Inner City Premiums May Rise Due to Riots : Insurance: Crusader, one of the biggest insurers of small businesses in central L.A., is asking the state insurance commissioner for the increase.

Since the Los Angeles riots dealt it $21 million in claims, Crusader Insurance Co., one of the biggest insurers of mom-and-pop businesses in central Los Angeles, has stopped writing new riot insurance and eliminated 85% of its agents there.

And the Woodland Hills-based firm says it may have to cancel critical riot coverage for all 1,500 of its inner-city customers, many of whom are in the South-Central area and are minority-owned businesses--unless California’s insurance commissioner, John Garamendi, allows Crusader to raise its rates by an average 25%.

“I feel awful about this,” said company President Erwin Cheldin, 61, who founded Crusader in 1985 and has won community praise for insuring businesses in areas that many insurers ignored.

But without a rate increase, he said, Crusader can’t afford to do business in the inner city anymore.

Crusader’s plan would raise rates only for inner-city customers. Its 6,500 other policyholders in the state, including about 1,500 in the San Fernando Valley, wouldn’t be affected.

Consumer groups contend that’s unfair. “It’s absurd to single out an area for an increase just because that’s where the riots happened the last time,” said Judith Bell, director of the Consumers Union in San Francisco.

But territorial rating isn’t unusual for the insurance industry. And neither is Crusader the only insurer to pull back in central Los Angeles after the riots.

Western International of Huntington Beach, which insured hundreds of inner-city shops, was liquidated last summer after it was hit with $22 million in riot claims.

At least one other popular inner-city property insurer, AIM Insurance Co. of Anaheim, said it had stopped writing new policies there in the wake of the riots.

Crusader is the only company to apply for higher rates because of the riots. But analysts consider Crusader’s case a litmus test, believing that other insurers will seek price hikes if Garamendi gives Crusader the nod.

Garamendi said he was still reviewing Crusader’s application, which was filed in October.

Crusader’s case has increased concern among inner-city business owners and leaders, who have long complained about the lack of affordable, quality insurance in their neighborhoods. Because Crusader was seen as one of a few aggressive marketers in the inner city, many fear that its withdrawal will make it even harder for mom-and-pop operations to find adequate insurance.

“It’s going to be a very, very devastating effect,” said George Bivins, who has been selling insurance in the inner city for 23 years and is chairman of the Black Business Assn.’s insurance committee.

Sea-Keun Kim, along with her husband, owns Satellite Market in Compton and has been a Crusader policyholder since 1985.

The Kims pay $1,800 a year to insure their mini-market, which they bought in 1979 shortly after emigrating from South Korea.

Under Crusader’s price-hike plan, their annual premium could go up by as much as 50% because their store was at the heart of the riot zone.

“It will be a big burden,” she said, noting that insurance is one of her biggest expenses. “We make enough just to eat and live.”

Still, Kim said she would rather pay a higher premium than go without riot coverage. During the riots, her market suffered more than $50,000 worth of damages from looting. Were it not for her insurance policy, much of their life’s savings would have vanished.

Crusader is the largest unit of Unico American Corp., a holding company in Woodland Hills that also provides rental-car and health insurance.

Because of riot claims, Crusader lost $7.1 million on premium revenue of $16 million for the nine months that ended Sept. 30.

In the same period, Unico posted a $6.4-million loss on revenue of $20.4 million.

Cary Cheldin, Erwin’s son and Crusader’s executive vice president, says he doesn’t like the idea of raising rates for just those in the inner city.

But his policyholders elsewhere don’t face such big riot exposure, he says. Crusader would become non-competitive throughout the state if it raised rates uniformly, Cheldin believes, because big insurers can absorb such losses without raising rates.

Crusader’s policyholders in the inner city now pay an average annual premium of $2,100--roughly the same as anywhere else in the state.

Few in the industry expect Garamendi to approve Crusader’s request, although he may allow a smaller increase than 25%.

But many other insurance firms--based outside the state--offer insurance in the inner city and are unregulated, so they don’t need Garamendi’s permission to raise rates.

Merchants and agents say some of them already have.

Dozens of firms write business insurance in the inner city. And many, including the Farmers Insurance Group of Los Angeles--which may have the biggest presence in the South-Central area with 3,000 commercial customers--have no plans to raise rates.

But even so, agents say few companies offer comprehensive property and liability insurance to as many kinds of businesses as Crusader once did.