Homeowners insurance in the wake of the firestorms
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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?
