Tough storm insurance rules could backfire

Representatives of companies that write home insurance policies in New York Wednesday warned regulators that tougher rules regarding storm damage proposed by the state could backfire and prompt providers to stop offering coverage in coastal areas such as Long Island.

At the first meeting of the Temporary Panel on Homeowners Insurance Coverage, regulators with the state Insurance Department, insurance executives and consumer advocates heard opinions on whether the newly proposed rules would be interpreted by insurers as too burdensome and costly.

"I think we need to be cognizant of the fact that we don't want to do anything that reduces competition," John Reiersen, president of Kingstone Insurance Co., of Hewlett, and a former chief examiner with the state Insurance Department, told panel members at the Manhattan meeting.

Homeowners who live closer to water have "got to expect to pay more" than they have in the past, Reiersen said.

Ellen Melchionni, president of the New York Insurance Association, a trade group representing insurers, said that new regulations appear to be "a solution in search of a problem."

"There's no supporting data that's saying there's an availability problem," Melchionni said Wednesday in a telephone interview after the panel's meeting.

Enrollments in the New York Property Insurance Underwriting Association, the state's insurance-of-last-resort program, are down 23 percent, with only 1 percent of the properties in Nassau County and 2 percent in Suffolk County in the program, she said.

But state regulators say that since 2007, 145,000 homeowners in an eight-county downstate region that includes Long Island have received notices that their policies will not be renewed.

On Sept. 22, the Insurance Department announced new regulations. The proposed changes would limit windstorm deductibles to instances in which a hurricane makes landfall, and lower the trigger for insurers to notify regulators of plans not to renew policies in coastal areas. The panel is seeking input and may offer amendments to the proposed regulations before they take effect.

Under current law, a company can opt not to renew up to 4 percent of its book statewide without notifying regulators. The new rules would change that cap on nonrenewals without notification to 2 percent in a county, or 50 policies, whichever is greater.

Regulators also want to set up a catastrophe pool for money that could be used to reduce the need for higher premiums following a devastating storm.

Michael Moriarty, deputy superintendent with the Insurance Department, didn't set a date for the panel's next meeting. However, the panel must get data on how much more a typical consumer pays after being dropped by an insurance company, he said.

"I think it's a good start," said Ellen Anderson, senior vice president of Community Development Corp. of Long Island, who is on the panel as a consumer advocate.