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Thursday, October 11, 2007

Insurance relief can only come from state

By Daniel Israeli
October 11, 2007

As the wave of big insurance companies dropping thousands of Long Island homeowner's insurance policies continues to gain momentum, legislators in Albany are contemplating ways to calm the storm, which has already left its mark in Long Beach.

On Tuesday the state Senate's standing committee on insurance held a public hearing on Long Island to examine the availability and affordability of homeowner's insurance in New York's coastal communities. The committee, led by state Sen. James Seward (R-Oneonta), gathered at the Western Campus of Suffolk County Community College in Brentwood, for a hearing that included testimony from insurance company representatives and state insurance department superintendent Eric Dinallo.

According to Tom Dunham, a spokesman for Sen. Dean Skelos (R-Rockville Centre), the hearing was focused on assessing the current problem, while also gaining input from the insurance companies, to better understand why so many policy holders on Long Island have received nonrenewal letters.

In the two years since Hurricane Katrina, the big insurance companies, such as Allstate, Liberty Mutual and State Farm, have stopped providing coverage for thousands of residents in Long Island and other coastal communities. As homeowners continue to wonder what their next move is, legislators have been left with a troubling question - whether or not to further regulate the insurance companies.

According to Dunham, while nothing was resolved at the hearing, a lot was taken away by the parties involved. "The hearing was a step in the right direction," he said. "Right now, it's about weighing the pros and cons of each course of action."

At this point, the most talked about course of action appears to be a bill proposed by Eric Dinallo last week, which would require insurance companies to set up a catastrophe reserve fund, to be used in the event of a major storm to help pay off claims. Each company would save a percentage of its premium dollars on an annual basis. It's Dinallo's hope that the funds would reap enough for the companies to feel more secure, and drop fewer policies.

According to Dunham however, the proposal hasn't gone over well with insurance companies, obviously uninterested in saving their own money for a rainy day, at least in New York. "They didn't feel it was an idea that made a lot of sense," he said. "[The insurance companies] did seem to support it on a national level, but didn't feel it was right for risk states to create their own carve-out policies."

The issue dates back to January 2006, when Allstate announced it would not renew a number of homeowner's policies in the region, in an effort to protect its liability after a major storm. Soon after, the other companies followed suit, and the legislators up in Albany took notice.

Assemblyman Robert K. Sweeney (D-Lindenhurst) wrote a bill to address big insurers not renewing people from coastal areas. Insurance companies are allowed to take four percent of their policy holders off their rolls annually under state law. Sweeney's bill would change that, by making it so insurance companies can drop four percent of their policies, but by each individual rating territory (region), not statewide.

This would prevent cherry picking, when insurance companies minimize their liability by targeting coastal areas during the nonrenewal process. According to Sweeney, the efforts of Allstate and other big insurers to flee the coastal market, and in effect decrease their market shares, hasn't always been the case.

"Originally, Allstate used aggressive tactics by undercutting rates," said Sweeney. "They wanted the lion's share of the market." He added that the company still covers 26 percent of homeowners insured on Long Island. "Then, Katrina happened."

The hurricane's impact on the insurance market is evident all along the state's eastern coastline, and the political response has come from all levels of government. Last year, U.S. senators Charles Schumer and Hillary Clinton criticized Allstate's decision to limit its exposure in lower New York. But change can only come from the state Legislature, since insurance companies are licensed through the state.

In Long Beach, the local push to get legislation passed has already begun. The members of Homeowner's Insurance Scam Stoppers, or HISS, are urging legislators to curtail the dropping of Long Island policy holders.

Richard Boodman, a Long Beach resident and founder of HISS, said the issue isn't political. "This is not about party politics," he said. "It's a matter of survival for all of Long Island. We have to take this issue island-wide and demand that the Long Island assembly and senate delegation create legislation that protects us.

The Senate has introduced three bills in the last two years regarding homeowners insurance, including one that would cap deductibles at $1,500 on policies for windstorms. However, that bill and Sweeney's bill, both sponsored in the Senate by Kenneth LaValle, have not reached the governor's desk. Sweeney's bill did pass the Assembly in each of the last two sessions.

According to Dunham, getting legislation passed has been difficult because insurance companies lobbying against bills that would effect their liability. While the lobbying power of big insurance is apparent, Dunham said that it has no correlation with the company's contributions to election campaigns. Both Skelos and Assemblyman Sweeney accepted contributions from Allstate during the 2006 election campaign.

"Senator Skelos has many different contributors," said Dunham. "If you look at his record of passing legislation, he's supported a number of bills that conflict with the interests of insurance companies."

Dunham said that the senator is confident, however, that the insurance committee hearing has shed some light on the issue of homeowner's policies, and has created a better understanding of what needs to be done to help Long Island homeowners.

"It's a situation where people are being unfairly denied a necessity, and the problem needs to be fairly addressed," Dunham said. "This is an issue that will be front and center once the new session begins in January."

Assemblyman Harvey Weisenberg said the practice of cutting coverage regionally is wrong, and said he believes the big companies should be held accountable.

"If you are a licensed insurer by the state of New York, then you have an obligation to provide insurance," he said. "These companies are not living up to their responsibilities, which is to protect people. They are in this business to make money and not serve the needs of people, and that is very offensive to me."

There are people in the market, like local insurance agent Denis Miller, who feel that the top insurance companies hold too strong an influence, which would prevent a major bill from passing. "It is nearly impossible to legislate insurance companies," he said. "They are too big. The licensed companies have paid their money into the state's guaranteed fund, and it's very difficult to legislate a private company."

As for Boodman and the members of H.I.S.S., they are continuing to gather signatures, in hopes that the names of Long Island homeowners can overpower the likes of Allstate and Liberty Mutual.

"Our legislators are supposed to be putting our interests, their constituents, first and not catering to special interest groups like the insurance industry," Boodman said. "If we don't put the fire to their feet now, our homes and our quality of life are going to be worth didley."

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