CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, NOVEMBER 11, 2016, OR THEREAFTER
FOR RELEASE: FRIDAY, NOVEMBER 11, 2016, OR THEREAFTER
BY THOMAS D. ELIAS
“’QUACKO’ AND THE QUAKE INSURANCE VACUUM”
Chuck Quackenbush is long gone from California after his
scandal-ridden ouster from the state insurance commissioner’s office in 2000.
He went on to live for awhile on the Big Island of Hawaii and subsequently has
been a sheriff’s deputy in Lee County (Ft. Myers), Fla., where he shot and
critically wounded a suspect in 2008 while the man allegedly resisted arrest.
But the after-effects of Quackenbush, long known to his
critics as “Quacko,” live on long after his emigration from this state and will
surely be felt widely after the next significant earthquake.
For Quackenbush is one of the main reasons why in a state
where virtually every homeowner carries fire insurance, almost 90 percent don’t
bother with earthquake coverage.
Before Quackenbush’s tenure as insurance commissioner,
which began in 1995, while most of the companies he regulated were still
negotiating settlements for the billions of dollars in damages inflicted by the
1994 Northridge earthquake, almost 20 percent of Californians had quake
insurance.
But that number has been cut almost in half since, Quackenbush’s
doing.
“Believe me,” Quackenbush emailed a few years ago. “I get
plenty of bad guys (as a deputy). The dark heart of Man is a frightening thing
to behold.” Perhaps that means Quackenbush has done a little introspection
since his days as one of the last Republicans elected to a statewide California
office.
He departed that office after six years rather than face
impeachment in a scandal where he was charged with allowing insurance companies
to compensate their customers far less than actual damages they suffered. In
return, it was alleged, insurance companies set up “educational funds” with
some of the money they saved. Those funds paid for public service TV
announcements increasing Quackenbush’s name identification as he planned for a
potential 2002 run for governor.
Insurance industry figures and agents also contributed
heavily to Quackenbush’s two campaigns for insurance commissioner, allowing him
to outspend opponents handily. Insurance companies also contributed to his
wife’s unsuccessful 1998 run for the state Assembly and to several of his pet
non-profits.
Of more lasting concern to today’s homeowners was
Quackenbush’s cave-in to insurance companies which refused to sell any new
property insurance in California after the ’94 temblor so long as they also had
to offer quake insurance. Instead of using his considerable powers to order
that companies like State Farm, Safeco and 20th (now 21st)
Century stop selling ultra-profitable car insurance in the state until and unless
they also sold quake and property coverage, Quackenbush devised a new outfit
called the California Earthquake Authority (CEA), now the main seller of
earthquake insurance here.
CEA policies cost more than earlier ones, carry
significantly higher deductibles and don’t cover fences, separate garages and
other outbuildings that were routinely included in previous policies. This
yields less coverage for higher premiums. There’s also the risk that the CEA
might not be able to pay claims in full after the next big earthquake (the
question is not if that quake will come, but when?) because its funds are
limited to the premiums paid by policyholders. By comparison, national
insurance companies have a much larger premium pool available in disasters,
including money raised from selling other kinds of insurance.
No wonder many fewer people buy quake insurance today as
before Quackenbush so eagerly did the bidding of the insurance industry.
Even today, the existence of Quackenbush’s CEA lets the big
national insurance companies off the hook at the expense of homeowners.
This didn’t perturb Quakenbush a bit the last time he
discussed it with this column. “If customers decide not to buy the CEA policy,
that’s their choice,” he said. “Only the market can decide what is a viable product.”
The problem with that is the lack of a real market, since the large insurers
still don’t sell new quake policies here.
A few small firms offer better coverage than the CEA’s, but
at even higher prices.
Meanwhile, no politician has stepped forward to try
righting the Quackenbush wrongs. The first one who did that, of course, would
incur the undying wrath of the insurance industry – not exactly a positive when
raising campaign money.
For sure, though, Californians need better earthquake
insurance than most can get now. This may not seem urgent right now, but after
the Big One hits, the perspective will be very different.
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Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net
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