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Planned Quake Insurance Rates Vary Widely


Homeowners across California would pay vastly different amounts for earthquake insurance, depending on where they live and the age of their homes, under rates approved by the new California Earthquake Authority.

The new rates are already being criticized by the Wilson administration and consumer groups, and late Thursday, Insurance Commissioner Chuck Quackenbush said he might reject or modify them before the authority starts up full operation Dec. 1.

"He will closely examine the rating plan," said spokesman Richard Wiebe. "He will carefully consider any evidence brought to his attention by scientists, insurers and consumers, and the rates he approves will fairly apportion the costs."

It had always been understood that homeowners in areas with greater seismic risk would pay more. But the rates, by ZIP Code, approved Monday contain some striking differences.

Much of the San Fernando Valley, for instance, would pay 40% more than residents in most of the rest of Los Angeles. That is not too surprising in light of the big 1971 and 1994 quakes there.

But rates in most of the Valley would be 2 1/2 times those in Sylmar and San Fernando, areas at the heart of the damage and casualties in the 1971 San Fernando earthquake.

Also at the much lower rate would be Palmdale, which lies astride the San Andreas fault, on which Southern California's most powerful quakes are expected to occur.

Also, several wealthy Westside communities--including Brentwood, Pacific Palisades and Malibu, but not Santa Monica--would pay a rate less than half that of the Valley and only 60% of that of the rest of Los Angeles.

There are other dramatic differences elsewhere in the state. San Francisco Bay Area residents--where most of the highest rates would be applied--would pay 4 1/2 times more than Eureka residents. Eureka was placed in the lowest rating category, despite the fact that it has had many damaging earthquakes and could face a tsunami danger.

Much of the state's territory would pay the lowest rates. This is not surprising in areas of low quake activity such as Sacramento, but also in the lowest rating zone are Humboldt County, Inyo County and Palm Springs in Riverside County, where many quakes occur.

Some of Orange County is in the lowest rating zone, but other parts, generally in the north and west of the county, would pay three times as much.

The dollar variations would be substantial.

The owner of a $200,000 wood-frame home in Hollywood or Westwood, for example, would pay an $540 a year for quake insurance if the home was built in 1979 or later.

The same house would have a premium of $780 in most of the San Fernando Valley, $300 in Sylmar and $200 in Eureka and Palm Springs.

If the house was built between 1960 and 1978, the premiums would be $660 in Hollywood, $960 in much of the Valley, $380 in Sylmar and $240 in Eureka.

If it was built before 1960, the premiums would be $700 in Hollywood, $1,020 for much of the San Fernando Valley, $400 in Sylmar and $260 in Palm Springs or Eureka.

Finally, if the house was not of wood-frame construction, its premiums would be $960 in Hollywood, $1,540 in much of the Valley, $540 in Sylmar and $360 in Palm Springs.

The quake insurance package provides coverage for the main structure, with a 15% deductible, but not for swimming pools, fences, garages or landscaping.

The CEA will also sell policies protecting part of a condo investment, mobile homes and renters, at varying rates. All the proposed rates will be available next week on the Department of Insurance's World Wide Web site:


In the hours before Quackenbush announced he would review the rate structure and that he might revise it, a Wilson representative, the Consumer's Union and a leading Southern California scientist all expressed doubts about the plan.

Marjorie Berte, representing Wilson at the CEA governing board meeting Monday, abstained in the vote by representatives of Quackenbush and state Treasurer Matt Fong to approve the rates.

"I think it's appropriate that the rates be first submitted to the Proposition 103 review process, which requires an opportunity for consumer intervention and a thorough review," Berte said Thursday.

In another action indicative of Wilson administration doubts, Berte voted no in a 2-1 decision to let Quackenbush appoint the officials who will run the CEA.

Meanwhile, Bill Ahearn of the Consumers Union said his organization was considering "a broad challenge to the rates in full evidentiary hearings."

He also objected to a governing board statement Monday that buyers of quake insurance policies would not be permitted to pay for them on the installment plan, as is currently the case with most insurance.

Tom Henyey, a scientist who directs the Southern California Earthquake Center at USC, expressed surprise that 19 different rating bands had been approved.

Henyey said he had originally been told there would only be three basic rating bands.

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