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March 2006

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CEA Rate Application Approved by California Department of Insurance

The California Department of Insurance (CDI) on February 10, 2006, approved the CEA’s application to reduce rates by a statewide average of 22.1 percent.  As a result, 85 percent of CEA policyholders will experience a reduction in their earthquake insurance rates beginning July 1st of this year.

The CEA Governing Board approved filing for lower rates last summer after staff crafted a rate application based on new information on earthquake-hazard and soils as well as lower CEA expenses.  After the application was filed in September 2005, the CEA agreed to adjustments suggested by CDI, and it was the adjusted application that earned CDI approval. 

Under the approved application, there will be a 22.8 percent overall rate decrease for CEA dwelling policies (base-limits program).  Decreases will differ for renters and condominium owners, and mobilehome owners will not be affected.  About 15 percent of CEA policyholders will see a rate increase, but negotiated adjustments will allow those increases to be phased-in over three years, as requested by the CDI and ratified by the Board in January.

Two applications are still pending with the Department:

  • The first would give consumers more options to select coverage to meet their needs by “unbundling” personal property and loss-of-use coverage options.
  • The second would allow the purchase of additional building code upgrade coverage.

Both proposed changes require revisions to existing regulations.  CEA anticipates the regulation revisions will be in place in time for the planned July 1st implementation of the new rate plan.

 

Governing Board Continues Review of White Papers

The Board moved forward on critical issues at back-to-back meetings in January and February.

On January 30th, the Board approved an innovative plan to finance the CEA’s supplemental program, beginning in 2007.  Keying on the CEA’s first-ever issuance of revenue bonds, already planned and approved to diversify and enhance CEA finances, the Board voted to use a portion of bond proceeds to underpin a new reinsurance arrangement.

At its February 23rd meeting, the Board heard a third and final installment of staff’s research white papers, with this analysis addressing the CEA’s investment policies—much of the paper keyed on suggestions derived from CEA public meetings held last summer in San Francisco and Los Angeles.  The Board also reviewed and approved the staff’s recommendation for next year’s financial structure—in that regard, CEA Chief Financial Officer Tim Richison is meeting with reinsurers at this writing to secure appropriate claim-paying capacity and will report to the Board at its April meeting.

To review full Board agendas, visit the CEA Web site at www.EarthquakeAuthority.com.

 

CEA Continues Financial-Strength Dialogue with Participating Insurers

The CEA executive staff is encouraged by the consistent show of interest and support by participating insurers in regular meetings called by the CEA to discuss the CEA’s present and future financial strength.  The staff hosted two meetings in February at the CEA office.  Four meetings in all were originally scheduled, but the insurers’ considerable interest could extend the dialogue.

 

CEA Goes On-Site to Learn From Gulf Mega-Catastrophes

Hurrican Katrina damage

Source: California Earthquake Authority

CEA claims manager Dan Dyce was on-site in the Southeastern United States for two weeks in January to observe areas where insurers continue to respond to the devastation of Hurricane Katrina.  The experience will help the CEA enhance its implementation of a primary strategic goal, to provide excellent customer service and ensure claims are processed promptly, fairly, and consistently.

Insurer claims managers and adjusters welcomed the CEA as both observer of and participant in companies’ post-disaster response to the overwhelming number of catastrophe-insurance claims.  The industry had recruited a substantial number of adjusters, all of whom were quickly trained and deployed where needed in the disaster-ravaged areas.  Of particular help in adjusting claims on property still under water, the newest satellite-imaging technology made it possible for adjusters to gather data about such inaccessible areas remotely and immediately gauge damage and authorize payouts. 

The CEA contracts with and ultimately depends on its participating insurers to adjust its claims—the strength of this arrangement can only be enhanced by this crucial post-Katrina claims experience.

 

CEA to Help the Bay Area Commemorate ‘06 SF Quake in April

Destroyed Financial District in San Francisco

Panorama of the Destroyed Financial District
Source: San Francisco Museum

April will be a significant month for San Francisco and the Bay Area as the nearly 300 organizations making up the ’06 Alliance help commemorate the centennial of the Great San Francisco Earthquake and Fire of 1906.  With full Governing Board support, the CEA is a major contributor to the efforts, supporting many activities and events, among them a special insertion of the CEA-sponsored Putting Down Roots in Earthquake Country handbook in Northern California’s Contra Costa Times and San Jose Mercury News and Southern California’s Los Angeles Times.

Plans also include distributing Putting Down Roots at retail locations, including Orchard Supply Hardware, Lowe’s, and Home Depot

A centerpiece of CEA sponsorship and efforts is the design, production, and printing of an attractive and highly useful commemorative calendar of events, slated for distribution throughout the Bay Area. 

The CEA continues its support of the Oakland Museum of California’s interactive exhibit, Aftershock!, which will shake visitors’ earthquake consciousness with a full-size shake-table that simulates the ‘06 Quake’s violent ground motion.  The exhibit opens April 1, 2006, and runs through August.  To make the most of the learning and earthquake-preparedness opportunities for consumers, the CEA will contribute to advertising to support the exhibition and other ’06 Alliance projects.

The CEA is also a sponsor of an upcoming documentary produced by the Bay Area’s KPIX-CBS Television 5.  The one-hour special features science from the United States Geological Survey and chronicles the ’06 Quake and its aftermath as well as the City’s recovery—it will also examine modern-day issues of safety and preparedness.  Check your local listings for the early-April air date, and watch for the CEA’s preparedness messages scheduled to air during the program.

Seimic photo

The ’06 Alliance’s Web site is a great resource for information about family-oriented activities and events related to the Great Quake.  The events kicked off in January and are held throughout the 10 Bay Area counties.  Access the ‘06 Alliance information at http://1906centennial.org.

 


Mitigation Program Results to be Analyzed by CEA

Mitigation continues to be a priority as CEA’s Communications, Public Policy & Mitigation (CPPM) staff conducts on-site evaluations of mitigation and education programs.  Last month, staff met with CEA contractors to plan analysis of the mitigation-pilot-project rebate campaign.  The analysis will access sample populations of consumers who submitted requests for rebates, free product samples, or both—by comparing responses from the three groups, the CPPM team hopes to gain further insight into what motivates consumers to prepare to take action to mitigate earthquake loss.

A new mitigation contract is starting up with the San Diego County Office of Emergency Services (SD-OES) to conduct a mitigation/education program in the Greater San Diego Area.  Education events will begin in April, with some to be held in conjunction with other SD-OES catastrophe-preparedness programs.


CEA Connects with Mitigation Organizations

The CEA is always reaching out to other organizations that promote awareness of disaster-preparedness.  In past months CEA has associated with the mitigation-focused Institute for Business & Home Safety (IBHS), a non-profit organization of insurers and reinsurers that engages in communication, education, engineering, and research in an effort to reduce impacts of natural disasters.  IBHS promotes evaluation of advancements in mitigation technology for earthquakes, hurricanes, tornadoes, and other natural catastrophes.  CEA hopes its involvement with IBHS broadens access to cutting-edge mitigation information and gives the CEA more tools for motivating consumers.

CEA’s CPPM team is also in cooperative mitigation discussion with the Federal Alliance for Safe Homes (FLASH), a non-profit organization first formed in Florida but now embracing a nationwide ambit.  The FLASH mission is “to promote life safety, property protection, and economic well-being through strengthening homes and safeguarding families from natural and manmade disasters.”  FLASH is involved in a variety of projects, including building a hurricane-proof demonstration house with television’s Bob Vila and producing a documentary on hurricane mitigation with the Corporation for Public Broadcasting.  Among FLASH’s more than 75 partners are the American Red Cross, the National Weather Service, the National Oceanic and Atmospheric Administration, media outlets, representatives of the insurance and home-improvement industries, and government agencies.


CEA Policy Counts Setting Records

As of February 16, 2006, the CEA’s policy count hit a five-year high with just over 753,000 policies in force.  Over the past year, the CEA’s policy count is up 3.3 percent, with areas such as Los Angeles posting gains near 10 percent.  These totals reflect the CEA’s highest one-year policy-count increase since the last original participating insurer came on board in 1999.

The number of policyholders opting for supplemental coverages rose by 15 percent over the past year.  While some growth comes from having added Foremost as a CEA participant—that move added about 3,000 new mobilehome policies—most of the increase crosses product lines and probably resulted from the CEA’s summer 2005 marketing and consumer-education campaign, coupled with the Gulf hurricane disasters.

If there is a positive outcome from such disasters, it is that they remind all of us that we are always just one disaster away from personal and financial devastation. 

 

2006 CEA Governing Board and Advisory Panel Meeting Schedules

CEA Governing Board
Unless otherwise noted, all CEA Governing Board meetings are on Thursdays and begin at 1:00 p.m.

  • January 30, 2006
  • February 23, 2006
  • April 27, 2006
  • June 29, 2006
  • August 24, 2006
  • October 26, 2006
  • December 14, 2006

CEA Advisory Panel
Unless otherwise noted, all CEA Advisory Panel meetings
are on Thursdays and begin at 10:30 a.m.

  • January 19, 2006
  • March 23, 2006
  • May 25, 2006
  • July 27, 2006
  • September 28, 2006
  • November 30, 2006

 

 

 

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