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Wednesday, October 24, 2007

Schumer seeks expanded flood insurance program

By Keith Herbert - Newsday, October 23, 2007

More New Yorkers are turning to unregulated insurers for property coverage, further proof that federal regulation is needed to stabilize the homeowners' insurance market on Long Island, Sen. Charles Schumer said Monday.

During a news conference at the home of a Huntington homeowner, Schumer (D-N.Y.) cited the trend to support his call for legislation that would expand a federal flood insurance program to include hurricane wind damage.

Private insurers fearful of a catastrophic storm hitting Long Island have been unwilling to cover wind damage, so the federal government should add "multi-peril coverage" to its flood insurance program, Schumer said.

"I think this would solve the problem once and for all," he said of legislation being considered by a Senate banking committee he serves on.

Since early last year, a half dozen insurers, including Allstate, Liberty Mutual and State Farm, have not renewed thousands of area homeowner policies. They cite concerns a catastrophic storm is overdue for Long Island, forcing large payouts for losses they would be unable to cover.

The nonrenewals have left many homeowners facing hard-to-find coverage, increased premiums and high wind-storm deductibles.

"We all complain about tax increases," Schumer said. "This is the same thing -- more money going out to keep your house."

There are 1.7 million homeowner policies in coastal New York areas, according to the state Department of Insurance.

Schumer said that in New York State the number of people seeking so-called excess line property insurance has jumped from 3,100 in 2002 to more than 7,000 as of last month.

Without providing detailed figures, Schumer said more and more Long Islanders have been forced to buy homeowners insurance from the excess-line market, whose companies aren't licensed by the state.

Such policies are more typical for homeowners with unusually expensive homes or whose property is close to a potential hazard, such as water. They often can't secure insurance from licensed underwriters. The premiums are also much higher than regular homeowner policies and involve more risk because state regulators don't monitor rates. However, the state does regulate the brokers who provide excess-line coverage.

Schumer spoke from the driveway of Denise Laimo, 55, who turned to an excess-line company after her previous insurer, Allstate, didn't renew her homeowners policy.

In January 2006, Laimo said her furnace malfunctioned and flooded her basement, prompting her to file a claim with Allstate. Six months later, she said she received a letter that her policy was not being renewed because her home was prone to flooding.

Laimo said she was unable to find insurance after shopping other providers, and turned to Utica Insurance. Her policy premiums increased from $960 a year to $2,400, but her new policy covers more.

"I have better coverage, but it more than doubled," Laimo said of the premium.

Copyright © 2007, Newsday Inc.

© 2007 Ana Maria Rosato. All rights reserved.
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