Quackenbush Says State Must Prod Insurers

Insurance Commissioner Chuck Quackenbush said Wednesday that sales of homeowner policies are drying up in California and, to solve the problem, it is imperative that the Legislature enact his proposed state earthquake insurance authority.

But consumer representatives who see the authority as a bailout of big insurance companies countered that Quackenbush is misusing his position in an attempt to get pro-consumer lawmakers to knuckle under.

One senator in the forefront of those who have stalled action on the measure--Herschel Rosenthal (D-Los Angeles)--called the timing of Quackenbush’s plea suspicious and termed the commissioner more friendly to insurers than he ought to be.

Reporting results of his latest survey on the availability of homeowners insurance, Quackenbush said that fewer than 0.2% of insurers are writing new homeowner policies on an unrestricted basis, regardless of where a person lives or in what type of house.

In other cases, he said, companies are refusing to sell, either to cover older homes or those they perceive as too close to brush fire areas or earthquake faults. Most of the restrictions were implemented after the 1994 Northridge earthquake.

Declaring that he is receiving thousands of calls from people unable to buy either homeowner or earthquake insurance, the commissioner called the shortage “a real problem that won’t fix itself.”

Only by putting earthquake insurance under state control and lifting the burden of paying quake damages off the companies can help bring an end to the shortage and entice insurers back into selling homeowners insurance, he said.

Under the earthquake authority, the companies would remit all quake premiums to the state, which would pay claims totaling as much as $10.5 billion.

Quackenbush’s comments jibe with recent public complaints. Many people said they have been able to obtain homeowner insurance only at rates two to three times what they had paid before.

But Rosenthal said he has been told by realty agents and escrow companies that whatever difficulties may exist in the market, so far most homeowners are able to buy sufficient insurance to secure mortgage loans.

“The commissioner knows that the only impediment to enacting the California Earthquake Authority is the insurance companies’ refusal to address in good faith the amendments which we have proposed,” the senator said.

Meanwhile, two consumer leaders questioned Quackenbush’s motives.

“What we see is the commissioner throwing the state into a panic in order to strong-arm the Legislature and the governor,” said Harry Snyder, West Coast co-director of Consumers Union.

And Harvey Rosenfield of the Proposition 103 Enforcement Project put it even more strongly.

“Quackenbush is aiding and abetting the insurance industry’s use of economic power to destabilize the marketplace and the California economy,” he said. “He ought to be investigating what the companies are doing, not supporting them.”

The commissioner’s spokesman, Richard Wiebe, responded:

“The evidence is overwhelming that we have serious problems in the homeowners insurance market. Companies are not turning their backs on hundreds of millions of dollars of premiums for no reason.” In short, Wiebe added, Quackenbush’s critics are ignoring a growing crisis in their resistance to enacting the authority.

Opponents of the authority are unhappy that the state insurance policies would cover less than private earthquake insurance policies of the past, and often would cost more.

Proponents contend, on the other hand, that in the wake of vast payouts in the Northridge earthquake, there simply are neither the public nor private resources to cover as much as in the past.

Two of the three biggest insurers in the state reiterated this week that they expect to reenter the homeowners market, if the earthquake authority is enacted.

State Farm said: “We will write a substantial amount of new homeowners business in every region of the state when the authority is enacted.”

And the Farmers group of companies said: “As we have said from the very beginning of the debate, should the authority be enacted and Farmers choose to participate, Farmers will reenter the California homeowners insurance market.”

Agents for both companies have said that for the time being, however, they are not free to write policies for new customers, and they have even been told not to sell renter insurance.