WASHINGTON–Insurance industry groups, who faced lawmaker outrage for perceived mishandling of Hurricane Katrina claims, held a briefing today to convince Congress they are doing a good job handling policyholder losses from October's California wildfires.
At a session for congressional staffers on Capitol Hill, the heads of the major insurance company groups spoke of the swift response of the industry and the sacrifices made by insurance professionals to help policyholders begin the rebuilding process.
Robert P. Hartwig, Insurance Information Institute president, noted that although the fires were indeed a disaster with an estimated insured loss of $1.6 billion, the catastrophe involved was relatively small in comparison with what the insurance industry has dealt with before.
"It is within the realm of expectation," he said. "It is within the realm of what we contemplate," he explained at the briefing.
Although the October fires' estimated loss of $1.6 billion would make them the second most expensive fire disaster in recent history, Mr. Hartwig noted that fire disasters accounted for only 2.2 percent of catastrophe losses during the past 20 years, and that the October fires was not among even the top ten most expensive catastrophes in U.S. history.
Furthermore, California is a strong market for homeowners insurance he said, with rate decreases having been filed and approved for most major insurers.
Additionally, Mr. Hartwig noted the state's insurer of last resort, the FAIR Plan, covers only 1 percent to 1.5 percent of the market, and the number of FAIR Plan policies has been shrinking in high-risk areas as private insurers offer coverage.
Marc Racicot, president and chief executive officer of the American Insurance Association, mentioned that the state's second largest insurer, Farmers, had numerous agents and adjusters, a mobile claims center, "and even its CEO on the scene."
He said other companies have gone beyond their legal requirements to pay claims. Employees at Safeco donated $250,000 to help the rebuilding effort, and Fireman's Fund has said it will offer policyholders the choice to rebuild their homes in a more environmentally friendly way at no extra cost.
Mr. Racicot also noted that Hartford has said it will not cancel policies for lapses due to the fires. "Helping others is why the insurance industry exists," he said.
David Sampson, president and CEO of the Property Casualty Insurers Association of America (PCI), said homeowners should not be concerned that their filing of a claim will make their insurer more likely to nonrenew them.
Since earlier fires, the state has enacted a law barring insurers from cancelling a policy prior to reconstruction and requires a renewal offer be made following a disaster.
Additionally, Mr. Racicot said insurers will pay replacement costs to rebuild a home without deduction for physical depreciation, and under the state of emergency declaration by Gov. Arnold Schwarzenegger, insurers will provide coverage for living expenses for up to two years.
"It is during these times of tragic loss that the value of our industry and the financial safety net we provide consumers, businesses and local economies becomes clear," he said.
Charles Chamness, National Association of Mutual Insurance Companies president, spoke of the work done at the ground level by insurance company employees to help clients, including an agent that "cut short a once-in-a-lifetime trip to Jerusalem."
He mentioned another whom he said had donated their RV so the policyholders of a smaller company would have a place to meet and work with their agent.
The insurance industry, said Mr. Chamness, is working to fund research that will lead to better, more secure homes to help avoid disasters in the future. "The science underwritten by the insurance industry now will help everyone understand how to avoid more damages later," he said.
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