CNBC Business Nation: Are you insured?

After the devastation of the California wildfires last October and record damage from hurricane Katrina, you’d think the homeowners insurance industry would be struggling. But you’d be wrong.

Insurance companies are reeling in record profits — making more money than at any time in their history. Insurers say they’re just having a few good years, but critics say the companies are charging more for premiums and cutting back on coverage and that’s leaving some homeowners in the lurch.

Attorney Karen Reimus tried to outrace the wildfire that devastated her San Diego neighborhood in 2003. 

“As we approached and started heading into the San Diego area, you could just see a gray fire cloud a gray ash debris cloud that was unlike anything I had seen ever,” she said.

But Reimus got there too late.

“It looked like a nuclear bomb had gone off,” she said. “It’s what I would fathom Armageddon would look like. Because it was just every home completely down to the ground and just black and sooty and there’s smoke in the air … And it looked like maybe you were walking into hell.”

But Reimus says a different sort of hell soon followed: dealing with her insurance company.  Even though she thought her brand new house  was fully insured, the company’s offer of what it would actually pay for — called the “scope of loss” — left  her stunned.

“There were things that were missing,” said Reimus. “Like one thing we noticed was there were no architect fees, and I’m like “call me crazy, but I think we might need a set of blue prints to build a house.”

It was clearly obvious to you that this scope of loss — this list — was not reality.

“It was a low-ball scope and it was a low-ball offer,” she said. “And that’s when my husband and I looked at each other and we said, ‘Clearly this is where the gloves are coming off.’”

Reimus went head-to-head with Liberty Mutual, her insurance company. The two came to an undisclosed settlement, and Liberty Mutual wouldn’t comment on the case.

CNBC: "These insurance companies are businesses. They’re in to make a profit. You would expect them to negotiate a little bit."
Reimus: “I’m going to have to beg to disagree with you there. I don’t think there’s negotiation over policy coverage that I paid for. I paid that coverage. They were very happy to take the check.”

Insurance companies want you to see them as friendly neighbors, there to protect you and to help you in your time of need. But more and more homeowners are finding themselves doing battle with their “friendly” insurance company to get the money they say they’re due.

“Things have changed in the past, I would say three to five years, a great deal in the insurance industry,” said Joanne Katzman, who has worked in the insurance industry for more than 20 years.

“In some cases, they’ll offer such a low-ball figure that you cannot repair the job adequately for what they’re offering you,” she said. “And that’s just wrong.”

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