Auto Club Aims to Write Fewer Homeowner, Earthquake Policies

The Automobile Club of Southern California, one of the last major insurers still writing new homeowners and earthquake policies in the region, has imposed new restrictions that observers say will make it more difficult for some consumers to obtain coverage.

The guidelines, outlined in a memo to sales managers last Friday, will make it harder for would-be customers--especially those with pre-1950 homes and residents of communities considered to be at high risk for earthquake damage--to qualify for Auto Club policies.

The firm said it is overexposed in earthquake risk in some parts of Los Angeles and Orange counties and needs to protect itself against the kind of financial calamity that nearly toppled 20th Century Insurance Co., which had more than half its capital wiped out by paying claims from the Jan. 17 quake.

As a condition of renewing reinsurance contracts that came due in July, the Auto Club promised to reduce its sales of earthquake policies in areas where it is already heavily concentrated or its engineering consultants project severe damage, said Alan Morris, the company’s director of underwriting.

Among the areas most affected by the new restrictions are West Los Angeles and Santa Monica, much of the coastline from Manhattan Beach to the Palos Verdes Peninsula, parts of the San Gabriel Valley and a swatch of the central city area from Pico Rivera south to Long Beach.

The Auto Club ranks about 15th statewide, but its 78,000 homeowners policies are concentrated in Southern California. The firm had gross losses of $80 million in the Northridge quake, Morris said.