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Earthquake Insurance On The Rise

Could See 8 Percent Hike

By
Nannette Miranda

(KGO) -
Consumers could pay about 8 percent more a year for state earthquake insurance
if a new plan to restructure the way the California Earthquake Authority is
financed is approved by state lawmakers.

It also means insurance companies can pay out less in claims. Next year, the
law obligating insurance companies to help the California Earthquake Authority
pay up to 2.2-billion dollars in claims expires.

Insurers could have walked away, but a new deal worked out at the Capitol
would cut that pot of money in half.

"The assessment totals over one billion dollars. So rather than stepping away
from the CEA, insurance companies want to make sure that the California
Earthquake Authority remains strong", says Sam Sorich, who represents the
Association of California Insurance Companies

Today, the California Earthquake Authority has the ability to pay more than 8
billion dollars in claims, including the current 2 billion from insurers. Most
of the remaining money is from premiums paid by roughly 750,000 policy holders.

Amy Bach, who represents the United Policyholders say making the insurers'
portion smaller is a bad deal for homeowners.

"With this deal, it is questionable that the authority will have enough money
to pay claims."

State Senator Mike Mochado , who is involved with the negotiations, says it
would have been very difficult to get the insurance industry to extend its 2
billion dollar commitment beyond next year.

"The ability to try and extend it would have been a game of chicken. And if
we were not successful, they would have walked away and we would have reduced
the coverage available to homeowners."

Opponents say the new plan would drive up the cost of the average price of
earthquake insurance by $55 dollars a year. It's already about $700 a year.
Lawmakers have two weeks to decide the fate of this bill before they adjourn for
the year.

Copyright 2007, ABC7/KGO-TV/DT.

ABC7 News Team

Nannette
Miranda

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