After the fires, insurers busy rebuilding southern California

Fueled by the infamous Santa Ana winds, the fires that broke out on October 21, 2007 quickly turned deadly and multiplied resulting in 23 named fires in seven counties which scorched over 500,000 acres and damaged or destroyed over 2,100 homes. Now that the tragic Southern California wildfires have been extinguished and evacuees have returned home, the recovery process is underway. California insurance companies are diligently working with their policyholders to rebuild homes and lives.

As soon as the fires erupted, insurers put their catastrophe response plans into action. Companies mobilized their catastrophe teams and dispatched mobile vans from locations across the country and sent them into the impacted area. Immediately, insurers bought advertising on television, radio stations and in newspapers to publicize their toll-free 800 numbers. This advertising of 800 numbers enabled policyholders forced to flee without any paperwork to call their insurer and start the claims process.

Insurers sent all available adjusters into the seven counties. Insurance adjusters went to evacuation centers to locate policyholders and provide them with Additional Living Expenses available under homeowners insurance policies so fire survivors or evacuees could move out of the centers and into a hotel room. Insurance Comissioner Steve Poizner registered an additional 502 emergency adjusters sent by companies from outside of California to accelerate claims processing.

Many insurers and company employees went the extra mile to help during this tragic fire. One insurance adjuster, who was forced to evacuate his own home, put his troubles aside and went straight to work adjusting claims. Another company partnered with their employees to donate upwards of $250,000 to the San Diego/Imperial County Red Cross. These insurance company employees also coordinated a national program to donate 1,000 new stuffed animals to children impacted by the fires.

Several insurance companies imposed a freeze on cancellations for non payment. There are examples of insurers processing the claims of people who have policies that have lapsed because of non-payment. Another company is offering to rebuild homes destroyed by the fire back according to stronger “green” building code standards for no additional costs to the policyholder. Insurers are also working with state and local officials to coordinate debris removal so properties damaged in the fire can be cleared quickly and efficiently. This coordination will protect California’s environment and allow the rebuilding process to begin sooner. All debris removal should be completed by January 2008. These are just a few examples of the extraordinary efforts insurers have and will continue to make in order to help policyholders recover.

Following any major catastrophic event questions inevitably arise: Will claims be paid? Will policies be renewed? Will insurance rates go up? The answers to these questions are simple and clear.

Yes, insurance claims from the 2007 fires will be paid. So far insurers have received 22,700 claims for coverage under auto, homeowners and commercial insurance policies. These claims will be adjusted in a timely manner and covered claims will be paid.

Insurers doing business in California understand that wildfires are an ongoing risk. Insurers plan for major wildfires by reserving premiums to pay claims in events such as this. The recent fires are expected to cost insurers up to $1.6 billion. The 2003 fires resulted in 3, 631 destroyed or damaged homes causing $2.2 billion in losses.

Yes, insurance policies will be renewed. Following the 2003 fires, insurers’ non-renewal rates scarcely changed. Non-renewal rates consistently run about .5 percent of all policies including policies canceled for non payment of premium. A consumer protection law, AB 2962, was passed in 2005 which prohibits non renewal of homeowners policies following a state declared emergency. It is against the law for an insurer to not renew a policy with a claim from these recent fires.  

No, insurance rates will not go up as a result of this fire. Moody’s analysts expect that for most primary insurers, damages from these fires will not reach the retentions of their catastrophe reinsurance programs. California’s homeowners insurance market has remained highly competitive in the wake of the 2003 fires. In fact, rates have gone down since the 2003 fires. Over the past three years, insurers have requested average rate decreases ranging from 6 to 23 percent.

Unfortunately the risk of wildfire is something that all Californians must prepare for. The recovery process will take some time and insurers are committed to rebuilding the Southern California communities.

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