The New York State Assembly has passed a package of insurance legislation designed to help consumers in the aftermath of Hurricane Sandy, but insurance industry groups said the bills are likely to increase insurance rates.
Three bills are aimed at streamlining the claims-filing process. A 2729 would ensure that Department of Financial Services creates standards for hurricane windstorm deductibles to aid uniformity in operations; A 7453 would standardize the definitions of terms and phrases used in homeowners and some commercial insurance policies; and A 7454 would require insurers, agents and brokers to provide potential customers with copies of homeowners and certain commercial insurance policies before the policy is purchased.
Other bills would speed the process for lawsuits against insurance companies that stem from a declared disaster or emergency (A 5570), and create a private right of action for unfair claim settlement practices when the claim arises from a declared disaster or emergency (A 5780).
A 6913 would restrict the number of homeowners policies an insurer can decide not to renew to 4% of each rating area, while allowing the New York Property Insurance Underwriting Association the authority to expand into new markets. Currently, insurers can drop homeowners in an entire region, causing major policy cost hikes for those seeking replacement coverage, said bill sponsor Assemblyman Robert Sweeney. A 7455 would prohibit insurers from refusing to pay for damages caused by a covered event solely because a flood occurred simultaneously or contributed to the covered event. The bill also mandates that insurers clarify situations in which anti-concurrent causation clauses apply. Bill sponsor Assemblyman Phillip Goldfeder said that after Sandy, homeowners found that insurance companies denied coverage simply because damages were concurrent with severe flooding, excluded in most homeowners policies. The American Insurance Association opposed the ACC portion of the bill.
The Property Casualty Insurers Association of America said the bills would limit insurance options and result in insurance cost increases. The bills would harm most those consumers lawmakers were trying to protect those living in areas of the state damaged by Sandy, said Kristina Baldwin, PCI vice president, in a written statement.
Baldwin likened New Yorks legislative approach post-Sandy to that of Florida lawmakers after Hurricane Andrew struck in 1992. Florida passed a legislative package following that storm that Baldwin said has harmed its homeowners and automobile insurance markets since. Floridas insurance market now ranks 50th among states for homeowner and auto insurance, with 40 fewer companies offering homeowners insurance in Florida than before the legislation, she said. Now, the Assembly has potentially put New York on a path to the bottom.
The AIA also issued a statement expressing its disappointment in the Assemblys vote. AIA Northeast region Vice President Gary Henning urged the Senate not to consider the bills. This legislation could negatively impact availability and affordability of homeowners and commercial property insurance in New York State, he said in the statement. While intended to serve policyholders, these bills would simply open the floodgates for even greater litigation after a catastrophe, thereby increasing systemic costs without providing significant benefits to policyholders who already have substantial rights and protections under existing law.
Since Sandy hit, insurers have paid out 95% of all related claims and have paid out $5 billion to New York consumers with a 1% complaint rate, Henning said.
Baldwin said following Sandy, most consumer insurance complaints were related to federal flood insurance, not homeowners insurance. However, the legislation passed today may, in all likelihood, have a serious, long-term and negative impact on the affordability and availability of homeowners insurance, particularly in coastal and high-risk areas, she said in the statement. That is hard to understand and is counterproductive to the stated goals of the legislation.
Assemblyman Matthew Titone, who sponsored A 5570, said in a written statement that families and business property owners have been left waiting months or years before receiving insurance company assistance. Assemblywoman Helene Weinstein, who sponsored A 5780, said while insurers can reasonably deny claims, they often place businesses and homeowners who lost everything in unrealistic situations.
Other bills include A 2287, which creates a Homeowners Bill of Rights. It educates consumers about property/casualty insurance coverage, provides consumers with disclosure notices that detail coverage after disasters, helps them identify if they live in a flood zone, and requires the state Department of Financial Services to establish a consumer guide to help insure against catastrophic losses. A 1475 would provide discounts on fire and homeowners insurance once policyholders complete a DFS-approved residential home safety and loss prevention course.