Quake Insurance Agency Stirs Confusion

They know earthquakes in Sylmar, but they don’t know much about the state’s vaunted new earthquake insurance authority. And they aren’t all that keen about what they’ve heard.

It was in this northeast corner of the San Fernando Valley that the Sylmar-San Fernando earthquake of 1971 did $511 million in damage. And the Northridge quake of 1994 hit hard here too.

So earthquake insurance is more than a casual topic with the members of the Sylmar Coordinating Council, community leaders who came out Wednesday in greater-than-usual numbers to hear a presentation by a legislative aide on the California Earthquake Authority.

Speaking to the group meeting at a restaurant in Northridge was Keith Weaver, a field representative for state Sen. Herschel Rosenthal (D-Los Angeles), an outspoken critic of the new authority. Weaver flatly called the authority “a bailout for the insurance industry.”

The $10.5-billion authority will market residential earthquake insurance policies through private companies that agree to participate and make an initial contribution to create early reserves.

Afterward, at the end of a question and answer period, the 40 people present were asked for a show of hands on whether they had earthquake insurance, understood the new authority and thought Insurance Commissioner Chuck Quackenbush sides more with the insurance industry or consumers.

Half raised their hands when asked if they have quake insurance now, but the community leaders showed by their questions that there is considerable misinformation about how the new state system will operate.

In the other displays of hands, by a 2-1 margin audience members indicated they do not understand the authority, and by about a 3-1 margin they agreed with speakers who said Quackenbush sides with the insurance industry.

Weaver reflected the view of his boss Rosenthal, who was one of just five senators to vote against establishing the authority in August. Weaver said the authority’s new rate structure is unfair.

If Quackenbush doesn’t act to revise the rates, the Legislature “will look to make it more fair,” Weaver said.

The authority’s new rates, subject to eventual hearings, create 19 different levels throughout the state, with some areas perceived to have a higher quake risk paying vastly more than others.

Several in the audience said Quackenbush should have held hearings on the rates before setting them, and complained that they are not scientific.

But one participant, Gwen Larson, pointed out that the rate in Sylmar will be lower than in the rest of the Valley.

Audience member Norman Dudley expressed uncertainty about how the authority will sell its policies, particularly in areas where homeowners insurance has been hard to get.

And Barbara Perkins asked, “Can we go back to our old policy?”

“My deductible has gone so high, it almost doesn’t make sense to have a policy now,” she said.

Another participant, Gale Robinson, interjected a blast at Quackenbush.

“Why can’t he be firm with the companies and tell them that if they don’t want to offer the product, they should get out of the state?” he said.

“He needs a little backbone, and if he hasn’t got it, then get him out. Impeach him! We know who he’s loyal to.”

Weaver cautioned the audience that too high-handed an approach by Quackenbush might lead all companies to stop writing homeowners and earthquake insurance policies in California, “leaving people without anything.”

Commenting later from Sacramento, Quackenbush deputy Richard Wiebe said the insurance commissioner had “always realized this would be politically risky.”

“He had to do something to open up the insurance market,” Wiebe said. “We can’t lose sight of the fact that is the real purpose of the earthquake authority, to open up the homeowners [insurance] market and benefit everyone.”

At the luncheon, an aide to Supervisor Zev Yaroslavsky, Laura Fay, said she doubted that insurance companies would leave the state in any event.

“California has one-fifth of the population of the country,” Fay said, exaggerating by 8 percentage points. “They need the business.”

Harry Coleman suggested that writing letters to Quackenbush might help.