Are You Protected from Wildfire Damage?

Do you live in California? Are you at potential risk for wildfire? Don't be surprised if your insurer starts making demands that you clear brush, cut down trees or install a fireproof roof before you get your next policy, according to an article on Mohave Daily News. 

It's just another step in the push by companies to make homeowners take more of the risk in the insurance contract between insurer and policyholder.  

We've seen more and more of this kind of behaviour, especially in homeowners insurance. Just recently, many insurers have actually stopped writing insurance policies for certain types of coverage, especially when hit by a lot of claims. For instance, State Farm stopped writing new insurance policies in hurricane-prone Mississippi after Katrina. Since then, others have followed suit. It's all called good business decisions for the financial health of the insurers.

Shareholders love it; policyholders hate it.  

Have insurers and their agents got you convinced that they have to take these steps in order to make enough money? After all, they have to be able to survive in the face of catastrophic weather and other disasters. Think again. State Farm -- one of the biggest insurers in the hurricane-prone Gulf coast -- posted a healthy profit for 2005, despite fall-out from Katrina. In fact, the net worth of State Farm increased by almost $4 billion in 2005 alone.

Here's yet another example: Allstate has currently stopped writing homeowners insurance in California, at least in part because of wildfire risk. It's all part of Allstate's move to "tougher" underwriting requirements. Note that Allstate posted a profit of $1.8 billion in 2005, even with losses from three hurricanes.

It would seem that many insurers have forgotten that the insurance contract actually entitles you to have a legitimate claim paid. Insurance is supposed to spread out the risk over hundreds and thousands and (in some cases) millions of insurance policies. In exchange, you've paid for a service in advance of a catastrophe. Lately, insurers don't seem to like that, despite that fact that this is the insurance business, plain and simple. However, I think that many would just prefer that you pay something for nothing. 

Or perhaps I'm paying all that money for those lovely and decorative insurance certificates.  

Monique L. Attinger

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