Risky Business
Big insurers rig the game to avoid covering people likely to file claims
Residents, however, can't just walk away. Depending on the scope of a disaster, they might have to pay up to a 20 percent surcharge on their premiums to cover some losses. To make sure they pay, the law allows for cancellation of coverage if they balk. "The industry rigged it up as a hostage-taking measure," says Brian Perkins, a senior staffer of the California State Senate Insurance Committee. Authority officials say the plan is improving, with better coverage at lower prices. But consumer advocates remain unconvinced. "You could be out thousands and thousands of dollars before you even see a penny," says Norma Garcia, an attorney for Consumers Union in San Francisco, "if you ever do."
Nearly three years ago, a moderate quake rumbled through northern California's Napa Valley wine country. Only 15 quake-authority policies paid off. "It's very telling about the insurance industry," says Amy Bach, executive director of United Policyholders, a consumer group. "They're running as fast as they can away from what they're supposed to do. They just want to make a profit without delivering the product. It's crazy."
Insurers bulk up
Insurers' assets have increased nearly 50 percent since 1994, despite 9/11 and the weak stock market.
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[labels]
0, 50, 100, 150, 200, 250, $300 billion
'94, '95, '96, '97, '98, '99, '00, '01, '02
Source: Insurance Services Office, National Association of Independent Insurers; USN&WR
Figures are for property and casualty insurers.
Big Bucks, little coverage
Homeowners forced into a special plan often don't reap many benefits from the policy. The California Earthquake Authority offers quake coverage, for example, that features a steep deductible and fails to cover key portions of a property.
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COST OF INSURANCE
For a median-priced 25-year-old home in the San Francisco Bay Area: $1,910 (including 15 percent deductible)
DOESN'T COVER features not part of the main structure, including:
Detached garages
Motor vehicles
Walkways
Awnings and patio coverings
Swimming pools, spas, and hot tubs
Decks and patios
Sources: California Earthquake Authority, Independent Insurance Agents & Brokers of America, Santa Clara County Assessor's Office, Marshall & Swift / Boeckh
Rob Cady--USN&WR
Playing politics with policyholders
Across the country, doctors are rallying and striking to protest soaring medical malpractice insurance costs, which the American Medical Association says top $200,000 annually for doctors in some specialties. Making insurance unavailable or too pricey is a standard tactic insurers use to dodge risk, as the protests that often follow pressure lawmakers. The gambit is working, as many states are moving to cap the pain-and-suffering damages juries can award to malpractice victims. President Bush is also calling for a $250,000 limit on noneconomic damages. Such legislation has passed the House and is pending in the Senate. Insurers claim that escalating jury awards force up premiums, but consumer advocates note that the size of awards is not up.
Insurance industry's campaign contributions to federal elections
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[labels]
0, 10, 20, 30, $40 million
'92, '94, '96, '98. '00, '02
2002 figures not yet complete
Source: Center for Responsive Politics
-Christopher H. Schmitt
With Edward Hof
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