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The availability, cost and adequacy of property insurance in coastal communities


To examine the availability, cost and adequacy of homeowners' and property insurance in New York's coastal areas.

Friday, October 22, 2004
12:30 PM to 3:30 PM
Long Beach Public Library
2nd Floor Auditorium
111 West Park Avenue
Long Beach, NY 11561

Shortly after a number of insurance companies were wiped out or suffered crippling losses from claims arising from Hurricane Andrew in 1992 and a massive earthquake in California in 1994, property insurers moved to reduce their exposure to losses in areas they perceived as high risk.

In addition to non-renewing and not issuing new policies, raising prices and adding hefty deductibles on policies covering homes and business properties in vulnerable communities, insurers began phasing out coverage that guaranteed the full replacement of a destroyed property, regardless of the cost. In place of such unlimited coverage, insurers began substituting similar sounding policies with a crucial difference: the coverage is limited to an amount stated on the policies. Worsening the insurance gap on replacement costs has been the housing boom across the country that has been driving up the cost of lumber, bricks, cement and other construction materials. Consumers who have been led to believe that their "replacement c ost coverage" would pay for the rebuilding of their properties are finding that it often falls far short of this goal. Experts estimate that up to 60% of American homes may be underinsured by as much as half of their replacement cost.

At the Assembly's insistence, the Legislature has enacted a series of reforms to help stabilize the property insurance market, including requiring Insurance Department approval of company plans to withdraw from the homeowners' insurance market. The reforms also authorized the state Insurance Superintendent to direct the New York Property Insurance Underwriting Association (NYPIUA) or "FAIR Plan," to issue standard homeowners' policies if insurers are not making meaningful coverage available. Though private market insurance is generally available, problems persist in some communities, and are expected to worsen as insurers cope with losses from this year's disastrous hurricane season.

In New York, owners who cannot find needed coverage in the private market for properties in vulnerable costal communities, turn to NYPIUA -- the state's property insurer of last resort -- which now provides insurance for 57,000 homes and businesses across the state. Twenty five percent of NYPIUA's current policies are for properties on Long Island. Unfortunately, lapses in NYPIUA's underlying statutory authority at the hands of the Senate Majority have become increasingly common. A 53-day lapse in authorization in 2003 caused great turmoil, uncertainty and unneeded expense. Once again this year, another multi-month lapse forced NYPIUA to send out over 6,000 nonrenewal notices to existing policyholders and turn away hundreds of would-be customers who had been denied coverage in the conventional market. Legislation has been approved by the Assembly for six consecutive years to make NYPIUA a permanent statute but the Senate has failed to act on these measures. Only one other state, Alabama, is without a permanent FAIR plan statute.

The committee seeks to examine these developments in the property insurance market, including the availability and cost of adequate coverage in storm vulnerable communities in New York and the value of maintaining coverage options through NYPIUA.

Persons wishing to testify at the hearing should submit ten copies of any prepared testimony at the hearing registration desk. The Committee would appreciate advance receipt of prepared statements.

In order to meet the needs of those who may have a disability, the Assembly, in accordance with its policy of non-discrimination on the basis of disability, as well as the 1990 Americans with Disabilities Act (ADA), has made its facilities and services available to all individuals with disabilities. For individuals with disabilities, accommodations will be provided, upon reasonable request, to afford such individuals access and admission to Assembly facilities and activities.

The committee is seeking testimony directed to the following questions:

  1. Is meaningful property insurance available for homes and business properties in New York's coastal areas?
  2. What are the roles of the insurer, agent or broker and property owner in making sure a property is insured to the consumer's expectations?
  3. How well do insurers inform consumers about the scope and adequacy of their property insurance coverage?
  4. What, if any, incentives are there for insurers, agents or brokers to undervalue a property or otherwise offer less coverage than a consumer may need?
  5. What is the impact of the temporary nature of NYPIUA? What is the impact on NYPIUA's ability to respond promptly to a major event resulting in wide scale policyholder losses? What has been the human and business toll of lapses of NYPIUA's statutory authority? What impact have these lapses had on NYPIUA's administrative expenses and staff? What impact have these lapses had on real estate and other business transactions?
  6. What additional actions should be taken in New York to improve access to affordable coverage in coastal communities?


Persons submitting written testimony as part of the public hearing on the Availability, Cost and Adequacy of Homeowners' and Property Insurance in Coastal Areas on October 22, 2004 are requested to mail, fax or email their testimony to:

Renee Skorupski
Committee Assistant
Assembly Committee on Insurance
Capitol, Room 520
Albany, New York 12248
(518) 455-4928
(518) 455-5182 Fax


Please complete and return this reply form to the address above, if applicable.


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