Wildfire Spots Spook Insurance Companies
Sunday, May 20, 2007; 8:30 PM
SANTA ANA, Calif. -- Spooked by devastating wildfire seasons, the nation's top insurers are inspecting homes in high-risk areas throughout the West and threatening to cancel coverage if owners don't clear brush or take other precautions.
The inspections have angered homeowners and watchdog groups that accuse the companies of trying to cut risk at the expense of customers, even while industry profits soar. The complaints echo concerns raised after Hurricane Katrina, when many insurance companies increased rates or dropped policies along the Gulf Coast.
"It certainly isn't fair for these insurers to be dumping these last-minute requirements on homeowners," said Carmen Balber of The Foundation for Taxpayer & Consumer Rights.
"It does make sense to require homeowners to take reasonable precautions, but some of the excessive demands that we've heard from homeowners are over the top," she said.
The requirements can range from clearing brush to cutting down trees or even installing a fireproof roof.
Insurers and industry groups counter that making people take responsibility for living in the highest-risk fire areas makes good business sense.
"Insurers are in the business of measuring and attempting to put a price on risk," said Candysse Miller, executive director of the nonprofit Insurance Information Network of California. "We are encroaching further and further into hillsides and areas where we should not build, and insurers have to take a look at that."
Catastrophic fires, including wildfires, caused $6.4 billion in insured losses between 1986 and 2005, with more than $2 billion of that amount stemming from massive firestorms in 2003 in Southern California, said Loretta Worters, a spokeswoman for the Insurance Information Institute.
In California alone, more than 6 million homes stand in wildfire red zones, and the number of homes built in remote "wildland communities" is expected to increase by 20 percent during the next decade.
Yet a survey conducted last year by Allstate Corp. in California's most high-risk communities found that more than three-quarters of homeowners thought it was somewhat or very unlikely that their homes would burn.
Denise Taylor, a San Diego high school teacher, lost her home to the Cedar Fire in 2003. The wildfire east of San Diego killed 15 people, scorched 427 square miles and destroyed nearly 3,000 buildings, including some 300 homes.
Taylor was stunned when her insurer, USAA Insurance Cos., doubled the annual premium for her rebuilt residence, which was 300 square feet larger, to nearly $3,000.