There is a high element of adverse selection in earthquake insurance. Exposure to earthquake is location-specific whereas exposure to fire is universal. Usually, only those risks that perceive themselves to be located in a high-risk area consider purchasing earthquake insurance. Another unique element of earthquake insurance is that most insurers require a waiting period, usually from 10 to 30 days, before they will bind coverage for a new applicant. Furthermore, most insurers place a moratorium on writing new earthquake coverage when there has been a recent earthquake in the location in question.
Insurers wish to avoid adverse selection.
When there has been recent seismic activity, insureds rush to add earthquake coverage. After the panic dies down, they cancel the coverage. The exposure to risk and the expense to insurers are usually greater than the premium earned, so insurers choose not to bind coverage in this circumstance. V. Masonry Veneer Buildings Masonry veneer buildings are defined as buildings having exterior walls of combustible construction veneered with brick or stone. The masonry veneer is highly susceptible to damage by earthquake.