CA: Governor signs bill that could trigger higher insurance rates (for earthquake coverage)

AP - Bakersfield Californian ^ | 10/5/07 | AP

[NormsRevenge]

More than 760,000 California homeowners who buy earthquake insurance through a state-run authority could see their premiums rise under a bill signed Friday by Gov. Arnold Schwarzenegger.

But the measure's supporters say that without the legislation homeowners could be hit with even bigger rate increases.

The measure by Sen. Mike Machado, D-Linden, creates a new $1.3 billion underwriting requirement for insurance companies participating in the California Earthquake Authority program.

That $1.3 billion requirement will replace a $2.2 billion insurance industry commitment that's scheduled to expire on Dec. 1, 2008.

State Treasurer Bill Lockyer opposed the legislation, predicting it would force a raise in rates by another 8.5 percent to make up for the potential loss of industry contributions. Right now, they average about $700 a year.

He urged lawmakers to extend the $2.2 billion obligation until the authority builds up $6 billion in cash reserves. Currently it has only $2.7 billion.

But Machado said the $1.3 billion obligation was the best compromise that he could work out with the politically powerful insurance industry.

He said that an extension of the $2.2 billion requirement could have driven insurers out of the state. Without the $1.3 billion replacement, homeowners would face average rate hikes of 20 percent, he predicted.

Tim Richison, the authority's chief financial officer, said the likelihood of a rate increase with the smaller industry underwriting obligation will depend on how much the authority has to pay for the insurance it buys - called reinsurance - to help cover its claims.

Under Machado's bill, the $1.3 billion underwriting obligation will be phased out over 10 years, although the phase-out could be suspended for up to two years if the authority is forced to pay at least $500 million in claims because of an earthquake.

[goldstategop]

No one in California carries earthquake insurance. The deductibles are too high and the coverage is too skimpy to justify the policy even as an add-on to regular homeowner's insurance.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

[OldArmy52]

Here in Calif, we look at the ridiculously high premium prices for the Govt mandated earthquake insurance option and it makes me laugh with disbelief at how high the cost is, how high the deductible is, how low the payout/coverage is.

Sort of like going into a cheap motel and being told you can have one of their old, shabby rooms for only $2,000/night.

One laughs in disbelief and says, “I’ll pass.”

Another success story brought to us by the Dems running the Calif govt (and I’m including Gov RINO there).