Disaster Insurance

I couldn't agree with you more that homeowners across the nation should press for a federal disaster insurance program ("Disaster Insurance: The Job Is Too Big for the States," editorial, Oct. 14). The insurance industry has been struck by several major natural disasters in rapid succession since Hurricane Hugo. It doesn't take a math genius to figure out that the insurance companies will either have to manage their exposure in disaster-prone areas or face insolvency. Fortunately, the Natural Disaster Protection Partnership Act is sitting in Congress right now, awaiting debate and passage.

U.S. property and casualty insurers are expected to pay $6.5 billion in losses from 23 catastrophes during 2007, much of it from California wildfires, according to ISO Inc., a company that supplies statistical information for the industry. That figure, however, is dwarfed by those of earlier years when multiple major hurricanes slammed into the U.S. When Hurricane Katrina devastated New Orleans in 2005, property insurers paid more than $62 billion.

With the Northridge earthquake intensifying the political pressure for a national disaster protection program, California insurance regulators and consumer advocates warned Friday against rushing into an industry-supported plan that they consider seriously flawed.

Re "Change Sought to Cover Losses," Oct. 5 National disaster insurance will be a disaster. 1) Insurance companies will follow in the footsteps of big oil with guaranteed windfall profits, and rich men will line their pockets with the new poor's money, previously termed the middle class. 2) The program will be huge, unmanageable and riddled with corruption as all large government programs become. 3) The nation as a whole can no longer make good on all the entitlements it promises (my Social Security date has already been pushed back)

A number of legislators are eager to revive the short-lived California Residential Earthquake Recovery Fund, an insurance pool that was supposed to provide up to $15,000 in quake loss coverage to every homeowner, but which had to be liquidated as it teetered toward insolvency. The impulse to again offer some form of protection against major loss is understandable. But a limited, localized response falls well short of what's needed.

Many homeowners from Maine to the Gulf of Mexico are finding it hard to get insurance this year because they live in areas recently battered by hurricanes. Sound familiar? California homeowners face a similar problem because insurers do not want to take on the risk of providing earthquake coverage. Natural disasters have spooked America's private insurers, and efforts of the states to provide alternative coverage may turn out to be disasters themselves, financially.

Like pressure building invisibly along an earthquake fault, a crisis is mounting for homeowners who won't have enough insurance to cover their losses in a fire, earthquake or other catastrophe. Major insurance companies have quietly slashed their policyholders' coverage in recent years, raising deductibles, lowering caps and, perhaps most important, doing away with guaranteed-replacement coverage that promised to rebuild a damaged home regardless of the cost.

A meeting on Monday in Washington of federal officials involved in the Northridge quake relief produced two very useful ideas. One is that the widely praised federal effort will need to be even better next time. And the other is that the cost of disaster insurance is too onerous to be left to individuals or even to individual states but must be organized in the form of mandatory federal disaster insurance.

The time has come for Congress to take a hard look at making earthquake insurance mandatory for all homes, apartment houses and commercial buildings in California. The goal would be a minimum level of coverage, with a reasonable deductible, for all property owners exposed to such destructive events as last Monday's Northridge earthquake. The full scope of the damage produced by that magnitude 6.6 shaker and its aftershocks can't yet be calculated.

Nothing unites Californians like the fear of an earthquake. Which is why, when word went out among the Golden State's Washington contingent that a federal agency was proposing that state and local governments should insure public buildings against earthquakes and other natural disasters to be eligible for federal disaster aid, it was all hands on deck.

Question: If there's a disaster and everything is ruined in my apartment, doesn't my landlord's insurance cover me? Answer: Not usually. Your landlord's policy doesn't include your possessions. It extends only to the landlord's property. Your personal contents as a tenant are your responsibility to insure, which can be accomplished by having renter's insurance. Some leases even require tenants to have renter's insurance.

In addition to facing pockets of high seismic risk, Ventura County has some of the costliest earthquake insurance rates in the state. Homeowners along the loamy edges of the Santa Clara River and the sediment-rich Oxnard Plain can expect to pay top rates because soil conditions mean shaking during a major quake will be especially intense there. Because of the greater danger in Oxnard, Santa Paula, Fillmore and Piru, rates in those areas are $4.

Nothing unites Californians like the fear of an earthquake. Which is why, when word went out among the Golden State's Washington contingent that a federal agency was proposing that state and local governments should insure public buildings against earthquakes and other natural disasters to be eligible for federal disaster aid, it was all hands on deck.

Fearing a potentially hefty price tag, Los Angeles officials have launched an attack on a federal proposal to require cities to insure their buildings to be eligible for disaster assistance. For Los Angeles, which has 750 uninsured buildings worth billions of dollars, the cost of meeting the proposed insurance requirements could be in the tens of millions of dollars annually, said Richard Welch, the city's director of risk management.

Fearing a potentially hefty price tag, Los Angeles officials have launched an attack on a federal proposal to require cities to insure their public buildings in order to be eligible for disaster assistance. For Los Angeles, which has 750 uninsured buildings worth billions of dollars, the cost of meeting the proposed insurance requirements could be in the tens of millions of dollars annually, said Richard Welch, the city's director of risk management.

Residents whose homes were devastated in this week's rupture of a Westminster water storage tank expressed skepticism Friday at the city's assertion that the 10 most severely damaged homes can be repaired instead of rebuilt. "It's ridiculous," said Rich Lechler, a 16-year resident. "It sounds cockeyed to me. I definitely want to come back and I'll be very upset if they don't knock it down. That's why we have insurance."

During a recent trip to earthquake-devastated Mexico City I found myself wondering how American cities would respond to a similar disaster. Would private insurance and government assistance be sufficient to help stricken U.S. cities rebuild businesses and neighborhoods? The answer is no. For example, the Federal Emergency Management Agency estimated two years ago that a repetition of the 1906 San Francisco earthquake would cause at least $40 billion in losses.

In a move certain to shake up the Southern California insurance market, earthquake-battered 20th Century Insurance Co. said Thursday that it will stop selling earthquake policies immediately and phase out all homeowner coverage over the next two years. The big insurer's exit increases fears that consumers--especially in the Los Angeles Basin--will have trouble finding earthquake insurance.

The typical homeowners policy covers a number of different risks. Here are some points to consider when evaluating your policy: * Dwelling coverage. This insures your home and any attached structures, such as a garage, for a specific sum. The coverage should be equal to the cost of rebuilding the house, not the home's fair market or sale value, which could be substantially more (in a desirable neighborhood) or less (in a poorer neighborhood) than the cost of rebuilding.

Scott and Lea Newton say they never could have afforded the Northridge neighborhood they moved into three years ago had it not been for the 1994 earthquake. They bought a 4,000-square-foot home for less than half what neighboring houses had been worth before the temblor arrived to crack foundations, shatter ceilings and tilt swimming pools. Even though the Newtons have spent $80,000 repairing the evidence of that disaster, they have no insurance to cover them if a quake hits again.