Insurance payments to homeowners for water damage have doubled in California since 1997, according to an industry survey that's sure to intensify the debate over rising premiums and insurers' increasing reluctance to pay claims related to mold.
The survey, to be released today by the Insurance Information Network of California, showed 24% of property insurance claims filed by the state's homeowners in 1997 involved water damage, the category that includes mold claims. By last year, the figure had climbed to 32%.
The amount insurers paid in water claims to homeowners rose even more sharply, from $206.1million, or 20% of all property insurance payments, in 1997, to $430.5 million, 31% of such payments, in 2001.
The survey included insurers representing 63% of the state homeowners' market, but no commercial lines, and the figures aren't inflation-adjusted. Nonetheless, the industry says it's enough data to explain why insurers are seeking to raise homeowners' premiums and to be exempt from covering mold claims, or--in the case of State Farm Insurance Cos.--to stop writing new homeowner policies in California altogether.
"There are concerns that we're heading for a crisis," said Insurance Information Network spokeswoman Candysse Miller. "Think back a few years to the period after the Northridge earthquake, when any homeowner insurance was nearly unavailable."
The state Department of Insurance last month granted Allstate Corp., California's third-largest insurer, an 18.5% increase in premiums for home insurance policies, the latest in a series of approved rate increases.
State Farm's California home insurance subsidiary, the state's largest home insurer, recently won two hikes totaling 14%, and Farmers Insurance Group and the Automobile Club of Southern California have rate-increase requests pending.
With insurance claims rising nationwide after a relatively quiet period during much of the 1990s, the industry also has been seeking to limit its coverage of events including terrorism, dog bites and mold-related health claims.
As of May 1, the state Insurance Department had received 287 filings from insurers seeking to exclude or limit water-damage claims--mostly for commercial lines, but also on homeowners and even auto policies.
During recent hearings, though, some state legislators questioned whether the industry had proved the mold risks were extreme enough to warrant the exclusions. According to the Department of Insurance, the companies were only willing to reduce premiums by 1% to 3% after excluding mold claims.
