Homeowners insurance in the wake of the firestorms

Do the recent fires mean homeowners insurance prices are going up?

The Times' David Pierson looks at that and related questions in "Insurers likely to weather California firestorm." From his report:

After years of booming profits and a general aversion to risky investments within the property casualty arms of their companies, insurers are well capitalized to handle the latest fire claims and are not as vulnerable as other financial institutions, several experts said....

But some watchdogs are more skeptical and believe the cost to consumers will come eventually -- though perhaps long after the fires are extinguished.

"These fires, as devastating as they may be, are already built into our premiums," said Doug Heller, executive director of Consumer Watchdog. "The fact these fires are happening during an extraordinary economic downturn is more of a concern. That's because the insurance industry makes its profit by investing our premiums. When interest rates are low and bond markets are producing inconsistent returns and the stock market is down, insurance companies make less money."

Heller believes insurance companies are understating their investment losses after the subprime meltdown and will eventually try to recover those losses by raising rates.

That won't be easy in California. In order to raise premiums here, insurers would have to prove to the California Department of Insurance that they sustained losses over at least a three-year period.

Not addressed is the general availability of homeowners insurance at all. Last time I checked fewer insurers were offering California coverage at any price.

--Lauren Beale

Thoughts? Comments?

Photo: Firefighters battle flames in Sylmar. Credit:  Jay L. Clendenin / Los Angeles Times

Comments

[Candysse Miller]

Re the comment: "Not addressed is the general availability of homeowners insurance at all. Last time I checked fewer insurers were offering California coverage at any price."

It must have been a very long time since the reporter checked. The last time there was an availability crisis with homeowner insurance in California was shortly after the Northridge Earthquake in 1994, due to the linkage between homeowner and earthquake policies.

Today, California has a competitive homeowner insurance market that has seen rates dropping of late.

A good barometer of insurance availability? The California FAIR Plan, sometimes referred to as the insurer of last resort, which has seen its market share steadily declining.

Candysse Miller
Executive Director
Insurance Information Network of California

[dilbert dogbert]

USAA canceled our fire insurance for our cabin at Donner Lake. The reason: There is "brush" within a 1000 ft of the cabin. Donner is not SoCal. It has no fire ecology "brush".
They helpfullly suggested that we could get coverage from Lloyds of London. Thanks a bunch!
We had all of our insurance with USAA as did all of our family members. Now they have lost a lot of customers.
Will USAA have its hand out to get some of that "free" government money??

[dino]

I am really baffled to hear some many people don't have insurance. Here in the OC, none of my friends have earthquake insurance, which begs the question: do you remember what happened in Northridge and surrounding areas? Do these people expect to get bailed out by FEMA when the big one hits? Between the overinflated home prices and the bankrupt federal and state government they're in for a major surprise.

[Depression Child]

I really appreciated knowing the insuring premiums rate of $200 per square feet of the average home used by the insurance companies. It is good to know that my home is properly insured by my insurance company. Thank you Lauren