If you're in the insurance business you have a right to be nervous. Essentially you have a bet with policyholders that if their home is robbed, burned or the scene of an accident the insurance company will pay a claim. The good news is that since these are not attractive events to most people, policyholders and insurers both prefer a claims-free existence.

But today the insurance game is changing. The wagers are different because new forms of risk have arisen:

• Mold used to be something associated with blue cheese, now it's been magically transformed into the residential threat of the century, one-upping such former scares as radon and asbestos. Given that mold is everywhere, it follows that every home is potentially impacted.

• Insurance used to come automatically when you bought a home because it was thought that owners were likely to use care with their most valued possession. Now insurers are looking at credit ratings and denying coverage to those who fail to make their credit card and car payments, the theory being that such folks are somehow more hazard-prone than those with good credit.

• If you have commercial property, good luck getting anti-terrorism insurance. Looking at the billions of dollars in claims brought on by the September 11th attacks, insurers no longer want to chance a similar event -- at least not at the old rates.

The real issue here involves risk shifting. Insurance companies are willing to accept certain risks in exchange for given premiums, but now the definition of "risk" has changed. As a result insurance companies say either they can't do what they did in the past or they can only offer yesterday's coverage with sharply-higher premiums.

This is not a situation where one party automatically has a white hat and the other does not. You can easily understand that insurance companies want to limit risk and you can also see that policyholders need access to both coverage and reasonable premiums.

Despite what has happened in the past year, there remains reason for optimism on the insurance front:

First, the insurance industry has been able to handle a major terrorist attack. The concern is what happens in the event of one or more additional incidents of equal magnitude.

Second, people have been living with household mold for millions of years and it has not been much of an issue. The betting here is that because of mold concerns, property owners will begin to favor homes that are less sealed and office structures with windows that open. A little fresh air and a willingness to stop leaks should resolve most mold concerns.

Third, you can bet that state insurance regulators are going to look at the use of credit reports to qualify individuals for homeowners insurance. Already Maryland has told insurance companies to forget the practice and other states will likely follow.

Fourth, the terrorist risk for commercial properties should not be shouldered by insurances companies alone. The federal government will have to back-up firms that insure commercial properties. As a nation we cannot close office buildings, shopping malls, and high-rise apartment structures because insurance is totally unavailable or is unavailable at a reasonable cost.

Fifth, while it's entirely proper to be prudent, we may find over time that perceived new risks have been over-estimated. There is concern about a radiological "dirty" bomb, as one example, but a new study of exposure to radioactive iodine at the government's Hanford Nuclear Site in Washington state offers surprising data: Long-term tests by the Centers for Disease Control of 3,400 people exposed to the substance between 1944 through 1957 show no increase in the incidence of thyroid disease above what would normally be expected.

As this is written, Congress has two versions of terrorism insurance in mind: A lawyer-friendly Senate bill that would not protect companies against punitive damages and a House measure that would prohibit such claims. President Bush supports the House approach and it's the legislation most likely to pass.

There is no doubt that new risks have emerged in the past year which should give insurance companies pause. At the same time, rather then new risks is it possible that any portion of the current "crisis" is related to declining portfolio values caused by falling stock prices and thus smaller insurance company profits and reserves?

Tough days on Wall Street should not mean higher premiums for property owners. After all, the idea is that insurance companies protect us, not that we protect insurance companies against bad stock picks and subsequently lower profits.

For more articles by Peter G. Miller, please press here.

Published: June 25, 2002

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .