Actually, insurance companies don't want the model to go up. I work at a company that writes Earthquake and Hurricane insurance, and we use RMS extensively to model and price our risk(in fact, part of my job is writing the code that pushes our policies into RMS). There are 2 things at work that you aren't taking into account.
1.) You don't have to have catastrophe insurance. At a certain point, people can't afford/won't pay for insurance, and at that point, you start losing money as your customer base shrinks. And even if you are required to (mortgage), at a certain point, people just can't afford it, and just start hoping no one will notice or take action.
2.) Insurance companies have insurance. Insurance companies pay for a huge insurance policy, known as re-insurance, to cover them, to pay out claims against their policies in huge events. Those re-insurance companies look heavily at the risk in your book of policies, and use RMS to determine their risk accordingly. They, like a normal insurance company, are looking to get as much money as possible, but there is much less competition(how many people can afford to pay out 10-100 billion dollars when an earthquake takes out half of LA). When this costs rise, the cost gets pushed through, or erodes into profits, as the Insurance companies try to avoid problem 1.
