California Castles Under Siege : Homeowner insurance is harder to get

Any tax cut that California homeowners hope for from the reelected Gov. Pete Wilson must be balanced against the increase in home insurance premiums that many may face soon after Insurance Commissioner-elect Charles W. Quackenbush takes office. The insurance industry, the largest single contributor to the Wilson campaign, virtually financed the Quackenbush campaign, and big benefactors tend to receive kid-glove treatment.

Statewide public pressure on Wilson and Quackenbush could change that, but a looming insurance panic is creating pressure in the opposite direction. As Bradley Inman reported in The Times last Sunday, “All of the big companies have stopped writing homeowner policies and hordes of smaller ones are following their lead. Those remaining represent only 25% of the total need. . . . “ In the week before the election and the week after it, the crisis has grown suddenly more acute. The unavailability of insurance is forcing many real estate sales to fall out of escrow.

Homeowners are a captive market: Their property cannot be moved. Home buyers and sellers are particularly vulnerable inasmuch as a sale typically involves a mortgage from a lender who demands an insurance policy.

Just how much the Northridge earthquake has taught insurers that they did not already know about the risk of insuring California property is a complex question. Perhaps the risk is now considered so much greater that all the property insurers who say they are leaving California for good really mean it. It would be naive, however, not to ask whether the major insurers are not attempting, perhaps with the help of friends in state government, to stampede the nation’s most lucrative insurance market into substantial rate increases that are unwarranted even in light of previously unrecognized risk.

More hangs on the resolution of the insurance crisis than whether family budgets are to be busted. Much, if not most, of California’s wealth exists in the form of real estate, and if the value of the real estate takes a nose dive, so does the state’s tax base and its revenue.

However, the state need not negotiate with insurers from quite the same position of vulnerability that the individual homeowner suffers; also, insurers stoutly support some kinds of government involvement--the federal Natural Disaster Protection Act, for example. Meanwhile, tough and honest regulation has to make the difference. That’s what Californians have to hope for from Quackenbush and Wilson, despite the millions that the insurance industry spent getting the two elected. Let’s give them a chance to show that they put the consumer first, while respecting the legitimate needs of insurance companies to run a profitable business.