Risky Decisions

All the devastation from natural disasters that have occurred across the nation in recent months illuminates the fact that many, many homes across the United States are either uninsured or underinsured.

Violent weather, wildfires and flooding have been unusually intense. But violent storms and fires occur annually, and despite the widespread attention natural disasters receive in the press, many consumers continue to take the risk that the worst won’t happen to them.

Even in areas where dramatic events like wildfires, tornadoes and flooding occur year after year, the message seems not to have gotten through to folks that insurance can help them rebuild their lives after disaster strikes.

In California, only about 10 percent of homeowners are insured against earthquakes – despite the fact that the U.S. Geological Survey says there is a 99.7 percent chance that a magnitude 6.7 earthquake will strike California in the next 30 years.

A recent study conducted by Associated Press revealed that the percentage of homes covered by typical residential property policies varies by region. Thinking positively, the West has the lowest rate of homes without insurance, at 3.3 percent. In contrast, the South had the highest rate of homes without coverage, at 17.4 percent. The rate for the Northeast was 12.2 percent, and the Midwest was 8.4 percent.

Obviously, price is a major factor in consumers’ decisions whether to purchase insurance for their property, as well as how much coverage to buy. But it’s your job as agents to help homeowners and renters to evaluate the costs and the risks.

As an incentive to make sure your customers are adequately aware of their risks, California has implemented new homeowners underinsurance regulations to enhance the standards and training for estimating the replacement value on homeowners insurance. While the law faces some controversy (See Insurance Journal West July 4, 2011, issue, page 8), the regulations are not without merit. After all, the commissioner imposed them primarily to ensure consumers who are victims of disaster have the appropriate relief to resume their lives.

So even if you disagree with the method by which these regulations are being imposed, please take the training seriously. After all, your customers’ livelihoods are on the line.

Finally, there’s one last risk management decision of which you should be aware. My husband was recently asked to help manage the cleanup of Agent Orange in Vietnam, to help mitigate the risks of toxic dioxins affecting the Vietnamese. So this is my last issue as West editor for Insurance Journal. Thank you for sharing your expertise and for being so considerate to an insurance novice like me. I appreciate your taking the time to read.

Topics California Legislation Homeowners