years, which is an annual probability of (roughly) 0.1% (one in 1,000 years).  In this case, let’s use the highest deductible of 25%, which is $150,000 ($600,000 * 25%).  In a total loss, my payout would be $450,000 ($600,000 minus $150,000).  So my premium ‘should’ cost around $450 per year ($450,000 * 0.1%), which still doesn’t match with the $1,100 premium that CEA estimates for my house with a 25% deductible.

Why don’t the numbers work out?

Simply put, there’s a factor of 4 to 5 between your ‘true’ risk and the cost of annual premiums, because there are too many ‘hands in the pot.’  Intermediaries drive costs through the roof.  Repeat: currently, conventional earthquake insurance costs up to five times more than the underlying risk.

Technology is quickly making it possible to minimize intermediaries as much as possible.  That’s the first of two reasons Jumpstart will be so much more affordable.  The second important reason is that Jumpstart covers just-enough to get you back on your feet, but not total losses.

Over to you: Do you expect a payout from conventional insurance when the quake occurs?  Why or why not?

 

Postscript: How Conventional Quake Insurance Works:

A conventional homeowner’s earthquake policy typically accompanies your standard homeowners’ policy (for fire and theft).  The limit (maximum payout) is the replacement value of your house, as specified in your standard policy.  For earthquake, you can choose from various deductibles specified as a percentage of that replacement value, for example, 5%, 10%, 15%, or 25%.  Just as for car insurance, the higher the deductible, the lower the annual premium.

Example: If you have conventional quake coverage on your home, with an insured replacement value of $500,000 and a 10% deductible, you would be responsible for the first $50,000 of property damage losses, and your insurance would pay for losses exceeding $50,000 up to $500,000.  You would be responsible for losses exceeding $500,000.

Important Note: Replacement value does not necessarily equal the market value of your home.

Earthquake-Safe Hospitals, Thanks to the Sylmar Quake

If a damaging earthquake could have a silver lining, it would be the safety improvements that follow it.  That silver lining for the 1971 Magnitude 6.7 Sylmar earthquake in southern California, 45 years ago today, is safer hospitals.

The Sylmar quake caused several dramatic consequences, including one similarity to last week’s M6.4 Taiwan earthquake: its recorded ground motions were surprisingly high for a relatively small magnitude.

Olive View hospital campus, showing two-foot offset in first story and collapsed stair structure. By USGS (Kachadoorian), public domain

Olive View hospital campus, showing two-foot offset in first story and collapsed stair structure. By USGS (Kachadoorian), public domain

But the most significant outcome of the Sylmar quake was substantial damage to hospitals, including the Olive View and Veterans Administration complexes.  It was bad enough that this damage caused most of the quake’s 58 fatalities, but even worse was the loss of hospital capacity to care for people injured by the quake.

On the other hand, Sylmar was a success story for schools.  Thirty-eight years earlier in the 1933 Long Beach earthquake, school collapses led to emergency legislation requiring schools to be built to a higher seismic standard than other buildings.

Schools built after 1933 using the higher standards experienced significantly less damage than pre-1933 facilities.  (The Sylmar quake occurred at 6am local time when children were not occupying schools.)  This sent a strong signal: safety legislation works.

After the Sylmar quake, lawmakers and the public agreed that a shortage of post-quake health care is inexcusable.  In 1973 legislation was passed requiring a higher standard of construction for hospitals, so they are reasonably capable of providing services to the public after a disaster.

Hospitals built since 1973 conform to the new standard, while hospitals built prior have been required to upgrade.

The Sylmar earthquake also precipitated other important programs including:

Each earthquake teaches us something.  What have you learned from a quake?

Will Your House Survive an Earthquake? Only a Few Factors Affect Your Fate

This is the first post in a two-part series.

When I meet someone for the first time and mention I’m a structural engineer, they usually nod blankly and change the subject.  But occasionally I get the polite question: “So – will my house withstand the Big One?”

Only a few factors affect your fate.

Post-quake observations show that outcomes are typically ‘all or nothing’ – at least for the wood-framed houses typical in the US, Canada, and New Zealand.

Damaged chimney at my friend Alex's house after the Christchurch quakes

Damaged chimney at my friend Alex’s house after the Christchurch quakes

In real life, quake damage is “nothing, nothing, oops,” as my friend Tom Larsen likes to say.  In an earthquake, most houses experience ‘nuisance’ damage like fallen chimney bricks, diagonal cracks above doorways, and broken dishes.  Only a small minority experience a ‘total loss.’

Let’s look at some numbers:  In the 2011 Christchurch, New Zealand earthquake (a good comparison for reasons stated below), initial reports estimated that 10,000 houses would be demolished, in a region of about 160,000 total houses.  A later report estimated 8,000 demolitions.  That means 5%, or only 1 in 20 were a total loss.

An ‘Oops’ can happen for any of the following conditions (again this applies only to wood-framed houses).  The good news is that most of these conditions still don’t jeopardize your safety.

If you have any of these conditions, then fix it if you can.  Until then, be sure to keep your camping gear where you can access it after the quake!  And, if you don’t already, consider carrying conventional insurance (not just Jumpstart).

UNBRACED WATER HEATER: The gas water heater is not strapped to the wall, which means it can topple and cause a fire.

Cripple Wall Retrofit image courtesy Simpson Strong-Tie

Cripple Wall Retrofit image courtesy Simpson Strong-Tie

UNBRACED CRIPPLE WALL: The house can slide off its foundation, either because:

  • The house has a brick foundation, or
  • The framing is not properly connected to the foundation. This includes bolts from the wood framing down into the concrete, as well as sheathing (plywood) around the perimeter of crawl space, if there is one.

Fix: A cripple wall retrofit with bolts and sheathing typically costs less than a bathroom remodel.  (Replacing a brick foundation can be more.)  Some cities even offer partial rebates.  Next time you schedule work on the house, add a seismic retrofit to the list.

GEOLOGIC HAZARD ZONE: The house is located in one of the following:

  • Active fault zone (Alquist-Priolo zone)
  • Landslide susceptibility zone or on an active landslide
  • Liquefiable soil – unconsolidated soil that can ‘turn to quicksand’ when shaken. This includes, but is not limited to, most sites on ‘reclaimed land’ or ‘land fill’ (not ‘landfill’).
  • Rockfall zone where boulders could tumble from above.

Fix? A geologic hazard is not so easy to fix.  But it was disclosed when you bought the house, right?

example of a soft story apartment building with tuck-under parking

example of a soft story apartment building with tuck-under parking

SOFT STORY: The house has a ‘soft story’ where the first story has few or no walls. This occurs more often for apartment buildings and is less common for single-family houses, except those ‘on stilts.’

  • Soft story conditions can be retrofitted, but each case is different.

URM: The structural walls of the house are made of unreinforced brick masonry (URM).

  • Again, retrofits are possible but each case is different.  Some cities have URM ordinances.

Back to Christchurch: of the 185 fatalities, three were in houses, based on available information.  And all three of those were caused by rockfall.  But there were multiple injuries due to bricks falling from chimneys.  Please don’t sleep near a brick chimney!  Next time you re-roof, replace it with a lightweight enclosure.

From these descriptions, you can see that many – no, most houses don’t have a major vulnerability that could cause a total loss.  Perhaps that 1 in 20 figure is pretty near the mark, but definitely have a look at your cripple wall.

Over to you: Do you think your house will survive an earthquake?  Are there other conditions you’re curious about?  What have you done to protect yourself?

 

Postscript:

I used Christchurch as a point of reference for two reasons:  First, the construction materials and methods are similar to that in the USA and Canada, in contrast to earthquakes in Turkey, Japan, or Chile.  Second, it’s ‘clean’ data – all of greater Christchurch experienced roughly the same shaking, as opposed to the 1989 and 1994 earthquakes in California, where we would have to argue about what proportion of houses actually experienced strong shaking.  Plus, it’s more recent than the California quakes.

The 2010-2011 series of earthquakes in Christchurch included a Magnitude 6.3, six miles from the city center; a Magnitude 7.1, five months earlier, 25 miles west of Christchurch; and several M5+ aftershocks in the months following the M6.3.  All the fatalities and most of the damage occurred in the M6.3 event.

Jumpstart’s Origin Story: Overturning Conventional Wisdom

How did Jumpstart originate?  By way of explanation, I share this message I sent recently to the editor of San Francisco Magazine:

Date: Jan 29, 2016

Subject: Gary Kamiya’s Oct 2014 sidebar inspired my startup

Dear Gary Kamiya,
I’m writing to let you know that one of your brief sidebars was the inspiration for my current venture – Thank you!

As a licensed structural engineer, I have been working to reduce earthquake risk for 20 years. What bothers me most about my work is “selling to fear.”  But I felt enormous inspiration – and relief! – upon reading your sidebar, “The Case Against Preparedness,” in the Oct 2014 issue, which also featured a 25-year retrospective of the Loma Prieta earthquake.

By overturning conventional wisdom, your article made me realize how powerful it could be to tap into natural human resourcefulness. My venture aims to transform the thought of an earthquake into a sense of hope rather than doom.  It’s earthquake insurance that will pay out a fixed amount fast and automatically. Shifting the mindset, like you did for me.

I hope to get a chance to express my thanks in person some day, maybe after the business is thriving.

Thanks again!
Kate

Reply: Feb 2, 2016

Well, this sure is nice, Kate. Thank you for sharing, and congrats on starting this new business. I will definitely pass your note along to Gary!
All best,
Jon Steinberg
Editor-in-chief
San Francisco magazine