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Thursday, June 8, 1995 Home Edition Section: Business Page: D-3 State OKs Farmers' Plan to Raise Quake Insurance Prices; Underwriting: Quackenbush allows 138% average increase, exceeding recommendation.; By: THOMAS S. MULLIGAN TIMES STAFF WRITER After extended administrative hearings, Insurance Commissioner Chuck Quackenbush approved a controversial new earthquake insurance plan for Farmers Insurance Group, under which the state's third-largest insurer will increase rates by an average of 138% and impose higher deductibles and co-payments on most customers. The plan also allows consumers to opt for a new kind of bare-bones earthquake insurance policy providing limited coverage at a lower price than the traditional policy. For example, the annual earthquake premium for a Los Angeles home insured for $200,000 would be $528 under a traditional policy but only $240 under the new "basic" policy, which imposes coverage limits of $5,000 for contents, $2,500 for alternative living expenses while a damaged home is being repaired and $2,000 for exterior structures such as swimming pools or walls. Gina Calabrese, staff attorney for the Proposition 103 Enforcement Project, a consumer group in West Los Angeles, criticized the rate hike as "a back-room deal" between Quackenbush and Farmers. Quackenbush signed the approval order last Friday, partially overruling an administrative law judge who had recommended a 121% rate hike. Farmers, like other major insurers, has virtually stopped writing new homeowners insurance in California, fearing additional exposure to earthquake losses. State law requires companies that sell homeowners insurance to also offer earthquake insurance. After losses estimated at $1.7 billion from the Northridge earthquake, Farmers' financial strength ratings were downgraded by major ratings agencies. Quackenbush's approval of the new rate plan would enable Farmers to begin "a selective return to writing new homeowners business in California on a limited basis," the company said in a statement Wednesday. But it did not say when, and a spokesman declined to go beyond the statement. ---- START OF CORRECTION ---- For the Record Los Angeles Times Tuesday June 13, 1995 Home Edition Business Part D Page 2 Financial Desk 2 inches; 46 words Type of Material: Correction Earthquake insurance rates--Farmers Insurance Group said it supplied incorrect information in a story last Thursday about the company's new earthquake insurance plan. Its new "basic" earthquake insurance policy actually provides a maximum of $2,000 coverage for personal property and $1,000 for exterior structures. ---- END CORRECTION TEXT ---- Descriptors: CALIFORNIA STATE INSURANCE COMMISSIONER; FARMERS INSURANCE GROUP; EARTHQUAKE INSURANCE; INSURANCE RATES; Copyright (c) 1995 Times Mirror Company |
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