New York insurers and industry trade groups have their eyes on the state's regulatory and legislative environment six months after Hurricane Sandy as the state deals with the aftermath of the late-season storm. Those in the New York insurance industry use words like "strident" when talking about the current regulatory landscape and express concern about what the future holds.
Regulations that took place after Sandy, and even some that are being mulled by New York regulators, could cause insurance availability issues in the state, said Dan Robinson, president and chief executive officer of New York Central Mutual Fire Insurance Co. Following Sandy, New York was among the states that banned the use of hurricane deductibles, and a subsequent regulation limited the time frame for responding and adjusting a claim.
Regardless of the regulatory outcome, weather experience of the past few years in the Northeast including Sandy, Hurricane Irene and the Halloween 2011 snowstorm will likely lead insurers to scrutinize future underwriting risks there, according to an A.M. Best Briefing on Sandy. The average adjusted loss ratio in 2012 for homeowners insurers in New York was 80.7, which is its highest level in the past five years, according to BestLink, A.M. Best Co.'s online financial system.
One instance of increased underwriting scrutiny has surfaced in New Jersey, according to a filing in Best's State Rate Database (http://ratefilings.ambest.com). Three companies in the Andover Cos. Pool requested to increase the effective hurricane deductible range to three miles from the coast, from one mile, the filing said. The request, submitted March 11 and approved March 28, was made "in light of recent experience and in an effort to protect insurer solvency."
No similar filings could be immediately located in New York. Robinson, along with the New York Insurance Association and the Independent Insurance Agents & Brokers of New York, said the industry there is focused on regulatory issues.
"That's probably the biggest fear right now is what is going on with the regulatory environment because there are a lot of knee-jerk reactions happening from legislators at this point," Robinson told Best's News Service. "I get very concerned at the end of the day about where is all of this going to end up."
One bill under consideration in the New York Legislature, A-1092, would mandate insurers investigate a claim within six business days of notice and also make any property inspection within that same time. The legislation mirrors an emergency regulation put into place by New York regulators following Sandy in an effort to speed up payments to policyholders.
"This event, and some people lose perspective on this, was only about 10% of what the worst case scenario could be," Robinson said of Sandy. "So take this times 10, and then try to figure out if we have enough adjusters in the country to come in if you had a Cat-4 [hurricane] go into Long Island. I dare say not."
Despite travel issues and gas shortages following the storm, NYCM was averaging five or six days to have claims adjusted following Sandy, Robinson said. However, there were some exceptions, he said, because some cases were not as critical as others. "We prioritize when we get them," he said. As of April 29, NYCM had closed 98% of its claims. The company expects a gross loss from Sandy of $35 million, Robinson said.
The New York Department of Financial Services recently asked the New York Insurance Association, and other industry representatives, to have their members provide input on two potential measures: a ban on writing anti-concurrent causation clauses into new policies, and reducing the threshold for insurers to lower exposures without state approval, said Ellen Melchionni, president of NYIA.
The measures are not official proposals, she said, and the DFS wants to know "how this would affect appetite and how this would affect pricing." The DFS declined to comment on potential regulations revisions. Melchionni said the New York DFS' primary focus should be regulating to ensure companies remain solvent.
"Our biggest concern, and what should be the biggest concern for DFS and the governor ... is market availability," Melchionni said. "We want to make sure there are companies willing to come in and write new business."
Regulatory pressure is a major concern for Dick Poppa, president and chief executive officer of the Independent Insurance Agents & Brokers of New York, because he says it could lead to insurance availability issues in Sandy-affected areas. Poppa said he doesn't want to see the New York market get into a position like Florida, where the largest homeowners insurance is government-backed Citizens Property Insurance Corp.
"The more the [DFS] and the Legislature puts pressure on insurers the more likely they are to take capital elsewhere," Poppa said. "On the regulatory side, the department continues to be pretty strident in the way it's dealing with insurers. I have also heard they are looking at the actual claims expenses and so forth, and being much more willing to look at rate increases as necessary."
Reflecting on the experience from Sandy, Robinson said public education about flood insurance is one thing the industry should emphasize more. Not getting flood insurance sold to those who might need it and consumers not buying flood is a problem, he said.
"The biggest lesson I see out of all this is there is no question that agents and companies need to do a better job in promoting the flood part of insurance," Robinson said. "I think there are agents who do a great job and there are agents who don't."