Homeowners Insurance Remedies Sought : Coverage: San Francisco gathering looks into potential solutions to the dearth of new policies. Another meeting is set.
Amid fears that the near shutdown of the California homeowners insurance market will upset the economy, state officials, insurance executives and consumer advocates hashed out ideas for solutions at a meeting in San Francisco on Thursday, but they emerged without a concrete legislative proposal.
“There was a very strong sense of urgency around the table,” Richard Baum, top deputy to Insurance Commissioner John Garamendi, said of the three-hour session at Garamendi’s headquarters. Garamendi set another meeting for next Friday.
Facing huge claims from the Northridge earthquake, most of the state’s largest insurance carriers recently either stopped writing new homeowners and earthquake insurance entirely or imposed severe restrictions on new business. Most insurers are renewing old policies as they expire.
The insurers are pushing for repeal of the state law requiring companies that sell homeowners policies to offer earthquake coverage also. Such a de-linkage, they say, would let them resume writing homeowners policies and allow policy-makers to focus on the real problem: earthquake coverage.
However, Garamendi opposes immediate de-linkage on grounds that it will make a tough market for earthquake insurance even worse, Baum said.
Baum said the group did reach a consensus on some general issues, such as that the ultimate solution is a national disaster program.
So far, there is little evidence that the insurance availability crunch has hurt home sales. Allstate Insurance Co. and other big carriers have said they will write new policies for current customers who are buying new homes.
“I don’t think it’s broken any deals yet,” Jim Stewart of Brentwood Escrow Co. said Thursday, “but it is putting pressure on people. They’re scrambling to find insurance.”
There were reports that the mortgage industry was poised to require earthquake insurance as a condition of qualifying for a home loan in California. However, two of the biggest players in the secondary mortgage market--Federal National Mortgage Assn. (Fannie Mae) and Federal Home Loan Mortgage Corp. (Freddie Mac)--have no such plan. A spokesman for Freddie Mac said that organization had considered the idea but rejected it.
As a stopgap measure, Garamendi ordered the California Fair Plan, the industry-financed high-risk pool for property insurance, to extend its fire and earthquake insurance statewide, effective July 1. A Fair Plan representative told officials at Thursday’s meeting that while the Fair Plan has received many requests from insurance agents for information and documents, so far there have not been many new applications for the coverage.
State Farm Mutual Automobile Insurance Co. will propose legislation to create a statewide pool as the sole provider of new earthquake insurance. But with the Legislature about to leave for a three-week summer break, the measure will not be taken up until at least mid-August.
