Homeowners Insurance

Underinsured homes. Ever-rising premiums. Stealth changes. Intrusive satellite inspections. Blacklists of homeowners who have filed multiple claims. Policy cancellations. These are a few of the gripes that homeowners, consumer advocates and lawmakers are voicing over the state of homeowners insurance in California and across the nation.

Question: It is my understanding that homeowners associations are required to carry insurance coverage to protect the titleholders and those who serve on the board from liability for actions conducted by board directors in good faith during the ordinary course of business. I'm on my homeowners association's board and we do carry this insurance for the directors and our third-party property management company. One of our three directors believes we don't need this coverage since all the individual homeowners have their own liability insurance, and he has proposed dropping this coverage to save around $5,000 a year.

U.S. Atty. Gen. Janet Reno announced on Thursday a landmark settlement in a homeowners' insurance redlining case filed on behalf of this city's African American homeowners against American Family Mutual Insurance Co. American Family was alleged to have offered inferior coverage to blacks compared to the policies available to whites and to have avoided prospective clients who are black.

As California heads into another season of wildfires that have been growing more frequent and more ferocious, homeowners are facing higher prices to insure their property. In the last year, some big insurance companies have won approvals from regulators for premium hikes ranging from 4% to 7%. And a round of requests for similar increases has been submitted to the state insurance commissioner. In a state parched by a three-year drought, wildfires are at least partly to blame for the price increases, industry officials and even some consumer advocates agree.

It's the peak of what is now a year-round fire season. And throughout Southern California, homeowners in blaze-prone regions are having a hard time finding fire insurance. Tens of thousands of homes are in the region's brushy canyons, with still more under construction.

Hurray for Benjamin Zycher, a lonely voice telling it like it is again in his column "Misguided Policies--Then the Earthquake," Commentary, July 27. He is absolutely correct, tying earthquake coverage to homeowners insurance works only as long as homeowners is a profitable line of business and the earthquakes are small. However, there is much more to the availability problem in the homeowners line of business in California than just the Northridge earthquake. The California insurance industry has not made a profit in the homeowners line since 1989.

The first price survey of homeowners' insurance in California was released Monday by the state Insurance Department and, as with auto insurance, the lesson to consumers was clear: It pays to shop around. In homeowners' insurance, the price differences between ZIP codes and between companies within the same ZIP code tend to be less than in auto insurance.

A recovering economy and healthier profits for property/casualty insurers are easing the tight market for homeowners insurance nationwide, but securing a policy is still a challenge for home buyers. A recent report card on the first half of 2003 by the Insurance Information Institute, a nonprofit group funded by insurers, shows a "remarkable turnaround" in the industry, with underwriting losses declining 95% from a record $52 billion in 2001 to just $4 billion to $6 billion this year.

The State of California Dept. of Insurance, Consumer Affairs Division recently released the results of its first "Comparative Premimum Survey On Homeowners Insurance," based on rates effective in July 1987. The statewide study was designed to show annual premiums for three rating examples: a typical 45-year-old home, a 25-year-old home and a newer home with higher value.

Homeowners and renters insurance prices have risen only slightly in the last year, Insurance Commissioner John Garamendi said in releasing the department's annual survey of the state's largest insurers. In Los Angeles and Orange counties, for example, the average price among the state's 10 largest insurers for a $150,000 homeowners policy on a frame house built in 1985 was $516, up $3 from a year earlier.

Two of Southern California's biggest insurance companies are joining forces to create the state's largest auto insurer, at the same time throwing a financial lifeline to troubled insurance giant American International Group Inc. AIG agreed to sell its 21st Century Insurance subsidiary for $1.9 billion to Farmers Insurance Group of Los Angeles, itself a unit of Zurich Financial Services of Switzerland.

It's the peak of what is now a year-round fire season. And throughout Southern California, homeowners in blaze-prone regions are having a hard time finding fire insurance. Tens of thousands of homes are in the region's brushy canyons, with still more under construction.

All homeowners should periodically have their insurance policies reviewed to make sure they have enough coverage. Consider last week's fires as a reminder to do just that and to conduct a photo or video inventory of your home. Such documentation will simplify the task should you have to file a disaster claim. After a fire, flood or other disaster, some homeowners opt to work with an independent or public adjuster rather than directly with their insurance companies. Your insurer may be cool to this idea -- such adjusters invariably come up with larger damage estimates than do insurance company adjusters.

California Insurance Commissioner Steve Poizner has quietly dropped an effort to seek refunds for Allstate Corp. policyholders who might have paid too much for their homeowners' coverage in recent years. Critics immediately denounced his decision. On July 10, Poizner announced that Allstate had been ordered to slash its homeowners' rates by 28.5% for policies that begin or renew after July 30.

Allstate Corp., the state's third-biggest home insurer, must slash its annual premiums by more than one-quarter, saving more than 850,000 customers about $250 apiece. The rate reduction, to be announced this morning in Los Angeles by state Insurance Commissioner Steve Poizner, marks the end of a battle of more than two years between state regulators and Allstate. The company covers about 1 in 7 homes, condominiums and rental units insured in California.

California Insurance Commissioner Steve Poizner proposed emergency changes Monday to regulations that help determine rates for auto and homeowner policies, saying the changes would "help speed lower insurance rates to consumers." The proposal would make changes to the formulas used to set rates. These changes would require insurance companies to show premium trends over the last six years. Under the current regulation, they must show trends going back three years.

A steep rise in dog-bite incidents--including the notorious San Francisco case in which a lacrosse coach was killed by her neighbor's dogs--has spurred homeowner insurers to reconsider how they cover canines. Mercury Casualty Co., citing higher claims costs for households with dogs, recently began offering a 10% discount on homeowners insurance for families that don't own a dog or are willing to take their dog off their homeowner policy.

Companies representing 95% of the market have either stopped or restricted the sale of new homeowner policies, according to the California Department of Insurance. Most of the companies that are still writing new policies have severely limited their activity in the San Fernando Valley and Ventura County because of earthquake risks. And local real estate agents report that they are having trouble closing deals because of the insurance shortage.

Louisiana Atty. Gen. Charles Foti sued the state's largest property insurers Wednesday, accusing them of conspiring to limit payments to policyholders after hurricanes Katrina and Rita and engaging in an elaborate price-fixing scheme. Foti's wide-ranging lawsuit, filed in a state court in New Orleans, alleges that Allstate Insurance Co., State Farm Fire and Casualty Co. and other insurers worked together to manipulate damage estimates and low-ball claims payments after the 2005 hurricanes.

California home insurers, reacting to pressure from state Treasurer Bill Lockyer, have sweetened their proposal for financing the government-backed earthquake insurance fund. With less than a week left in the legislative session, they're supporting a new compromise that would increase insurance companies' financial support for the California Earthquake Authority by $100 million and eliminate the need to hike homeowners' annual premiums by an average of $55.