But What About the Consumer? : Reminder to Quackenbush: More than the insurance industry needs help

Which is it, Mr. Insurance Commissioner? On the one hand, Chuck Quackenbush maintains there is no crisis in the availability of homeowner insurance since the Northridge earthquake. On the other, California’s insurance commissioner is backing the industry’s big push to free insurers from the state requirement that they offer earthquake insurance when they sell homeowner policies. If there is no crisis, why do insurers need relief?

Homeowners now are finding it more difficult--and considerably more expensive--to purchase insurance, especially if they want earthquake coverage. That has not resulted in any major troubles for the real estate industry yet. But with spring and summer house shopping poised to begin, the fact that nearly all the major property insurers have stopped or sharply curtailed writing new earthquake insurance could slow sales.

Most carriers also have stopped writing new homeowner policies because of the state requirement to offer earthquake and homeowner policies. The companies have incurred nearly $12 billion in costs to cover insured losses from the 1994 Northridge earthquake. The industry, which originally backed the idea of linkage, now wants to repeal the law. Meanwhile, insurers are seeking approval from the commissioner for rate hikes, in some cases 100% increases.

For many consumers, this is a crisis.

On Tuesday Quackenbush, in his first appearance before the Assembly Insurance Committee, said he endorses repealing the law. He said that he is working with the industry (which backed his 1994 election campaign to the tune of $2.3 million) and has “challenged (it) to develop another plan for earthquake coverage that will protect the homeowners.” He offered no details on what alternatives were being discussed.

The insurance commissioner is supposed to oversee the industry, not hold the hands of insurers. He was elected to look out for consumer interests as well. Until Washington takes up a national disaster aid bill that includes earthquakes, Sacramento must find a means for homeowners to have some private measure of earthquake insurance. That will require creative preemptive action led by the insurance commissioner--not a simple bailout of insurers.