Earthquake Insurance

The logic of The Times’ recent analysis (Feb. 17) of the effort to repeal the California Residential Earthquake Recovery Fund was as shaky as an unreinforced brick home on the San Andreas fault.

The repeal effort is bipartisan and is based on the simple facts: The program will never be financially sound; it promises benefits that cannot be delivered; it exposes taxpayers to millions of dollars in unbudgeted liabilities; and it requires the creation of a costly and unnecessary new state bureaucracy. Support for repeal comes from a broad coalition that includes the Consumers Union, the Executive Council of Homeowners, the Insurance Agents and Brokers Legislative Council and the California Bankers Assn., as well as legislators from across the ideological spectrum.

Actuarial studies show that the first year’s shortfall will be $71.1 million and it will grow to $390.1 million by 1996. Should a catastrophic earthquake occur, the amount of the unmet claims could be over $5 billion.

Even worse, agents and insurers are reporting that some homeowners are canceling their existing earthquake insurance in the mistaken belief that the state program will cover all their damages in the event of a tremblor.

I am committed to applying the same sound business practices to government programs that are required of private sector insurance companies. With those principles in mind, the problems of the state earthquake program are too fundamental to repair. If it were a private insurance company, I would immediately take it over and shut it down. And I would prosecute its promoters for fraud.

With this earthquake fund, there are only two possible outcomes. Either thousands of homeowners will get back pennies instead of dollars on legitimate claims, or taxpayers will be stuck with the bill. With more fault lines than bedrock, this program must be repealed.

JOHN GARAMENDI

Insurance Commissioner

Sacramento