NU Online News Service, Oct. 15, 3:47 p.m. EDT
A panel formed to assess the state of coastal homeowners insurance in New York met for the first time earlier this week, with agent and regulatory representatives noting that there remains an affordability issue in some regions in the state.
Speaking to NU Online News Service, New York Insurance Superintendent James Wrynn said he wants to be proactive on the affordability issue, rather than waiting until it reaches crisis levels. He said the insurance department is exploring "modest measures" to assist consumers and to make the marketplace more competitive.
He noted that there is capacity in the marketplace, and, in an encouraging sign, there have even been some new entrants. But he said there is also an affordability issue. For coastal homeowners who are non-renewed, he said the replacement policies available to them come at a "considerably higher premium."
Superintendent Wrynn said he is looking at ways to encourage more competition in coastal regions, and some steps to "ensure that consumers know exactly what it is they're purchasing."
For example, he mentioned the idea of standardizing windstorm deductible triggers.
N. Stephen Ruchman, a partner at B&B Coverage, on Long Island, and a past president of the Professional Insurance Agents of New York (PIANY), noted that different insurers have different windstorm deductible triggers. He explained that two identical houses could suffer similar damage in the same storm. The wind speed may be enough to trigger the windstorm deductible on one home, but not the other home insured by a different carrier. The result could mean thousands of dollars more in payments for one homeowner compared to his or her neighbor.
Mr. Ruchman said the anger this could generate from unsuspecting homeowners could represent a litigation risk for agents.
Insurers, though, oppose standardizing windstorm deductible triggers. Ellen Melchionni, president of the New York Insurance Association (NYIA), said consumers should have a choice regarding whether they want higher or lower deductibles.
Ms. Melchionni also stated opposition to a plan to restrict an insurer's cancellations and non-renewals to 2 percent of its book of business in a given year. She said the current provision, which allows insurers to cancel or non-renew 4 percent of their book of business, means insurers already have to renew 96 percent of the business they write.
She took issue with characterizations that there is a problem with the New York coastal homeowners insurance marketplace, noting that there are plenty of players throughout Long Island, New York City and Westchester County. While she said some larger carriers are limiting coastal exposure–which she said was necessary to avoid companies becoming overexposed in certain areas–other companies are filling the void. She said the New York coastal market is "a bit of a market in transition."
She said New York should learn from mistakes in Florida and not tinker with a "healthy, competitive marketplace."
Superintendent Wrynn said the department is also looking into the creation of a catastrophe pool. He said homeowners pay a part of their premiums each year to insurers to be used in the event of a catastrophe. That money is not refunded to consumers if there is not a catastrophe, he said, and the insurers do not necessarily retain the money for future catastrophes. Those funds, Superintendent Wrynn said, would be set aside for the catastrophe pool.
The homeowners panel was authorized by law in 2008, but met for the first time this week.
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