Liberty Mutual will follow Allstate and no longer tie renewal of New York coastal residents' homeowners insurance policies to their purchase of other Liberty insurance products, the state's insurance department announced today.
New York Insurance Superintendent Eric Dinallo said today that Boston-based Liberty will offer coastal homeowners that were not renewed, partly because they did not have other policies with the company, the opportunity to get new homeowners coverage.
The move follows a directive from Mr. Dinallo on Aug. 28 banning the practice called tying, where a company denies renewal to customers who do not have other lines of coverage with the carrier.
"Liberty Mutual is to be commended for acting as a good corporate citizen by promptly complying with the department's directive and diligently working to do right by its affected customers," Mr. Dinallo said in a statement.
"This is an example of how regulation works best, with the industry and regulators working together to reach the best possible outcome for consumers," he added.
The department said that after receiving complaints from some coastal homeowners that their homeowners insurance policies were not being renewed, in part because they did not have an automobile or life insurance policy with the company or an affiliate as of a specific date, the superintendent ruled it was illegal for insurers to base a decision not to renew homeowners policies on the existence of other business with the company.
Liberty Mutual and Allstate were identified as engaging in the practice and ordered to cease immediately and offer renewals.
Mr. Dinallo said the carrier immediately rescinded any nonrenewals that had not gone into effect. The company "worked cooperatively" with the department to find a "suitable remedy for those who had to find other insurance coverage," and "today's announcement addresses the needs of those whose policies had already terminated."
Beginning Nov. 5, Liberty Mutual will send letters to nonrenewed policyholders offering them the right to an immediate quote and renewal of their policies for a period of at least three years.
Liberty Mutual said it plans to contact all 3,305 affected policyholders over a 10-week period.
The superintendent advised homeowners not to cancel their current policies until they have reviewed Liberty's quote. He said the company's rates have increased and its hurricane deductibles have also increased. Homeowners can wait until their current policy expires and seek another quote from Liberty, he added.
Allstate agreed to comply with the superintendent's order early last month.
At the time the directive was issued, a spokesman for Liberty said the company gave the department a plan to reduce its coastal exposure in 2006, prior to Mr. Dinallo's tenure (see NU Online Aug. 27). The company was given no direction to change the plan at that time and began the nonrenewal process, the spokesman said.
Glenn Greenberg, a spokesman for Liberty Mutual, said when Mr. Dinallo issued his order in August the company immediately stopped the process of nonrenewing 640 policyholders. The agreement affects 3,305 downstate policyholders who lost their insurance between January and August of this year and presumably have found new policies in the interim, he said.
"We made a promise to the department and all of our customers to come up with a solution that would be fair to our customers and be mindful of our need to prudently manage our coastal risk," said Mr. Greenberg. "Today's announcement is the culmination of that promise being kept."
While the company would still like to reduce its exposure downstate, it will fulfill its obligation to customers by offering them the policies but at a higher rate and with a larger hurricane deductible, something all Liberty Mutual customers are seeing, said Mr. Greenberg.
He said rates will be 20-to-30 percent higher than they were earlier in the year, and the hurricane deductible will now stand at 5 percent of the insured home value.
He said previously Long Island customers, who represent half of the nonrenewals, had a 2 percent deductible.
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