CNN-TV – AMERICAN MORNING 6:00 AM EST
KIRAN CHETRY, CNN HOST: Living in the popular but dangerous fire zones of California, now insurance companies are putting new demands on the people who live in these high risk areas. They say it’s good business sense but homeowners say it’s over the top. Chris Lawrence live now in San Diego to show us how wildfire insurance is getting tougher and it’s actually much more expensive.
Hi, Chris.
CHRIS LAWRENCE, CNN CORRESPONDENT: Hey, Kiran.
Yes, insurance companies are looking at neighborhoods like this one and remembering what it all looked like four years ago when the same area caught fire. They are convinced it’s only a matter of time before it happens again.
(BEGIN VIDEOTAPE)
LAWRENCE (voice over): Homes burn as firestorms torched San Diego suburbs four years ago. Insurers rebuilt those homes, but the costs just keep on coming.
Some insurers have doubled premiums and order homeowners to clear brush, cut down trees, and install fireproof roofs. The improvements can cost homeowners up to $20,000, with no guarantee their policies won’t be canceled.
SHARMILA BRUSHAN, HOMEOWNER: Right behind our house we have cleared everything. I even put some irrigation and plants.
LAWRENCE: Even with sprinklers and other safety features, Sharmila Brushan says she’s been threatened with cancellation and charged exorbitant rates for her home at the bottom of a hill.
BRUSHAN: Basically, they just don’t want to take any risk. And that’s what insurance is for, to manage your risk.
LAWRENCE: Managing that risk can be profitable. State Farm and Allstate each made $5 billion in profit last year.
DOUGLAS HELLER, FOUNDATION FOR TAXPAYER & CONSUMER RIGHTS: The insurance industry is looking at American consumers sort of like they look at a — look at a casino. We just hit three blackjacks in a row, let’s take our chips off the table and leave.
LAWRENCE: Consumer advocate Doug Heller says the company’s message is clear.
HELLER: We’re going to force you to spend more money to comply with our — to comply with out newfangled policy rules, and if you don’t spend that money we’re dropping you.
LAWRENCE: Starting next month, Allstate will stop accepting new clients anywhere in California. The company says costs have skyrocketed and Allstate has to ensure it’s got enough money to help nearly one million Californians who already have an Allstate policy.
Insurers are asking, how can we keep rebuilding entire neighborhoods that firefighters are convinced will burn?
CANDYSSE MILLER, INSURANCE INFORMATION NETWORK: They looked at Scripps Ranch and said, I fought that same fire 20 years ago. And there’s another firefighter that’s going to probably fight it 20 years from now. So it really begs the question: Are we building in safe areas?
LAWRENCE: Sharmila Brushan says her home in Scripps Ranch is safe. Insurers see what that same property looked like four years ago and aren’t so sure.
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LAWRENCE: And this is just one neighborhood in one city. Insurance companies are now inspecting homes in Arizona, Oregon, Colorado. So this is an issue that could affect homes all across the western half of the country — Kiran.
CHETRY: Especially pertinent with the drought, the severe drought that they’ve had in that area in particular.
Chris Lawrence, thanks so much.
