The San Diego Union-Tribune
The news from the insurance agent was far from comforting when Wanda Kwiatt called last week to check on her claim from the Cedar fire.
“My agent told me that because I have a claim, my premium will go up,” said Kwiatt, 50, who lost much of the Ramona ranch property she shared with her children and a grandchild, including the house she lived in. “I just sort of said, ‘OK.’ “
It’s not OK with her, of course. After enduring the trauma of being burned out of her home, then learning how to navigate the oft-confusing claims process, being told she will have to pay more when her homeowners’ policy renews in February adds insult to injury.
Kwiatt recognizes that her agent could be wrong, but she doesn’t have much faith that the system will work in her favor.
“That is just what they’re going to do,” she said.
As the claims process continues for thousands of fire victims, the idea that their claims could be held against them, resulting in premium surcharges or nonrenewal of their policies, is a fear held by many.
As a general rule, insurance companies consider policyholders who file a claim as more likely to file additional claims in the future and are, thus, a riskier proposition for the insurer. It is not uncommon for those who file too many claims — as few as one, depending on their insurer and how long they have been with the company — to pay higher premiums or lose their policies.
Insurance industry representatives say natural disaster claims are treated differently. Unlike everyday damage claims, say for burst pipes or a kitchen fire, claims for natural disasters such as hurricanes or wildfires typically do not factor into “experience rating,” as some companies call it.
“For us, (wild)fire does not count,” said Bill Sirola, a spokesman for State Farm, which normally rewards those who are claim-free but attaches surcharges to the premiums of those who make repeated claims, with just one claim sometimes enough to trigger a surcharge for a new policyholder.
“It is a natural disaster, a catastrophic loss,” he said. “It will not be part of our experience rating plan.”
Most insurers have said they will not single out fire victims based on their claims. Still, state regulators and consumer advocates are concerned that the very nature of the databases insurance companies use, which post individuals’ claims history as supplied by their insurers, could inadvertently result in some fire victims who make claims being branded with a scarlet “C.”
The use of two databases, Comprehensive Loss Underwriting Exchange or CLUE, and A-PLUS, has become increasingly popular with insurers over the past few years for underwriting. Originally used to ferret out insurance fraud, the databases have emerged as a tool to share information about individuals’ claims history and, thus, assess how attractive they are to insure.
According to state Department of Insurance officials, consumers complaints regarding homeowners’ insurance began escalating during the early part of this year.
“People were making one claim and not being renewed for it,” said a spokesman for the department, which earlier this year reported more than 3,000 consumer complaints received over an 18-month period. “This scenario is called ‘use-it-and-lose-it.’ “
Linda Blatt of Alpine recently found the hard way that it’s best not to use a homeowners’ policy for relatively small claims.
The 61-year-old widow made two claims over a two-year period, one for frozen pipes that burst and another for her patio, which was blown down in a windstorm. The claims totaled around $10,000. About two weeks before the Cedar fire, she received a letter from her insurance company telling her that her policy would not be renewed.
“That is what I thought I had insurance for,” said Blatt, who was dumbfounded. “I will never make a claim again.”
That is, if she ever finds a new policy. After the Cedar fire swept through the area, coming so close to her property that her son had to fend off flames by draining the swimming pool with a sump pump, Blatt has been unable to find a new insurer because of the fire risk.
An attempt earlier this year by Insurance Commissioner John Garamendi to introduce emergency regulations that would restrict database use is hung up in court. A number of similar legislative measures have also met little success.
The recent wildfires are California’s first large-scale disaster since the widespread use of databases in underwriting began. With at least $2.5 billion in insured losses so far and more than 19,000 claims expected from homeowners, businesses and vehicle owners, state officials say they will be monitoring how well the system protects fire victims from future claims-record problems.
“If there are problems, or patterns begin to emerge, we are going to be on it,” a state insurance department spokesman said. “It would be very bad public relations for these companies to try to victimize these people a second time.”
According to ChoicePoint Inc., the Atlanta-based company that operates CLUE, attempts are being made to make sure a catastrophe code is attached to every wildfire-related claim that comes in from insurers to help differentiate these claims from other fire claims.
“We look at the dates and the counties,” said Laura Crabill, ChoicePoint’s director of marketing. “We go into the database and do a search on the date or the range of dates that the catastrophe occurred. If we see they don’t have that catastrophe code, we contact the insurance company that reported it to us.”
But mistakes happen. The state insurance department has received complaints from policyholders who were told they had filed “claims” when they only called to ask a question and reports of flat-out errors, such as claims showing up on one property that were made elsewhere.
Claims made by a home’s previous owners also show up.
Doug Heller, a consumer advocate with the Santa Monica-based Foundation for Taxpayer and Consumer Rights, was surprised to hear while searching for lower premiums that he had once filed a claim for theft. He had not. A previous occupant of the house had made the claim, yet it came up when the insurance company checked Heller’s record.
“That is why there really is sort of a scarlet letter that sticks with you, that you can’t pull off,” Heller said.
Only six out of 10,000 items entered into CLUE result in a dispute, Crabill said. Consumers who find an error may contact ChoicePoint, which has 30 days to contact the insurer and correct the problem if the insurer agrees an error was made. Crabill said about half of the disputes result in corrections.
Sam Sorich, president of the Association of California Insurance Companies, said companies plan to act responsibly.
While not speaking for all insurers, Sorich said it would be highly unlikely to see fire victims not renewed or given a surcharge because of their claims, though “a company may reassess its overall rating plan as it applies to brush fire areas.”
For insurance agents to be warning clients that their individual rates will go up due to their fire claims, he said, “that sounds to me a little bit alarmist.”
Blatt, however, doesn’t think so.
“They say that now,” she said, “but that will change.”
Leslie Berestein: (619) 293-1542; [email protected]