State insurance plan may ditch homeowner deductibles

Homeowners on Long Island could be spared having to shell out cash to meet an insurance deductible for home repairs caused by many types of windstorms, state insurance regulators said Wednesday.

If the proposal becomes a permanent regulation - it could take up to 75 days and includes a comment period for the public and the industry - homeowners may not have to pay thousands of dollars in deductibles to repair windstorm damage caused by anything but a hurricane that makes landfall.

The New York State Insurance Department also wants to know sooner if insurance companies intend to shed home insurance customers in coastal areas.

State regulators described the proposed changes as relief for consumers who have had to navigate New York's turbulent homeowners' insurance market in the past few years.

"This is going to be a big deal for Long Islanders," said Assemb. Robert Sweeney (D-Lindenhurst), who has in the past proposed legislation similar to the new rules proposed by regulators. "It goes to the heart of insurance availability and affordability."

The possible elimination of a windstorm deductible would become effective when a homeowner renews a policy or starts a new policy. Deductibles for other types of home damage, such as a pipe bursting or a fire, would remain in place.

Paula Abraham, an Oceanside resident, said the proposal will save her and other homeowners thousands of dollars. "That makes a difference," she said.

Not all windstorm deductibles are alike. Some are based on dollar value and others are based on a percentage of the replacement value of a home, or the amount of insurance coverage. Some deductibles can range up to 5 percent of the value of a home or what the home is insured for, making a homeowner responsible for tens of thousands of dollars of upfront costs before an insurance company payout.

If the deductible provision becomes reality, insurance regulators will have to prepare for the possibility that insurers might seek to raise premiums or decide to discontinue insuring homeowners, officials said.

Insurance companies can raise premiums after filing a notice of intent with the state.

Regulators will "need to further evaluate" those matters, said Mike Moriarty, deputy superintendent for property and capital markets with the New York State Insurance Department.

Along with reducing the deductible, the insurance department wants to limit the ability of insurance companies to drop policy holders without notifying state insurance regulators.

The insurance department wants to limit to 2 percent of an insurance company's policies within a county, or 50 policies in a county, whichever is greater, the number of nonrenewals after which a company would be required to notify the regulators.

More than 100,000 homeowners in Nassau and Suffolk counties have had their homeowners insurance policies not renewed by insurance providers as of 2007, officials said. The pace of nonrenewals has slowed, but continues on Long Island as insurers seek to reduce their exposure should a catastrophic storm ever hit Long Island.

"We want to protect consumers to make sure that they are getting a fair deal protecting their most valuable asset," Moriarty said.

The insurance department will also seek to create a "catastrophe pool" or fund that over time could stockpile enough money to cover the cost of catastrophic storm, reducing the need for insurance companies to increase premiums after a storm hits.

"Homeowners have already been pummeled by rising rates, nonrenewals and threats of nonrenewals of their homeowners insurance policies," said James Wrynn, insurance department superintendent, in a statement. "This uncertainty must be addressed."

Krista Conte, spokeswoman for Allstate Insurance Co. in New York, said the insurance company would continue to work with regulators "to ensure New Yorkers are as safe and as prepared as possible for any catastrophe."

Homeowner Richard Boodman of Long Beach praised the renewal proposal but said it should have been done sooner.

"It's a step in the right direction but it's not enough," Boodman said. "They should have stopped this a long time ago. The superintendent of insurance should be demanding that they stop the cancellation of all policies."

With Yamiche Alcindor

Correction: The original story did not state correctly what the minimum number of policies would be for an insurance company to notify state regulators.