Schumer urges insurer penalties over pricey LI policies
When the retirees of the Founders Village Homeowners Association in Southold set out to renew their property insurance with Farmers Insurance in April, they didn't expect their annual premium to increase by more than double.
The North Fork seniors, like many homeowners across the Island, are feeling the squeeze as major insurance companies cancel policies to manage risk. Even when insurers are willing to renew policies, they often increase clients' out-of-pocket costs while decreasing their coverage, said Peter Elkowitz Jr., president of the nonprofit Long Island Housing Partnership.
Sizable insurance increases have become endemic on Long Island, Sen. Charles Schumer (D-N.Y.) said at a news conference Monday, urging federal officials to inflict penalties on companies that refuse to cover Long Island properties.
After Farmers dropped Founders Village, Long Island's other major insurers told the retirement condominium community they would no longer be insuring homes on the East End, according to Charles Stringfellow, a condo resident and board member. The companies cited wind and flood damage risks.
"We have never had a claim based on storm damage of any type," said John Aichner, the board's former president.
Aichner and his fellow board members settled on a new policy from Lloyd's of London for an annual premium of $95,500, up 110 percent from last year's premium.
Unlike state-regulated homeowner insurers, companies like Lloyd's can set their prices without state oversight, said Joanne Bentivegna, president of the Independent Insurance Agents & Brokers of Suffolk County. On what is known as the "excess market," these insurers often charge two to three times more than mainstream competitors do, for less coverage, Schumer said.
If the major insurance companies refuse to cover Long Island properties in the future, Schumer said he will enlist FEMA's help to inflict penalties.
Under the National Flood Insurance Plan, FEMA assumes all financial risk when companies such as Farmers Insurance sell flood insurance policies for lucrative fees. Schumer believes that FEMA should prevent companies from participating in the flood policy market unless they continue to insure Long Islanders.
"If insurers abandon Long Island homeowners, the federal government should abandon them," Schumer said.
Although Schumer acknowledged his proposal has no precedent, he said it makes sense. "I think FEMA's going to be amenable here, because this will save them money, too," he said.
FEMA is currently reviewing Schumer's plan to determine what the National Flood Insurance Program can actually do, said FEMA spokesman Daniel Watson.
Since 2006, some of the largest insurance companies on Long Island, including Allstate and Liberty Mutual, have not renewed homeowner policies, especially those for waterfront properties. Under state law, insurers can drop up to 4 percent a year of their homeowner customers statewide to manage risk. In 2007, companies said they needed to manage exposure to catastrophic storms, and that too much of their business was concentrated on Long Island.
"What the companies are doing is legal, but, in my judgment, it's immoral," Schumer said.