Friday, April 21, 2006

The Shrinking Long Island Homeowners Insurance Market

Aaron Stein, Long Island Insurance

So to continue where the last post left off, what are the insurance carriers doing about this situation of increasing storm frequency and severity combined with the tremendous run-up in home values of the past few years? Well, Allstate Insurance Company fired the first shot, completely closing down for new homeowners insurance policies on Long Island. In their original news release, they said they would be keeping those customers they already have. But shortly after, they announced that they would be non-renewing (canceling) the number allowed by law, up to 4% of their customers. Unfortunately, the current law is that the 4% is based on the number of homes they write statewide, not just in a particular area. This means that they could actually cancel a much larger percentage here on Long Island as long as they don't cancel many people from other parts of the state.

Last week, MetLife Auto and Home announced that they are going to stop writing homes that are not at least five miles from tidal waters on Long Island, which takes in a pretty large slice considering we are only 20 miles wide at the widest point.

Nationwide followed next with what they are calling 'managed growth', and exactly what action they are taking depends on whether you are in the relatively sheltered areas of Nassau and Queens counties, or in the more highly exposed sections of Suffolk starting in Brookhaven.

This is only going to get worse because the companies that remain can't absorb all this business at their current rates. Part of that issue has to do with reinsurance, which basically is when the insurance companies buy insurance themselves, through giant carriers that spread billions of dollars of risk around to help stabilize the market. The problem is that the reinsurance carriers have raised their rates because of the recent storms and the predictions that we will be having more of them. But the regular insurance carriers are not allowed to pass those costs on to their policy holders. There are valid reasons for this which are beyond the scope of our discussion, but still it is making it very difficult for insurance companies to price their policies and offer coverages in high hazard regions like ours.


Dan B said...

My family is findng itself squarely in the senario you describe. We are in contract to buy a home in Freeport, about 200-300 Yards from the Bay. We are held up moving forward right now because we can't find a home Insurer. State Farm has rejected us, as has Liberty Mutual, We are told that AllState will do the same. Where can we turn to get somewhat affordable insurance. Our deal depends on it.

Anonymous said...

The only Power we have is the power of the checkbook. We LI'ers need to CANCEL these Insurance companies. Cancel your auto,life whatever that you have with these companies and just reward the ethical companies (if there is any)

We cannot count on the politicians as they are all bought and paid for by the corporate machinery.

Just look at the credit card swindlers who can charge 30%+. Usuary laws not with standing. Ever woonder why Citicards is in So Dakota ??? No Usury laws.

Joy H said...

Interesting article! So what do you think a good solution would be to this growing problem?

Anonymous said...

Dem Bums!
Many of us have been loyal customers acquiring homeowners, auto, life, umbrella, flood etc. insurance from a single carrier. Now insurers have made dollar based decisions to cancel policies. I'll agree with Mr. Anonymous that as consumers our best alternative is our checkbook. So Joy H my solution is to shop and use a blog like this to share information. I live in Eastern LI. Approx. 1800ft from the bay. I am being dropped by Allstate. I've been rejected by Liberty Mutual, Nationwide, Metlife, State Farm. I've been offered state insurance for the residential structure which I'll hold on to as a possible option. I've gotten rather high quotes from Scarsdale and LLoyds (Non-admitted companies) and quotes from (admitted companies) Interboro & Ocean Harbor that were more expensive than my origional policy but best thus far...
I am interested in feedback, and alternatives. Shop and Share