Reduces percentage of policies an insurer can cancel, requires insurers to demonstrate potential risk or loss to justify cancellations, authorizes oversight over par

(1) To reduce the percentage of policies (from 4% to 2% in a single year and from 20% to 10% over a five year period) that an insurer can cancel/non-renew without state approval and also requires insurers to demonstrate potential risk/loss to justify such cancellations or non-renewals before such approval shall be granted by the department.

(2) To stipulate that for every two new homeowners' policies, which an insurer voluntary writes in each territory, the insurer will be permitted to non-renew or conditionally renew one additional homeowner policy in that territory in excess to the two percent limit described in Section (d) (1); this will be subject to a formula developed by the Superintendent.

(3) To provide that if an insurer intends to reduce the volume of policies written in excess of the limits specified in (d) (1) the insurer must file a plan regarding the proposed reduction with the Superintendent, which demonstrates potential loss or risk justifying the additional cancellations.

Section 2: Adds a new Section 2352 to direct the Insurance Department to conduct a study on the profitability of the property/casualty insurance industry, specifically reviewing the reasons and rates at which they increase their premiums or terminate coverage in markets less impacted by natural disasters, and to report such findings to the Governor and the Legislature.

Section 3: Section 3425 of the Insurance Law is Amends Section 3425 of the Insurance Law to add new Subsection (r) (1) which authorizes the Superintendent of Insurance to establish and regulate the Coastal Market Assistance Program (CMAP) to facilitate the placement of homeowners' insurance (2) which provides the Superintendent to consider the following criteria when making any determination pursuant to (r)(1): the extent and nature of competition; size and significance of the coverage; availability of adequate limits of coverage; efficacy of CMAP administered by the Superintendent including but not limited to: actual placement and demand for placement of coverage through the programs at the time the determination is to be made; rate of growth in policies placed through the New York Property Insurance Underwriting Association (NYPIUA); reinsurance availability; extent and nature of consumer and producer complaints to the insurance department, steering committee and administrator of a CMAP; extent of denials and restrictions of coverage: volume of cancellations and nonrenewals; or changing conditions in the economic, judicial and social environment (3) which stipulates that with respect to any action taken the Superintendent if he/she determines in a written finding, after a hearing on a record, that ready availability and placement of meaningful homeowners' coverage has been restored, or that rescindment of any action will best facilitate the placement of homeowners' insurance, the Superintendent may rescind the action.

Section 4: Establishes that the effective date should be immediate; provided however, that the amendments to Section 2351 of the Insurance Law is made by Section 1 of this act will not affect the repeal of the section and will be deemed repealed therewith.

Justification

Insurers in New York State have been canceling homeowners' insurance policies for many residents because of the possibility of a major catastrophe (specifically affected areas include what is described as "coastal areas" of the State, on Long Island and New York City). Allstate, which controls more than 25% of the market in downstate New York has led the way. In 2007, Allstate, announced cancel or "non renew" more than 26,000 homeowner's insurance policies in the coastal portions of New York City, Westchester County. and Long Island. Other insurance companies have taken similar actions, which have left many homeowners without insurance. The recent action by insurance companies does not only leave many homeowners without homeowners' insurance but will dramatically increase premiums throughout the State.

Current Insurance Law does not require insurance companies to demonstrate any kind of financial or actuarial rationale for dropping tens of thousands of its policyholders. This legislation will provide protection of homeowners' insurance policies by limiting notices of intent from 4% to 2% in a single year and from 20% to 10% over a five-year period. This measure will ensure that when insurers depart from this segment of the market, it is conducted in an orderly manner to minimize not only the disruption caused by homeowners searching for replacement coverage, but the increase in premiums.

The creation of CMAP will also provide greater protections for homeowners. CMAP is a voluntary program established by the Superintendent in which insurers agree to take on a limited number of new policies in designated coastal areas. CMAP was designed to accommodate consumers having difficulty finding coverage, including those who have had to resort to New York Property Insurance Underwriting Association (NYPIUA) since 1993 because of the proximity of their property to the shore. Consumers, agents and brokers have complained of difficulties using CMAP. Many consumers who are eligible for coverage through CMAP report being unaware of its existence. This bill will provide that with respect to a CMAP the Superintendent of Insurance will facilitate and regulate the placement of homeowners' insurance policies. By providing the Superintendent of Insurance with the authority to make improvements to CMAP operations and ensuring that consumers who may be eligible for CMAP coverage are made aware of its availability, CMAP will be used to its fullest potential and more consumers will have access to more complete coverage than that offered by NYPIUA.

Legislative history

2007/2008 - S.7940 Remained in the Senate Committee on Insurance

Fiscal implications

None.

Effective date

Immediately.