Fire Causes Soon To Be Blamed For Insurance Company Claims Denial
Anyone who's already made the comparison of California wildfires to the Katrina disaster, probably also has had a little suspicion that more disaster will follow.
The insurance claims rejections after Katrina took the grounds that the policies didn't cover floods, and named anything they possibly could just flood damage. No, there wasn't a flood, but it fit the companies' needs so they invented one.
What will be the grounds for denying claims after the wildfires? I suspect some grounds will be arson. Who's insured for arson? And if your house was about to be repossessed, as so many California homes are, I suspect your fire damage might well be viewed as suspicious.
The insurance industry's plight has already begun to attract attention at the financial pages in the media.
Right now, thousands of dislocated Southern California homeowners are fretting about the fate of their residences, but the biggest headaches could come months after the wildfires ravaging the area are extinguished.
Consumer advocates warn that insurance firms could take a hard line with their policyholders in the wake of the wildfire disaster, by skimping on claim payments or going so far as to refuse to write new policies altogether.
At least for now, most consumers should not fear getting dropped by their insurance company. Under California law, insurance companies are required to renew their homeowner policies at least once if they live in a declared federal disaster area. After that term expires, insurers may then drop their clients.
Earlier Tuesday, President Bush declared seven California counties disaster areas.
In the end, some consumers may get dropped, warns Amy Bach, executive director of the California-based consumer group United Policyholders, which deals primarily with the insurance industry.
But, she added, even if some firms cut back in California, others may well step in. "Hopefully the market will [eventually] stabilize," said Bach.
The concept of insurance originally was shared costs for damages, with those who incurred losses making claims on the fund for repairs. The insurance industry instead has grown into a vast investment fund for shareholders. Denying claims, as the movie "Sicko" brought into sharp focus, is seen as loss control - not the purpose of taking out insurance.
The industry is making policies increasingly less desirable in all fields, and in healthcare particularly. Almost 50% of all bankruptcies result from losses to insured parties with medical problems.
Building in disaster prone areas has long been a drain on public funds, as floods, storms and fires have called for rescue. This may be a time to end public support for preventable disaster losses. We may soon be facing this necessity. Homeowners in California have a lot more facing them.
(This post also at http://cabdrollery.blogspot.com )