THE SAN FRANCISCO CHRONICLE (California)
The owners of as many as one-quarter of the homes destroyed by fire in Southern California this week will learn that their properties were underinsured, California Insurance Commissioner Steve Poizner said Wednesday.
Insurers say that they harp on the necessity of keeping policies current and that policyholders in this disaster, like many before it in California, will be made whole. But the reality is that too many consumers hold policies that have not been updated to reflect recent additions to homes or purchases, such as home entertainment systems, said the insurance commissioner.
So, are you ready? There are a number of steps you can take to find out and prepare.
“It’s very important that homeowners keep detailed records, including using digital cameras and videos” to photograph possessions, Poizner said in San Francisco Wednesday shortly after declaring an “insurance emergency” due to the devastating fires raging from Santa Barbara County to the Mexican border.
The disaster serves as a reminder of how important it is for consumers to provide the documentation necessary to be fully covered when the need arrives, Poizner said.
The California Department of Insurance has on its Web site, www.insurance.ca.gov, a 37-page “Home Inventory Guide,” which consumers can download and use to document all their personal property. The state recommends that an updated copy of the document be kept at a different location, such as in a safety deposit box.
Poizner urged consumers to locate receipts for major purchases, such as art, electronic equipment and appliances. The documentation will help expedite the recovery process after a claim is filed, he said.
Insurers say they stress the importance of customers being properly insured, including having policies reflect economic trends and global demand for certain products used in home construction, said Gary Raphael, director of the risk management advisory services program for personal insurance at Fireman’s Fund in Novato.
The company’s personal insurance program is geared toward high-end customers who tend to grow in net worth and liability, said Erron Al-Amin, who heads the program’s marketing. “They tend to be almost chronic renovators,” she said of clients.
Poizner said he sent employees of the Department of Insurance Consumer Services office to four assistance centers in San Diego County — in San Diego, Ramona, Fallbrook and El Cajon — and one in Castaic (Los Angeles County). He said he has also dispatched fraud investigators.
“It’s like clockwork. Every time there’s a natural disaster, scam artists show up trying to victimize victims. And they pretend to be contractors or claims adjustors. We’re going to nip that in the bud,” he said, adding that a dozen arrests for fraud were made this year during and after the Lake Tahoe fire, most of them unlicensed contractors.
Poizner estimated that insurance claims resulting from the devastation will reach $1 billion, but he said that is a fluid number that could change overnight, and certainly will before the embers are cooled.
The emergency declaration lifts the ban the state imposes on out-of-state insurance adjusters so that those being dispatched to California can help fire victims sort out losses and begin to make claims.
The law is in place because the adjusters must be current on California insurance law, but Poizner said he’s waiving it for now due to the magnitude of the crisis, one of the worst fires in California history.
Poizner said insurers will be “overwhelmed by the number of claims that they will soon receive,” and he said that prompted him to lift the ban. For their part, representatives of several insurance companies said they are up for the task.
“We’re focused on our most important priority, which is serving our customers when they need it the most,” Pete DeMarco, a spokesman for Allstate Insurance, said Wednesday from a San Bernardino County emergency station.
A law enacted after the 2003 wildfires prohibits claims adjusters from soliciting homeowners for business for seven calendar days after a disaster.
Poizner said the purpose of the law is to permit victims, such as the victims of this week’s fires, to have some time to comprehend their losses before contacts related to their losses are solicited.
Insurers are insisting this week that policyholders will be compensated and that the industry is healthy.
ISO of Jersey City, N.J., an association that monitors the U.S. property/casualty insurance industry, said Sept. 25 that insurers’ net income after taxes rose 10.7 percent to $32.6 billion in the first half of 2007, from $29.4 billion in the first half of 2006. ISO said the industry surplus increased
$26.5 billion to $512.8 billion at June 30, compared with $486.2 billion at the end of 2006.
“We’re a very healthy industry,” said Sam Sorich, the president of the Association of California Insurance Companies, a trade association in Sacramento.
Sorich noted that lenders require borrowers to have homeowner policies. Even those buyers who don’t buy a policy on their own get one anyway. Lenders charge their customers for “forced placed insurance,” which the buyer typically drops when he realizes he can save money buying his own policy, said Sorich.
Most people who own their homes outright have insurance, too, so it’s believed the great majority of homes in the fires are covered, industry analysts say.
Poizner said he does not anticipate there will be requests for rate increases as a result of the fires and claims. Consumer watchdogs don’t either, but only because they’re high already.
“Insurance companies have been jacking up rates for the last five years, not just in California but all over the country, in anticipation of this natural disaster,” said Harvey Rosenfield, founder of Foundation for Taxpayer and Consumer Rights in Santa Monica.
“It’s the nature of their industry in collecting as much in premiums as they can and hold on to it to recoup the investment profit. The industry wants to pay out as little as possible and the policyholders want as much as possible. That’s two competing tensions that always make for problems,” said Rosenfield.
Allstate Insurance on July 1 stopped writing homeowner policies in California, on the grounds the state is “catastrophe-prone,” although it continues to serve the 900,000 policies it wrote prior to that date, said spokesman Rich Halberg. He added that the company has 130 adjusters in Southern California “taking care of the needs of customers.”
State Farm Insurance has the largest market share of homeowner policies in the state, with 21.7 percent. Farmers Insurance is second, with 16.6 percent, and Allstate is third, with 13.4 percent, according to the National Association of Insurance Commissioners.
———————-
Insurance advice:
– Californians who have questions or problems with their insurance policies can call the Department of Insurance at (800) 927-4357 or go to the Web site at: www.insurance.ca.gov.
– To download the Home Inventory Guide, go to the California Department of Insurance Web site, www.insurance.ca.gov, and click on the link “Don’t Get Burned Twice — How to Protect Your Home.”
Source: Chronicle research
———————————
State’s top home insurers
Figures are for 2006
Insurance company —- Market share
State Farm Mutual Group = 21.7%
Farmers Insurance Group = 16.6%
Allstate Insurance Co. Group = 13.4%
California State Automobile Assn. = 6.3%
United Services Auto Assn. Group = 4.5%
Inter Insurance Exchange of the Auto Club = 4.0%
Nationwide Group = 3.5%
Mercury Casualty Group = 3.0%
Combined Safeco Ins. Co. Group = 2.8%
Fireman’s Fund Insurance Group = 2.5%
Other = 21.7
Source: NAIC via National Underwriter Insurance Data Services/Highline Data
