Southern California wildfires and insurance claims

I’ve been watching for stories on the California wildfires and what people are saying about potential insurance disputes.  This AP story by Gary Gentile talks about fears that policyholders will be canceled or that insurers will seek to raise premiums.  Actually, what I was thinking was more along these lines — in areas where homes are rapidly escalating in value, and for homeowners who don’t have replacement cost coverage, there will undoubtedly be a number of cases where the home value exceeds the insurance.  You remember this Bloomberg story that I talked about a few months ago?  The discrepancy between the home’s value and the insurance coverage was the story’s main anecdote in a story about purported insurer bad faith. The specter of too little insurance is also mentioned in this recent CNN story.  Here’s an excerpt:

Insurance companies brought in a combined $6.6 billion in homeowner insurance premiums statewide during 2006, according to the Insurance Information Institute. During that same period, total California premiums for auto insurance reached an eye-popping $19.8 billion.

But what experts like Doug Heller, executive director for Foundation for Taxpayer and Consumer Rights, worry about is how much money will be available when it comes time for customers to rebuild their homes.

"That’s the real concern for me at least," said Heller. "Will they actually fulfill their advertisements?"

One of the biggest controversies erupted in 2003, when fires ravaged San Diego and San Bernardino counties. Consumers found themselves underinsured because their policy limits were not raised to reflect their home values, said Heller. That meant homeowners had to pay the difference.

"I think there is a question as to whether insurance companies learned from 2003 and have made sure that policyholders have enough coverage," said Heller.

Interesting turn of the phrase there — did insurers make sure policyholders had enough insurance.  Another way to say it: did policyholders learn from the 2003 fires and make sure they had enough coverage? 

2 Comments

Filed under First Party Insurance

2 Responses to Southern California wildfires and insurance claims

  1. JKB

    When did insurance companies become “daddy”. In the previous post the entreaty is: “Did insurance companies pay policyholders what they needed when disaster struck?” Now this of whether the insurers made sure a policy holder had enough insurance. Personally, I do not feel an insurance company would be a good daddy.
    I can only imagine the lawsuits over home values given the dramatic decline in SoCal in the past few months. Not to mention, all the investor homes that were probably claimed as owner occupied even though they weren’t. Or how do you enforce a claim for non-catastrophic heat damage, i.e., flowed glass panes, melted weather stripping, cracks from over drying.

  2. WILLIE NELSON

    I would be interested in knowing:
    1: Total estimated claims
    2: % of policyholders with adequate replacement cost coverage on structure and household goods.