LOS ANGELES Despite reassurances from state officials, homeowners in fire-ravaged Southern California might have plenty to worry about when it comes to their home insurance.
With damage estimates climbing daily, reaching $1 billion Wednesday, homeowners fear that insurance companies will raise rates or even cancel policies in the wake of the fires.
State officials and consumer advocates say that's not likely, but the scope of the fires and past tussles with insurers make many Californians skeptical.
Officials say they'll be able to rein in rates, pointing out that insurance in California is highly regulated, and authorities aren't likely to approve any increases in premiums, especially after pushing companies to reduce premiums this year.
Also, California remains the nation's largest market for homeowner insurance, which is a profitable line of business despite the risks.
That didn't stop Allstate Corp., the nation's second-largest property-casualty insurer, from announcing earlier this year that it would no longer underwrite new California homeowner policies, citing risks from wildfires and earthquakes. The company is also seeking a 12 percent rate hike for its existing customers.
Major insurers are inspecting homes in high-risk areas throughout the West and threatening to cancel coverage if owners don't clear brush or take other precautions.
"Yeah, it's pretty worrisome. They might start not insuring us; that's pretty scary," said Bruce Fowler, a resident of San Diego's Scripps Ranch neighborhood who was evacuated to Qualcomm Stadium this week.
Fowler's home narrowly escaped being destroyed in 2003, the last time fires swept Southern California with such ferocity. More then 3,600 homes were destroyed then, and insured losses surpassed $2 billion, according to the Insurance Information Institute.
So far, about 1,500 homes have been lost across Southern California due to the fires. The number is expected to rise.
Insurers said they have sufficient reserves to pay claims that will likely surpass $1 billion.
"Insurance companies are in the business of taking these types of risk," state Insurance Commissioner Steve Poizner said.
"The companies are in great health and have substantial reserves," he said.
Poizner said he has talked to several insurance company chief executives in recent days and been assured they are taking steps to swiftly pay claims.
On Wednesday, he declared an insurance state of emergency, allowing out-of-state claims adjustors not licensed in California to come to the state to handle claims.
Paul Hopkins, chief executive of Farmers Insurance Group Inc., echoed Poizner's outlook.
"We don't set our rates or underwriting guidelines based on a single event," Hopkins said. "We have no desire nor has it been our past policy to start doing mass cancellations."
But the likelihood of companies taking a harder look at underwriting and pricing policies increases with the price tag of the fire, said Donald Light, a senior analyst with Boston-based financial consultant Celent. "The higher the final reckoning, the more likely companies are going to act."
Recent insurance history reinforces the skeptics' view.
California had to form a special authority to sell earthquake coverage after insurers threatened to leave following the 1994 Northridge earthquake.
And after the 2005 Gulf Coast hurricanes, a number of companies, including Allstate and State Farm Fire & Casualty Co., raised rates, canceled or limited homeowners policies.
The companies' finances rebounded. After largely resolving claims from Hurricane Katrina, State Farm saw profits climb 65 percent to $5.32 billion in 2006, while Allstate had 2006 profits of $5 billion, nearly triple its 2005 level.
Full-year figures for 2007 are not yet available, but some companies have seen earnings slip.
"I see no way they're not going to increase premiums," said Les Brown, a Los Angeles attorney who has sued insurers on behalf of policyholders.
"They are going to want to make up for the billions of dollars they will lose or more because of this disaster."