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Comprehensive proposal includes standardizing hurricane deductibles, more closely monitoring insurers among consumer protection items

Insurance companies soon may not be permitted to apply a special deductible for wind damage unless a hurricane actually makes landfall in New York. This is one of a number of consumer protection measures in proposed new regulations announced today by New York State Insurance Superintendent James Wrynn. The regulations are part of a comprehensive plan by the Department to help ensure the availability and affordability of homeowners insurance in coastal areas, Wrynn said.

“Let’s fix the roof before it starts raining,” Wrynn said. “Coastal New York has been lucky for a while to escape a direct hit from a hurricane, but luck is no substitute for planning. Homeowners have already been pummeled by rising rates, nonrenewals and threats of nonrenewal of their homeowners insurance policies. Homeowners shouldn’t have to worry about whether they will be able to get coverage when their policies expire. This uncertainty must be addressed. We have extensively reviewed our rules and regulations and we are planning for the storm we know is coming.”

Wrynn also announced he had called a meeting of the Temporary Panel on Homeowners Insurance Coverage, a group he chairs that is charged by law with examining insurance and other issues facing coastal homeowners and some possible solutions.

“Available, affordable homeowners insurance helps protect property values and the tax base,” Wrynn said. “The Panel will examine ways to protect coastal property and help keep insurance available and affordable.”

The Department’s proposed regulations and other changes include:

1. Standardizing windstorm deductibles so they apply only to hurricanes and are displayed clearly to consumers. Some companies currently apply a windstorm deductible to any wind damage, even if not caused by a hurricane, while offering homeowners little premium credit in return for the reduced risk the insurer then bears. The new regulation imposes limits on such deductibles, including having them apply only after a hurricane makes landfall.

2. Reducing the number of nonrenewals an insurer may issue without Department notification. Thousands of New Yorkers in coastal areas have been subject to nonrenewal of their homeowners insurance policies by insurers attempting to mitigate their exposure to a possible catastrophe like a hurricane. While insurers may consider these nonrenewals prudent, they are nonetheless a burden on many homeowners. Under current rules, a company may nonrenew up to 4% of policyholders net statewide without any Department notification. So a company could theoretically nonrenew all its policyholders on Long Island, so long as that number was less than 4% of its statewide customer base, or if it added new customers elsewhere in the state to drop the net reductions below 4%. The Department wants to change this so any reduction in a given county by two percent or more, or by 50 policies, whichever is greater, will require the insurer to file a withdrawal plan, including measures to mitigate market disruption.

3. Creating a catastrophe pool to stabilize premiums. While homeowners pay a “catastrophe load” each year in their premiums to cover the cost of a catastrophe such as a hurricane, that amount is not refunded to the policyholder if there is no catastrophe and not necessarily retained by the company to help pay for future catastrophes. The Department will explore the viability of creating a pool or some other plan that would allow companies to fund a facility that would, over time, accumulate resources that could be used to help cover the cost of a catastrophe and reduce the need for a large premium increase after the catastrophe.

In addition to the proposed regulations and catastrophe pool, the Superintendent directed the Temporary Panel on Homeowners Insurance Coverage to meet on Oct. 13 at the Department’s Manhattan headquarters. The Panel, which includes consumer representatives and experts appointed by the Legislature and the Governor, is charged with examining and assessing the problems affecting the availability and affordability of homeowners insurance and the effect of any potential major catastrophe.

Among the numerous areas the panel will examine are:

  • Market assistance programs;
  • The catastrophe insurance pool;
  • Existing state and local building codes, and retrofitting current structures to mitigate damage from a major weather catastrophe;
  • Insurer preparedness for recovery and rebuilding after a catastrophe;
  • Public education about storm risks and mitigation techniques; and
  • Other coastal homeowners insurance issues.

“Preparing for and then protecting the public in the event of a hurricane is not a simple task, but it is a vital one,” Wrynn said. “Keeping insurance rates affordable and available is the Insurance Department’s goal, and with the Panel, we will work to keep New Yorkers as safe and as prepared as possible for any catastrophe.”


Department of Financial Services


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