1 BEFORE THE NEW YORK STATE SENATE
STANDING COMMITTEE ON HOUSING, CONSTRUCTION & COMMUNITY
2 DEVELOPMENT
AND
3 STANDING COMMITTEE ON INVESTIGATIONS & GOVERNMENT
OPERATIONS
4 AND
STANDING COMMITTEE ON INSURANCE
5 ----------------------------------------------------
6 JOINT PUBLIC HEARING:
7 TO ANALYZE ALL ASPECTS OF THE PROPERTY/CASUALTY AND
LIABILITY INSURANCE MARKETS FOR RESIDENTIAL
8 PROPERTIES IN NEW YORK, AND TO CONSIDER LEGISLATIVE
AND POLICY CHANGES TO PROMOTE ACCESS AND
9 AFFORDABILITY FOR ALL PROPERTY OWNERS AND THE
LONG-TERM STABILITY OF INSURANCE MARKETS
10
----------------------------------------------------
11
Location: Hearing Room 250
12 250 Broadway, 19th Floor
New York, New York 10007
13
Date: November 18, 2025
14 Time: 10:00 a.m.
15 PRESIDING:
16 Senator Brian Kavanagh, Chairman
NYS Senate Standing Committee on Housing,
17 Construction & Community Development
18 Senator James Skoufis, Chairman
NYS Senate Standing Committee on
19 Investigations and Government Operations
20 Senator Jamaal Bailey, Chairman
NYS Senate Standing Committee on Insurance
21
SENATE MEMBERS PRESENT:
22
Senator Pamela Helming (RM)
23 Standing Committee on Insurance
24 Senator Thomas F. O'Mara (RM)
Standing Committee on Investigations and
25 Government Operations
2
1
SENATE MEMBERS PRESENT (continued):
2
Senator Nathalia Fernandez
3
Senator Andrew Gournardes
4
Senator Brian Kavanagh
5
Senator Jack M. Martins
6
7 ALSO PRESENT:
8 Former Senator Diane Savino
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
3
1
SPEAKERS: PAGE QUESTIONS
2
PANEL 1: 17 27
3
Kaitlin Asrow
4 Acting Superintendent
NYS Department of Financial Services
5
PANEL 2: 90 103
6
Erin Collins
7 Senior Vice President of State &
Policy Affairs
8 National Association of Mutual
Insurance Companies
9
Robert Gordon
10 Senior Vice President, Policy,
Research & International
11 American Property Casualty
Insurance Association
12
Cassandra Anderson
13 President
New York Insurance Association
14
PANEL 3: 174 180
15
Ahmed Tigani
16 Acting Commissioner
Lucy Joffee
17 Deputy Commissioner for
Policy and Strategy
18 NYC Department of Housing
Preservation & Development
19
PANEL 4: 206 210
20
Andrew Finkelstein
21 President
New York State Trial Lawyers
22 Association
23
24
25
4
1
SPEAKERS (continued): PAGE QUESTIONS
2
PANEL 5: 224 230
3
Robert P. Hartwig, Ph.D., CPCU
4 Clinical Associate Professor, Finance
Department; Director, Center for
5 Risk and Uncertainty Management
University of South Carolina
6 Darla Moore School of Business
7 PANEL 6: 266 282
8 Carlina Rivera
President & CEO
9 New York State Association for
Affordable Housing
10
Wilson Kimball
11 Executive Director
New York State Public Housing Authority
12 Directors Association
13 Perry Perlmutter
President & CEO
14 Services for the Underserved
15 Rebecca Zangen
Chief Policy Officer
16 Supportive Housing Network of New York
17 PANEL 7: 313 326
18 Kathleen Irwin
Policy Director
19 New York Apartment Association
20 Tim Foley
CEO and Executive Vice President
21 The Building & Realty Institute of
the Hudson Valley
22
Ann Korchak
23 President
Small Property Owners of New York
24
25
5
1
SPEAKERS (continued): PAGE QUESTIONS
2
PANEL 10: 347 369
3
Iyla Shornstein
4 Political Director
Center for Climate Integrity
5
Elizabeth Derbes
6 Director, Financial Regulation &
Climate Risk
7 Natural Resources Defense Council
8 Dave Jones (via remote)
Director, Climate Risk Initiative
9 Center for Law, Energy &
Environmental (CLEE)
10 University of California,
Berkeley School of Law
11
Jordan Haedtler (via remote)
12 Climate Financial Strategist
Climate Cabinet Action
13
PANEL 8: 381 400
14
Patrick Boyle
15 Senior Director, Policy &
Communications
16 Enterprise Community Partners
17 Rachel Fee
Executive Director
18 New York Housing Conference
19 Emily Klein
Assistant Vice President,
20 Deputy Director for Policy and
Public Affairs
21 The Community Preservation Corporation
22 PANEL 9: 381 400
23 John Crotty
President
24 Milford Street Association
Insurance Company
25
6
1
SPEAKERS (continued): PAGE QUESTIONS
2
PANEL 11: 425 442
3
Kevin Wolfe
4 Deputy Director for Advocacy and
Public Affairs
5 Center for NYC Neighborhoods
6 Mary Ann Rothman
Executive Director
7 Council of New York Cooperatives and
Condominiums (CNYC, Inc.)
8
Sara Enright
9 Senior Director of Safety and
Sustainability
10 Consumer Reports
11 Monroe Shannon
Program Manager, Insurance and
12 Resiliency Services
Neighborhood Housing Services of NYC
13
PANEL 12: 452 466
14
Travis Wattie
15 Assistant Vice President of
Government Relations
16 Big I New York
17 Bradford J. Lachut
Director, Government and
18 Industry Affairs
Professional Insurance Agents of NY
19
Joseph Culver
20 Executive Director &
Chief Operating Officer
21 New York Mortgage Bankers Association
22
23
24
25
7
1 SENATOR KAVANAGH: Okay, good morning,
2 everyone and welcome to this joint public hearing on
3 insurance for residential properties throughout
4 New York State.
5 I am State Senator Brian Kavanagh. I chair
6 the Committee on Housing Construction and Community
7 Development, and this is a joint hearing of the
8 Insurance Committee -- the Housing Committee, which
9 I chair, and the Insurance Committee, chaired by
10 Senator Bailey, who you will hear from in a moment,
11 and Senator Skoufis, chairing the Investigations and
12 Government Operations Committee who is in the room.
13 Elvis has left the room, but Senator Bailey
14 has arrived.
15 We also have a number of senators with us,
16 including currently our ranker, Senator O'Mara is
17 the ranker of the Investigations and Government
18 Operations Committee. And Senators Nathalia
19 Fernandez and Andrew Gounardes who are members of
20 the committees here. And we do expect that we will
21 be joined by Pam Helming, who is the ranking member
22 of the Insurance Committee.
23 So I thank everybody for their collaboration
24 and also the many staffers of the Senate, including
25 my own staff, who have worked very hard to prepare
8
1 us for today.
2 The scope of this hearing, as I mentioned, is
3 insurance products that are necessary for
4 residential property throughout the state. So that
5 includes single-family homes, multi-family
6 buildings, co-ops, condos, rentals.
7 It does not specifically include buildings
8 that are exclusively commercial, other than maybe
9 some substantial overlap between the insurance
10 issues in commercial and residential. And we are
11 here to examine an issue that really has been
12 something that many of our constituents bring to us
13 very frequently.
14 The premiums for insuring homes and other
15 residential properties have been increasing, in some
16 cases very dramatically increasing, doubling and
17 tripling in short periods of time. And at the same
18 time, we have reports of reduced coverage, even
19 though policies may be more costly, greater
20 out-of-pocket deductibles, and in some cases, people
21 who are previously insured, who are losing access to
22 their coverage without adequate explanation.
23 So, you know, this raises, obviously,
24 concerns for individual homeowners in their ability
25 to maintain and secure what is often their most
9
1 valuable asset. But it also has become an issue for
2 our ability to produce and maintain affordable
3 housing, including multi-family housing throughout
4 the state.
5 So, you know, as we know, there are also
6 extreme weather events around the country that have
7 dramatically destabilized markets in some parts of
8 the country. There are reports along the Gulf Coast
9 and in California and in Colorado and in Florida of
10 circumstances where whole communities are losing
11 coverage. So we are very cognizant of that and the
12 extreme weather driven by climate change that is
13 driving a lot of those circumstances.
14 So, because of all of that, we basically have
15 undertaken an investigatory process that started in
16 August with the chairs of the two other committees
17 and the Housing Committee.
18 We began by basically querying various
19 insurers, sending very specific questionnaires to
20 retrieve data and documents from them and also began
21 a dialogue with the superintendent of DFS whom we
22 are very happy to have with us as our first witness
23 this morning, and basically the goal being to
24 understand and document the problem and generate
25 solutions that could be enacted either through
10
1 legislation or through other reforms, regulatory
2 reforms or other reforms that we can enact here in
3 the State of New York.
4 We expect to hear from a very diverse range
5 of witnesses today. There is also a lot of written
6 testimony that has already been posted, including
7 from some who were not able to testify in person.
8 So again, we are developing a very robust
9 record here.
10 We are, I should note, still in conversations
11 seeking testimony from certain large insurers who
12 will not be testifying today, but we hope to
13 continue to build that record over time.
14 So I think I'll hold off on going through the
15 timing. It's going to be very tight timing today to
16 get through many witnesses so we are not all here
17 tomorrow morning.
18 But maybe before I do that, I'll begin and
19 invite Senator Bailey to give some opening remarks.
20 SENATOR BAILEY: If the mic -- oh, it's on.
21 Good morning, everybody. Again, thank you
22 for coming. Senator Kavanagh laid out the reasons
23 why we are here. And I think that they're apparent
24 to you and your family, your friends, yourself,
25 anybody that you know, the cost of insurance has
11
1 risen. Period. Whether it be auto, which is not
2 the subject matter focus of this -- home, life,
3 everything has gone up.
4 And I just want to make sure that as the
5 Chair of the Insurance Committee, I want to state
6 very clearly, you know, unequivocally for the record
7 that this is not an attack on the industry.
8 As legislators, it is our job, 300,000 plus
9 people elect all of us to represent them. And they
10 come to -- each and every one of -- and I'm going to
11 take the liberty and say each and every one of us on
12 this stage, the dais, has fielded a great number of
13 questions as to why is my insurance going up. "My
14 insurance is going up at such a rate that I cannot
15 afford it. What can you do about it? "
16 Now as legislators, our job is to create
17 policies that protect and support New Yorkers, and
18 this hearing is in furtherance of that.
19 We're going to be asking a lot of questions,
20 gathering a lot of data and hopefully coming up with
21 some good solutions so that we can move forward and
22 figure out what's ailing us.
23 It has been no secret that the price of
24 insurance has gone up, like I said earlier, but what
25 that also comes with is it creates schisms in many
12
1 different ways. It creates people that have to make
2 other choices in their life if they don't pay their
3 insurance.
4 And there is a domino effect in many
5 households; especially older folks who are holding
6 on to their property and even if their mortgage is
7 paid off, they still have to pay that insurance and
8 it's affecting their quality of life because we know
9 SNAP benefits just came back online.
10 Every little cent counts, and we are going
11 get down to the dollars and cents.
12 I just want to thank, most importantly, each
13 of our staffs, myself, Senator Skoufis and Senator
14 Kavanagh have done incredible work in gathering
15 data, being persistent to stakeholders.
16 I just want to make sure that -- sometimes we
17 save staff for the end, but we have to thank you at
18 the beginning and thank you for the work that you
19 have done to make sure that we have gotten here.
20 It is going to take an effort from all of us,
21 and I'm going to ask you for your patience in
22 advance for today. There are a lot of people here.
23 A lot of people that want to testify, and I'm
24 hopeful that we can adhere to the time.
25 We have a time clock, you know, I'm speaking
13
1 a little bit past my time.
2 We have a time clock, and I would hope that
3 those who are testifying would adhere to the time so
4 that everybody that has come here on this wonderful
5 Tuesday morning gets an opportunity to speak their
6 mind and their voice and that we can have an answer
7 for everybody: The tenant, the homeowner, the
8 insurer, the regulator, the legislator.
9 So I just want to say thank you for coming.
10 And I want to kick it to my good friend and the
11 Chair of the -- I just say Investigations, Skouf;
12 the Investigations Committee, Senator James Skoufis.
13 SENATOR SKOUFIS: Thanks very much, Senator
14 Bailey, and thank you, Senator Kavanagh. Thank you
15 all for being here.
16 Good morning. I, there at the beginning of
17 my remarks as well, I want to underscore something
18 that Senator Bailey and Senator Kavanagh mentioned
19 at the start here, which is that a lot, a lot, a lot
20 of work has been put into this investigative process
21 by all of our staffs, including central staff, and
22 this is just the latest, sort of mile marker in our
23 process here this hearing.
24 So thank you all for being here and thanks in
25 advance to the individuals who are going to be
14
1 testifying.
2 So, with the cost of virtually every aspect
3 of life for New Yorkers going up, the purpose of
4 today's hearing is to look at the many contributing
5 factors in the lack of both affordability of and
6 access to insurance in the residential space.
7 According to a report by one of the trade
8 associations we'll actually hear from later today,
9 "Despite heavy catastrophic losses in 2025,
10 including the costliest wildfires on record, the
11 U.S. property and casualty industry recorded its
12 best mid-year underwriting gains in nearly
13 20 years."
14 But as I expect, we'll see throughout the
15 course of today's proceedings, this equation isn't
16 working for everyday New Yorkers.
17 Today's hearing, as I mentioned, follows
18 months of investigative work as Senator Kavanagh
19 outlined in his remarks and several common themes
20 have emerged to date.
21 1. That property owners, regardless of a
22 spotless claims history or any fault of their own
23 are seeing their premiums dramatically escalate in
24 recent years.
25 Second: That regulators are often lacking
15
1 the data needed to robustly evaluate and monitor the
2 impact of insurance trends on consumers.
3 Third: That the modifications homeowners and
4 property owners are encouraged to make in the face
5 of severe climate threats are not resulting in lower
6 premiums or meaningful savings.
7 Fourth: That many are boxed out of the
8 voluntary insurance market; again, through no fault
9 of their own and forced to pay even more with
10 insurers of last resort.
11 Fifth: That, in fact, countless New Yorkers
12 are foregoing property insurance all together.
13 And lastly: That the loss experience
14 carriers endure in other states may well be
15 influencing their rate setting here in New York.
16 These are just a handful of factors among
17 many others our committees are looking at as we seek
18 to develop a comprehensive understanding of the
19 health of New York's residential insurance industry.
20 And today we look forward to identifying, not just
21 the problems facing insurance consumers, but the
22 legislative and regulatory opportunities ahead of us
23 as we work to change course.
24 In the coming months, we'll publish our
25 investigative report which will include the
16
1 committee's recommendations ahead of the 2026
2 legislative session and look forward to a robust
3 conversation today.
4 Thanks very much.
5 SENATOR KAVANAGH: So again, some
6 housekeeping here.
7 We have about 30 witnesses scheduled to speak
8 in person today and senators here who have some
9 questions and a few additional ones who have joined
10 us, so we are going to try to adhere to a very
11 strict timeline to get through the day and make sure
12 everybody has an opportunity to speak.
13 So as is our custom, we will give the
14 superintendent and the heads of public agencies
15 10 minutes for their oral remarks here, and other
16 witnesses will have 5 minutes for their remarks.
17 Then after each panel of witnesses, there
18 will be a Q&A period during which chairs will have
19 10 minutes for questions, rankers will have
20 7 minutes for questions and other members will have
21 5 minutes. And if we go to a second round of
22 questions on a given panel, chairs will have
23 7 minutes, rankers will have 5 minutes and other
24 committee members will have 3 minutes.
25 For those who heard lots of numbers and
17
1 didn't commit them to memory just now, there is a
2 time clock, which I believe the witnesses as well as
3 the senators, can see, and we are going to try to,
4 you know, get everyone to adhere to that today.
5 And just to note: As I mentioned earlier,
6 there is written testimony. We actually started
7 posting written testimony for this hearing at the
8 end of last week.
9 So we have everyone's written testimony; even
10 those who are testifying in person today, and so
11 please as witnesses, please feel free to highlight
12 the key points of your written testimony with an
13 understanding that the committee and the staff --
14 the committees and the staff will thoroughly
15 consider everything you have to say.
16 So without further ado, I think I'll turn it
17 over to Senator Skoufis.
18 SENATOR SKOUFIS: We will be, as a matter of
19 practice today, we will be swearing in all of the
20 individuals providing testimony.
21 So Acting Superintendent, if you could raise
22 your right hand for me.
23 Do you solemnly swear that you will tell the
24 truth, the whole truth and nothing but the truth?
25 SUPERINTENDENT ASROW: I do.
18
1 SENATOR SKOUFIS: Thanks very much.
2 The floor is yours.
3 SUPERINTENDENT ASROW: Thank you so much.
4 Good morning, Chairs Bailey, Kavanagh, and
5 Skoufis; Ranking Members Helming, Martins, and
6 O’Mara; and distinguished Members of the Senate
7 Committees on Insurance; Housing Construction, and
8 Community Development; and Investigations and
9 Government Operations.
10 My name is Kaitlin Asrow, and I serve as the
11 Acting Superintendent of the New York State
12 Department of Financial Services (DFS).
13 Thank you for the opportunity to address you
14 today on today’s hearings on the cost and
15 availability of residential property insurance in
16 New York.
17 I also want to thank Governor Hochul for
18 trusting me to lead DFS into its next chapter.
19 Across the nation as was stated, homeowners'
20 insurance markets are facing extreme uncertainty and
21 rising risks.
22 Nationwide, the total number of claims has
23 increased by almost 50 percent, and the severity or
24 cost of the claims has almost doubled as well.
25 These figures are leading to rising rates
19
1 across the country.
2 A recent report from the Consumer Federation
3 of America found that nationwide from 2021 to 2024,
4 premiums for a typical homeowner increased by an
5 average of 24 percent.
6 Public reporting has highlighted particularly
7 acute challenges in states like California and
8 Florida where insurers have exited the market.
9 This topic is deeply personal for me. I grew
10 up in a rural farming community in northern
11 California, population of under 500. The median
12 household income there is $50,000, half the average
13 household of California. It is place where
14 neighbors rely on each other and a single event
15 impacts everyone.
16 I was recently there visiting family this
17 summer and heard the community phone tree go off.
18 The residential insurer for the town was not
19 renewing policies. An insurer no one knew had
20 coming in and was giving residents hours to sign
21 contracts at huge rate increases, but it was their
22 only option for coverage.
23 My hometown and much of California is faced
24 with both the disruption and fear of carriers
25 leaving or non-renewing and unbearable rate
20
1 increases.
2 We must find the balance between
3 affordability and access here in New York, and I
4 appreciate coming together today to do just that.
5 There are a number of factors that are
6 driving market instability nationwide: Increasing
7 frequency and severity of catastrophes due to
8 climate change, rising costs of materials and
9 repairs driven by inflation, a tightening
10 re-insurance market and the effects of social
11 inflation.
12 Severe weather events have become more
13 frequent and more costly and are cited as the
14 leading factors stressing the homeowners' insurance
15 market. An increasing number of natural disaster
16 events per year now exceed $1 billion in damages.
17 For New York specifically, more than
18 78 percent of the population live in coastal areas
19 of the state, meaning that a higher percentage of
20 New York in particular are vulnerable to weather
21 events. And additionally, in recent years, the cost
22 to repair and rebuild homes has been impacted by
23 inflation, supply chain disruptions, worker
24 shortages and rising wages.
25 According to the federal insurance office
21
1 between 2020 and 2023, the replacement cost for
2 property and casualty-related losses increased by an
3 average of percent. These increasing costs are
4 ultimately reflected in premiums.
5 Rising property values also represent upward
6 pressure on replacement costs and therefore rates.
7 Property values have risen 1.7 percent across the
8 U.S. over the past year, but here in New York over
9 the same period, it has risen by 3.8 percent.
10 Within the insurance industry, insurers often
11 manage the risk by purchasing reinsurance against
12 the losses they have agreed to cover. This enables
13 insurers to write more policy than if they retained
14 all risks themselves.
15 Since 2017, the overall cost of catastrophic
16 reinsurance has nearly doubled.
17 There are also non-economic factors
18 increasing insurance claims payout and loss ratios
19 including more frequent litigation and larger jury
20 awards. These costs are ultimately passed on to
21 property owners in the form of higher insurance
22 premiums.
23 We have seen the impact on policyholders when
24 states fail to strike the right balance or act
25 quickly enough to address market challenges.
22
1 Carriers withdraw, consumers lose access to
2 coverage and the cost of available coverage goes up;
3 further, as fewer options remain in the market.
4 Here in New York, the market remains
5 comparatively stable, thanks in part to DFS' strong
6 regulatory framework.
7 A 2024 "New York Times" piece highlighted
8 that while personal residential property insurance
9 is increasing by double digits across the U.S., in
10 states with robust regulatory frameworks like
11 New York, property owners are charged much lower
12 rates when measuring the cost of their premium as a
13 share of their overall home value.
14 Looking at trends over time from '21 to '24,
15 New York personal residential property rates
16 increases here in New York were about half of the
17 national average.
18 New York also remains below the national
19 average for residential property premiums.
20 Additionally, New York's personal residential
21 property insurance non-renewal rates are among the
22 lowest in the country.
23 New York also has unique risks compared to
24 other markets across the U.S. The metropolitan area
25 here has the highest population density in the
23
1 country.
2 This means that insurers are concerned about
3 correlated losses, where an event can significantly
4 impact more policyholders and have higher losses
5 than similar events in less populated areas.
6 New York also has the oldest owner occupied
7 homes in the U.S., which typically means more costly
8 repairs when they are needed.
9 While these factors would typically push
10 rates higher for consumers, we have kept them stable
11 in New York as described previously.
12 At DFS, we aim to maintain a stable and
13 competitive insurance market in order to enable
14 dependable insurance coverage at affordable rates
15 for New Yorkers.
16 State law requires DFS to review insurance
17 rates to ensure that they're not excessive,
18 inadequate, unfairly discriminatory, destructive of
19 competition or detrimental to the solvency of
20 insurers.
21 While residential property insurance rates
22 are not subject to DFS' prior approval but rather to
23 the standard of file and use, insurers typically
24 wait for DFS' approval on these rates before
25 implementing.
24
1 New Yorkers who cannot find insurance
2 coverage for their properties in the private market
3 can obtain coverage from the State's property
4 insurer of last resort, the New York Property
5 Insurance Underwriting Association for NYPIUA, which
6 DFS also oversees.
7 NYPIUA's policies tend to be more expensive
8 and can provide less coverage than standard
9 homeowners policy.
10 Insurers of last resort are designed to be a
11 temporary safety net and are not equipped to manage
12 a significant expansion of policyholders if insurers
13 withdraw from New York in substantial numbers.
14 State insurance regulators are limited in
15 their ability to directly or unilaterally address
16 the cost drivers I've discussed today, but most,
17 including DFS, try to balance insurer solvency and
18 therefore presence in the state, with affordability
19 for policyholders.
20 There are no easy fixes to these complex
21 issues, which is why I appreciate you making this a
22 priority.
23 Ultimately, solutions will require action
24 from a diverse set of stakeholders across local,
25 state and federal government, as well as the private
25
1 sector.
2 DFS has sought to address these challenges
3 through a series of actions.
4 At a macro level, in 2021, the department
5 issued guidance to insurers on how to manage their
6 material, financial, and operational risks
7 associated with climate change.
8 Insurers are expected to integrate the
9 financial risks from climate change into their
10 governance frameworks and risk management
11 strategies.
12 Within residential property policies, DFS
13 also issued guidance in 2024, reminding insurers of
14 their obligation to provide discounts to homeowners
15 who install storm shutters and hurricane resistant
16 glass, and encouraging insurers to offer discounts
17 for the installation of additional loss mitigation
18 devices.
19 Further, thanks to the great work of you and
20 your colleagues and the Governor, the 2025 budget
21 included legislation drafted by DFS that helps to
22 address the increasing costs of insurance for
23 affordable housing developments; which typically
24 purchased bundled commercial property and liability
25 insurance policies.
26
1 The department continues to explore solutions
2 to address market challenges and affordability.
3 DFS is analyzing how to effectively
4 incorporate climate and catastrophic data into
5 filings to better model credible and actuarially
6 sound loss projections considering increasing
7 frequent and severe climate events.
8 We are also developing a summary and outreach
9 plan to outline all available insurance discounts
10 and help New Yorkers better understand potential
11 cost saving avenues on their homeowners policies.
12 In closing, I will say that the first meeting
13 I convened when I assumed this role focused on
14 addressing the cost and availability of insureds in
15 New York.
16 In the six weeks since then, I have had
17 countless conversations about the topic. Myself and
18 the committed staff of DFS will work within our
19 authority to navigate these issues and partner with
20 all of you to find sustainable solutions to
21 affordability and access for New Yorkers.
22 Thank you for giving DFS the opportunity to
23 testify before you today and I look forward to
24 continuing to work together.
25 ///
27
1 SENATOR BAILEY: Thank you, Acting
2 Superintendent. Thank you for testifying, and thank
3 you to the Governor and the executive team for
4 permitting you to testify.
5 And I want to thank outgoing Superintendent
6 Harris for all of her excellent work. We worked
7 very well together.
8 Just a couple of questions because I know my
9 colleagues have a lot of questions.
10 Top line. Intra-agency stuff, right? You
11 have been at the agency for a while but you've just
12 assumed the top role.
13 If you are looking at the landscape of the
14 biggest problems or what the overall outlay of the
15 market is right now, what would you say that it is?
16 SUPERINTENDENT ASROW: So you know, I think
17 those three factors, I'm not sure which is kind of
18 the highest among the three factors but as I
19 mentioned, climate.
20 Climate risk is the primary factor I would
21 say that is discussed within our agency and with the
22 market.
23 I think in New York, over the past 5 years,
24 severe events have tripled in their frequency.
25 The next item is this kind of macroeconomic
28
1 pressure.
2 Inflation, building costs, supply chain
3 disruptions, cost of labor increasing and I believe
4 the New York State Comptroller has indicated that
5 repair and building costs have outpaced inflation
6 here in New York and continue to do so. And those
7 are just structural changes, and then the social
8 inflation issue.
9 I believe New York is second per capita in
10 kind of nuclear verdicts in that space.
11 So those are the three issues we are very
12 much focused on.
13 SENATOR BAILEY: Intra-agency stuff, you
14 know, we have had conversations, we have had
15 conversations with prior Superintendent Harris about
16 some of the staffing challenges that DFS has faced.
17 Would you say that some of those challenges,
18 while not an aptitude, only in number, just for the
19 record, would lead to an inability to fill certain
20 positions that may have an effect on the agency's
21 ability to carry out the work that it should?
22 SUPERINTENDENT ASROW: I appreciate the
23 question.
24 No, I do not believe that, you know, the
25 staffing challenges that DFS has undergone for a
29
1 number of years are leading to us loosening or
2 changing our regulation.
3 And I think that bears out, and again the
4 consistency we see in the market in terms of
5 carriers not leaving, rates remain below average for
6 the United States.
7 That being said, we understand it is very
8 significant for consumers and we are monitoring that
9 and working with all of you.
10 You know, the staffing challenges hit my
11 staff hardest, right? And they feel it by needing
12 to do more with less resources.
13 And so we have been very appreciative of your
14 support and the executive chamber support to build
15 up our staffing over the past few years, but we are
16 digging out of a hole, and that's going to continue
17 for sometime.
18 So we very much appreciate the collaboration.
19 We are continuing to talk to the executive chamber
20 about our needs.
21 I'm very focused on cross training. Focused
22 on kind of early entry staff and how do we train
23 them through a path to recreate resiliency in the
24 agency.
25 Again, that will make sure we keep the head
30
1 count.
2 We keep that retention while we continue to
3 do the work.
4 SENATOR BAILEY: Certainly.
5 I want to make sure I make very clear that
6 the lack of, in number, is not for the lack of
7 skill. You have quite capable staff. I just want
8 to make sure I underline and put a finer point on
9 that.
10 So what can we do as legislators? I know
11 that there is proposed legislation, program bills
12 that come to us.
13 We have a couple of months until the
14 legislative session begins in January. Are there
15 things that are top of mind at the agency that you
16 can think about giving us to think about, to
17 introduce, that may help tamp down some of the
18 issues and concerns that we are obviously having in
19 the market with insurance?
20 SUPERINTENDENT ASROW: So I appreciate that.
21 I will defer to kind of the wisdom of the
22 legislature on, you know, what bills that you would
23 propose, and we are here to work with you on any of
24 those.
25 You know, technical assistance, and
31
1 understanding kind of the not-good effects or the
2 unintended impacts is I think where we are
3 strongest.
4 SENATOR BAILEY: Certainly.
5 And I think the word of the day is going to
6 be affordability. I think all of us are going to
7 touch on that.
8 And I know that you are not going to be able
9 to specifically opine about a specific piece of
10 legislation that would create affordability. But
11 are there certain market conditions, certain
12 societal conditions, are there things that we can
13 help you and that the agency can help us with
14 achieving so that we can try to make things more
15 affordable?
16 SUPERINTENDENT ASROW: Yeah, what I will
17 point to at a broad level is something that we have
18 been very focused on and that is resiliency.
19 I think where we have more resilient
20 buildings, where we have more resilient communities,
21 then it's a win-win.
22 Consumers, New Yorkers are not experiencing
23 the actual loss event, which again is very
24 disruptive. They don't want to go and then seek out
25 insurance.
32
1 Insurer's costs are also going down. They
2 don't have to bear those losses. They're able to
3 underwrite more specifically and set their rates on
4 that assurance.
5 So DFS in particular has focused on
6 resiliency, so in statute as I mentioned in my
7 opening remarks, we do require discounts for
8 consumers on the use of storm shutters, shatterproof
9 glass, things like this.
10 And then we have encouraged a lot of optional
11 discounts that insurers can give and we think that
12 benefits both, right?
13 We are increasing the resiliency of the
14 actual homes and consumers are seeing reduction in
15 costs.
16 And so that's where I have asked the team to
17 pull together a rubric of all available discounts in
18 New York to provide to consumers so they can take
19 advantage of that and increase their resiliency.
20 SENATOR BAILEY: Certainly.
21 You said suggest. Is there a possibility for
22 us to go beyond suggesting?
23 In such an economic crisis, is there a method
24 where there is regulatory or legislative, in your
25 opinion, that we can compel certain carriers, if
33
1 there is a discount that can possibly be available
2 to a consumer, that they should tender it? Even if
3 they just have to apply and check a box.
4 Is there something that you believe that we
5 can do to, I guess, go much more towards compulsory?
6 I know we don't like the word mandate
7 sometimes in the insurance business. That's not a
8 great word. But is there something that we can do
9 to try to make sure that they're offering -- and if
10 it's already in a publicly available discount, is
11 there something that we can do to make sure that it
12 is widely advertised, widely known and widely
13 disseminated.
14 SUPERINTENDENT ASROW: I appreciate that.
15 And that's where I'm focused, to make sure that what
16 is available today is very available to consumers so
17 they are taking advantage.
18 So I would very much appreciate partnering
19 with you on how do we get the information about
20 these discounts out there that already exist.
21 As I said, there is precedent in the law for
22 a mandated discount on kind of hurricane resistant
23 shutters and shatterproof glass and again then
24 optional discounts that we strongly encourage.
25 And I will say in our most recent survey,
34
1 approximately 98 percent of insurers that we
2 surveyed are offering the optional discounts for
3 resiliency measures.
4 So happy to continue to partner with you on
5 what more we can do there.
6 SENATOR BAILEY: Certainly.
7 Again, we want to make sure the companies
8 remain solvent but the solvency of someone's home is
9 very much more important to me and my colleagues.
10 And I thank you for your time and I will cede
11 to my colleagues. Thank you.
12 SENATOR KAVANAGH: Thank you.
13 Thank you for your testimony. It's hard to
14 argue with someone who defers to the wisdom of the
15 legislature. What are we supposed to say to that.
16 But just, can you -- you mentioned, you know,
17 the effects of climate change and extreme weather
18 events around the country and here in New York.
19 Can you just talk a little bit more about how
20 risks of -- the growing risk of extreme weather is
21 priced into insurance from your perspective at this
22 point.
23 SUPERINTENDENT ASROW: Yeah, absolutely.
24 So how rate setting functions is that
25 carriers and then DFS, as the oversight layer on
35
1 rates, will look at their historic losses in an area
2 and their kind of projected out losses, claims and
3 then losses in that same space and then set premiums
4 to account for that.
5 You know, again, as I mentioned, in statute,
6 there is a requirement that we consider the solvency
7 and the adequacy of such rates to maintain the
8 insurers in New York. So we do expect a slight
9 profit on that.
10 Again, we make sure that it is reasonable and
11 justified in all cases.
12 So in terms of climate, you know,
13 catastrophic events are less predictable. They're
14 more severe. And so a lot of the actuarial science
15 is based on kind of standard losses that they've
16 seen year over year and they can more adequately
17 predict.
18 So what is happening with insurers is they're
19 not able to kind of account for potential large
20 losses and appropriately set those premiums.
21 So something that we are looking into that we
22 know is available and being used in other states is
23 catastrophic kind of climate modeling.
24 So we have a climate division in DFS that we
25 stood up that's focused specifically on how do we
36
1 think about that.
2 That being said, my background is in
3 technology and, you know, models have significant
4 lift.
5 So they can help account for that large
6 variation in catastrophes that insurers from the
7 actuarial side are not used to predicting but they
8 can also have large variations.
9 So small data changes can have large changes
10 that we want to make sure we understand and we want
11 to make sure those models are appropriately testing
12 so they're not having adverse effects.
13 So that's something that we are exploring,
14 but it's just harder to model catastrophes.
15 SENATOR KAVANAGH: And am I correct in
16 understanding that so far, those more sophisticated
17 models are not directly a part of the pricing or the
18 review and approval of rates; is that right?
19 SUPERINTENDENT ASROW: We are currently
20 exploring how they might be used in rates.
21 SENATOR KAVANAGH: And to the extent
22 insurance companies are using models, are they
23 submitting descriptions of those models?
24 I understand they're not actually submitting
25 the models themselves in a manner that DFS can
37
1 review; is that right?
2 SUPERINTENDENT ASROW: So, you know,
3 typically models, and again, we are still exploring
4 both with insurers and our own teams, you know, the
5 use of these models and their rate setting and then
6 our review.
7 So what we have been doing is talking to
8 other states about their process in particular and
9 one thing that they have expressed is a challenge is
10 a lot of times these models are considered
11 proprietary so it's very challenging to kind of
12 unpack the model and understand some of the
13 predictive mechanisms.
14 So again, that's something we are talking to
15 other states to learn from, learning from the
16 industry and learning from advocates.
17 SENATOR KAVANAGH: But aren't insurance
18 companies already using some proprietary practices
19 for pricing?
20 Like they don't necessarily share with their
21 competitors how they're pricing policies at this
22 point, right?
23 SUPERINTENDENT ASROW: So, you know, the
24 overall rate filings are public.
25 So I'll differentiate underwriting approaches
38
1 versus rate filing.
2 So the underwriting methods are not required
3 to be reviewed by DFS in statute that we can go in
4 and review them through examinations and yes,
5 typically also in the banking space, right, an
6 underwriting method is likely proprietary so they
7 can assess the risks of individuals and whether to
8 write them.
9 Rate setting, we do review that. Again,
10 obviously we keep that confidential amongst other
11 insurers.
12 Again, our mandate is to not be detrimental
13 to competition so we have to keep that confidential.
14 SENATOR KAVANAGH: Right, but if insurance
15 companies were to sort of take some leap into a new
16 method that involves some very sophisticated models,
17 presumably in order to properly regulate that, DFS
18 would want access to the models themselves?
19 SUPERINTENDENT ASROW: Yeah, so, you know, if
20 they were to -- again, we are in the early days with
21 our companies and exploring whether they're using
22 these models and how they're using these models.
23 So I will say yes, if they're using them, we
24 will review with them their approach.
25 But, you know, I think how deep we are going
39
1 to unpack the models themselves versus, again, a lot
2 of the work that I have done in my prior role is
3 really about the governance structure around models:
4 How do we make sure we understand the data that's
5 going into them, how do we make sure we understand
6 the models are tested, the right committees in
7 place, again, to make sure there aren't unfair and
8 discriminatory practices coming out of those models.
9 So a lot of what we would focus on is the
10 governance around them.
11 SENATOR KAVANAGH: Okay, you are currently
12 mandating through regulation, discounts for shutters
13 and shatterproof glass.
14 Does DFS set the sort of the amount of those
15 discounts?
16 SUPERINTENDENT ASROW: So we have worked with
17 the insurers to understand.
18 We see that the discounts are approximately
19 3 to 6 percent for those so we don't -- different
20 kind of factors come in, and we do approve kind of
21 the overall classification. So a discount.
22 And then insurers, depending again, on their
23 risks and kind of the specific data and loss
24 history, so it's not a very specific percentage
25 that's implemented by DFS.
40
1 They propose kind of a range, and then we
2 approve that general classification.
3 SENATOR KAVANAGH: Are you approving the sort
4 of pricing -- well, the amount of discounts, or
5 other discounts they're offering for safety and
6 mitigation?
7 SUPERINTENDENT ASROW: Yeah, so when we
8 receive a filing, we are kind of reviewing their
9 methods, their actual actuarial methods, and again,
10 how they're taking in loss data, how they're taking
11 in expense data to propose a percentage, a
12 percentage discount or a percentage premium.
13 And, yes, then we are kind of approving that
14 premium.
15 Did that answer your question?
16 SENATOR KAVANAGH: Yeah.
17 And I think I know the answer to this but
18 just for the record, we have been -- the state has
19 been investing a lot and localities have been
20 investing a lot and private property owners have
21 been investing a lot in kind of mitigation for storm
22 risk and other extreme weather risk that sort of
23 goes beyond the bounds of a particular property, you
24 know, improvements and drainage and, you know, all
25 kinds of barriers to damage that might occur to
41
1 individual properties, but is done at the community
2 level.
3 Are there currently any discounts associated
4 with those kinds of mitigation?
5 SUPERINTENDENT ASROW: So not at the kind of
6 overall community level.
7 I will say DFS is very supportive of kind of
8 community investment and resiliency measures to my
9 previous kind of comment, right, resiliency is very
10 aligned with both consumer and New Yorkers'
11 interests in terms of not having that loss
12 experience in the first place.
13 And then, you know, our expectation is that
14 investment -- first, it will encourage more carriers
15 to write in a space, again, increasing competition,
16 hopefully bringing down costs.
17 Also we do hope that those will show up in
18 rates over time.
19 That being said, we don't have a specific
20 classification in front of us because it's all kind
21 of historic data.
22 So, again, we look at historic losses and so
23 then we would expect to have the resiliency measures
24 that are being invested in today, to show up in
25 rates over time.
42
1 SENATOR KAVANAGH: Will you be able to
2 provide -- you mentioned you are gathering all the
3 potential discounts. Is that -- I assume that's a
4 work in progress. But will you be able to provide
5 for the committees here, kind of a list of current
6 discounts that you think insurers are offering?
7 SUPERINTENDENT ASROW: Yes, I hope to be able
8 to do that.
9 SENATOR KAVANAGH: We'd appreciate that.
10 Shifting gears a little bit. Talking about
11 kind of non-weather-related damages. I think we are
12 going to hear a lot about liability insurance,
13 which, as much as climate change and, you know,
14 increases in those kinds of losses have been
15 significant.
16 A lot of what we have been told and what some
17 of the written testimony has indicated is that there
18 is been a really dramatic increase in premiums for
19 liability insurance and in some cases policies
20 doubling and tripling without an explanation that is
21 at least adequate from the perspective of the
22 property owner.
23 I mean, just can you talk -- is that
24 something that DFS is observing?
25 SUPERINTENDENT ASROW: Yeah, so, you know, in
43
1 conversations with our related entities, we
2 absolutely see kind of social inflation and again,
3 higher jury awards, more litigation being a driver
4 on the liability side.
5 So, you know, like the other kind of factors,
6 we do see those increases.
7 SENATOR KAVANAGH: So if I'm a property owner
8 and my insurance company proposes to double my rate,
9 my premium, sort of how does that get -- how does
10 DFS' approval process relate with that decision
11 about what is an acceptable premium for me to pay?
12 SUPERINTENDENT ASROW: So how it works is a
13 carrier kind of will, whatever cadence in the
14 property and casualty, there is not kind of a set
15 cadence, right?
16 In health, for example, we might have a set
17 cadence in which premiums will be reviewed.
18 Property and casualty, it's when policies are
19 renewed.
20 So an insurer will come to us, and they'll
21 submit a rate filing, so a request to change their
22 premiums.
23 This could be to offer a discount.
24 This could be to increase their premiums or
25 to decrease their premiums.
44
1 So, again, then we would take that
2 information in with our actuaries and review the
3 methods, the factors that went into that; you know,
4 again, making sure that everything is fair in terms
5 of -- that rates are not excessive.
6 The rates they're posing are not excessive
7 but also that the rates are adequate to maintain the
8 solvency of the insurer and again, as we prepare for
9 potential losses, we expect there has to be some
10 amount of solvency and surplus there.
11 We look for unfair discriminatory practices
12 and then we will many times change the rate.
13 So we say that, you know, we think that our
14 indicated range is lower or different.
15 And so then they will have to go back and
16 refile and then that would become effective.
17 SENATOR KAVANAGH: My time is up.
18 I will reserve that that's an unusually
19 aggressive alarm. I like that.
20 I may want to come back for another round,
21 but thank you.
22 Do we have other senators?
23 SENATOR SKOUFIS: I have a few questions.
24 Thank you, Acting Superintendent. Thank you
25 for being here.
45
1 Thanks for your early and very responsive
2 work and it has been great working with your
3 predecessor. It was great working with your
4 predecessor as well.
5 I'm going to jump around a little bit here.
6 I want to start with does DFS track the number and
7 types of claims that occur in this space?
8 SUPERINTENDENT ASROW: We do not get -- thank
9 you for the question. We do not get claims level
10 data.
11 SENATOR SKOUFIS: Is that something you think
12 you should start tracking?
13 SUPERINTENDENT ASROW: I am happy to work all
14 of you on how we would use such data.
15 I will say from kind of a consumer advocacy
16 and privacy background and just kind of resources,
17 right, that is very sensitive data that is very
18 voluminous data so I would want to think carefully
19 about the purpose for its use and how we could work
20 together to make sure it is impactful for consumers.
21 SENATOR SKOUFIS: Do you, when you are
22 reviewing rate applications, do you get that
23 information as part of the application process?
24 SUPERINTENDENT ASROW: We do not review
25 claims level data in the rate filing process.
46
1 Again, we are looking at overall expenses.
2 We are looking at overall projected losses
3 based on historic losses.
4 We are looking at then the relevant income
5 that would offset to ensure, again, an adequate
6 rate.
7 And then other factors that are coming into
8 the filing, again, making sure there is not unfairly
9 discriminatory practices.
10 SENATOR SKOUFIS: My understanding is that
11 there is somewhere in the vicinity of 1100, 1200
12 property insurance carriers that do business in
13 New York.
14 Is that accurate?
15 SUPERINTENDENT ASROW: So I will -- I
16 appreciate the question. I will have to get back to
17 you on the exact number.
18 But one thing I will say about the overall
19 carriers, so distinguishing the kind of the number
20 of carriers against policies written.
21 I will say there's about -- the last count in
22 2024, 3.4 million policies written on the homeowners
23 side and 1.1 million in 2022 on the co-op and condo
24 side.
25 On the overall number of carriers, what I
47
1 will say is it has stayed consistent.
2 So again, that's a positive metric for us.
3 And then I also ask the team to review turnover.
4 Even if we have the same overall number, are
5 we seeing different carriers and the number stays
6 the same.
7 So we see low turnover, which, again,
8 mitigates kind of disruption for consumers who have
9 policies non-renewed.
10 So low turnover and consistent carriers right
11 now.
12 SENATOR SKOUFIS: It has been reported that
13 that is roughly the number but if could you come
14 back and confirm one way or the other.
15 Assuming that that number, that ballpark is
16 accurate, seems like a lot of carriers.
17 It seems as though a lot of folks want to do
18 business in New York, and at least from a
19 profitability standpoint, if that business
20 opportunity did not exist, you would not see over
21 1,000 carriers doing work here.
22 Do you have any sense of how -- again,
23 assuming that number is correct -- how that number
24 compares with other states?
25 I've heard Florida, for example, has below
48
1 50, below even 30 or 40 carriers doing business in
2 the state.
3 Any sense of how the 1100 roughly number
4 compares?
5 SUPERINTENDENT ASROW: I, again, I apologize.
6 I don't have that data but will come back to
7 you on kind of our total number of carriers and then
8 how it compares to other states.
9 What I will say is, again, from kind of my
10 early days in early review of this, it's very
11 specific kind of the insurers that are domiciled
12 here in New York versus kind of the overarching
13 parent company, which might have many carriers under
14 its umbrella.
15 And that might include, again, a property and
16 casualty that specialized in auto or in homeowners
17 and so these are each distinct carriers.
18 Someone who will only specialize in
19 homeowners but is under the same umbrella.
20 So we will differentiate that for you.
21 SENATOR SKOUFIS: Understood and thank you.
22 In that same vain and following up on just
23 how profitable this work is for the carriers, you
24 had referenced in your opening testimony, a May 2024
25 "New York Times" article.
49
1 I don't know if it's the same exact article
2 or a similar article around that exact same time but
3 in May of 2024, there was a "Times" story that --
4 and we've discussed this a little bit -- that broke
5 down state by state, how the industry, the
6 homeowners' insurance industry is fairing in each
7 state.
8 They looked at the prior 10 years, and every
9 state had a bar graph and indicated whether the
10 industry was losing or profiting in that state in
11 each of the prior 10 years.
12 And so, you know, a lot of states -- and I'll
13 give you a few examples here -- if you look at this
14 graphic, a lot of states, they were up and down.
15 California, for example, obviously the
16 biggest state in the country, the industry lost
17 money writing insurance for homeowners' policies in
18 six of the prior 10 years, and that was not
19 uncommon.
20 You had a lot of states, especially in the
21 midwest in the middle of the country where they were
22 losing money in 4 or 5, 6, of the prior 10 years.
23 Then you get to New York, and this is the bar
24 graph.
25 Every single year, 10 straight years, very,
50
1 very healthy profits without exception.
2 And so that raises two questions in my mind.
3 And we've talked about at least one of these a
4 little bit, but I want to get into both of them.
5 First, the first question is are rates too
6 high in New York?
7 As DFS is getting applications and approving
8 rates, this tells me that, you know, maybe rates are
9 a little bit too high.
10 Do you think that rates are too high in
11 New York?
12 SUPERINTENDENT ASROW: I appreciate the
13 question and the details.
14 Right now, again, I think it is on a carrier
15 by carrier basis that we have to review.
16 Again, our mandate is to look at that carrier
17 and balance their specific solvency and in addition
18 to that, right, the affordability for consumers.
19 In our analysis, we find New York
20 profitability or kind of net return on the income
21 that they're generating to be about average against
22 other eastern seaboard states and about average,
23 again, with our other high population states.
24 So we do monitor this for, again, ensuring
25 that carriers remain in the market.
51
1 So happy to continue to work with you on how
2 we see and kind of how we view profitability and
3 what more we could do there.
4 That being said, I'm concerned, again, for my
5 own personal background on carriers leaving the
6 market as we have seen in California and the strain
7 on our New Yorkers if they can't access policies.
8 And again, the less carriers here, then it is
9 going to be detrimental to overall competition,
10 again, another prong of my mandate. Meaning that
11 that then will drive prices higher for a different
12 reason, right?
13 We don't have sufficient competition.
14 So we do look at profitability. We are very
15 conscious of it given the affordability crisis
16 overall, given how consumers are feeling and we are
17 trying to strike that balance.
18 I will say, knock on wood, luckily, the kind
19 of rate of catastrophic losses, which, again, can be
20 a crater, what you see in California on
21 profitability, have not happened really to the same
22 extent since "Sandy" in 2012.
23 So while like overall climate events are
24 increasing, overall losses are increasing, that big
25 one is what will wipe out profitability year over
52
1 year.
2 So, again, I think our job is to keep the
3 market stable and hope that that big one doesn't
4 come.
5 SENATOR SKOUFIS: Certainly I think we would
6 all agree that we don't want to see what has
7 happened in California happen here with carriers
8 fleeing the state.
9 And look, it stands to reason based on just
10 this snippet of data when you are losing money in
11 six of the prior 10 years, and a couple of those
12 years are massive, massive losses for the industry,
13 that stands to reason why, you know, they would pick
14 up and leave.
15 But when looking at New York's information
16 here, there is nothing that suggests it's anything
17 but very profitable for the industry and that's why
18 I think, again, assuming that number is correct, you
19 see 1100 or 1200 carriers doing business here.
20 The other question that this raises for me
21 that we've talked a little bit about in the past, is
22 are we in New York subsidizing the losses that are
23 occurring in other states?
24 And by we, I mean policyholders.
25 I know that there is statute that is supposed
53
1 to protect against that, but no doubt if a carrier
2 was interested in trying to cross subsidize, they
3 wouldn't put that explicitly in their rate
4 application.
5 They would embed it in their rate
6 application.
7 And so can you give, with 2 minutes left
8 here, can you give us a sense of how DFS is able to
9 parse out?
10 Is there something funny happening in this
11 rate application whereby New Yorkers are expected,
12 from the applicant's point of view, expected to
13 cross subsidize wildfire losses in California, flood
14 losses in Florida and these other catastrophic
15 events that are happening in other states?
16 SUPERINTENDENT ASROW: Absolutely.
17 I appreciate the question.
18 So, in the rate filing, I will say the
19 documents we receive are voluminous and our
20 actuaries go through them in detail.
21 For example, the checklist of documents that
22 we receive is publicly available and goes into quite
23 a lot of detail.
24 So as you noted, New York carriers cannot
25 bring in cost from -- direct costs from other
54
1 states.
2 So, they present to us and we confirm that
3 the expenses that they are projecting are only
4 New York-based expenses from that carrier, again,
5 domiciled here or active here.
6 We make sure that the projected losses are
7 only based on New York losses.
8 Even reinsurance, which is a key expense, it
9 has to be proportioned out for the specific risk to
10 New York.
11 So we do look at that, and it's a very
12 important part of our rate review process.
13 That being said, you know, the overall --
14 SENATOR SKOUFIS: Can I interject because
15 I only have 30 seconds.
16 I appreciate you're trying to parse out
17 exactly the New York losses, these are the New York
18 expenditures.
19 If you don't have claims level data, how are
20 you able to verify that that information is New York
21 exclusive?
22 SUPERINTENDENT ASROW: So, you know, the
23 actual expenses for the New York carrier, for
24 example, their reinsurance costs, their cost of
25 staff, those are specific, right?
55
1 We get that data and so we are able to look
2 at that.
3 And again, the projected losses and how
4 they're considering that at a macro level, we are
5 able to look at that.
6 Again, happy to work with you on kind of
7 overall how we can use claims level data.
8 SENATOR SKOUFIS: Thank you.
9 SENATOR GOUNARDES: Thank you very much,
10 Senator Mayer, for letting me cut ahead quickly. I
11 have to take my little one to a doctor appointment
12 soon.
13 I have a couple of very quick questions,
14 Commissioner.
15 First, you mentioned in response, I think, to
16 Senator Bailey's question or Senator Kavanagh's
17 question that sometimes the insurance carrier will
18 come and ask for a decrease.
19 When was the last time a carrier came and
20 asked for a rate decrease?
21 SUPERINTENDENT ASROW: I will have to get
22 back to you -- I appreciate the question -- on the
23 specifics of the last time a carrier in the
24 homeowner space came back for a decrease.
25 SENATOR GOUNARDES: Ballpark, last 10 years,
56
1 last 15 years?
2 SUPERINTENDENT ASROW: I apologize.
3 SENATOR GOUNARDES: Has it ever happened?
4 SUPERINTENDENT ASROW: I'm six weeks in, so I
5 will have to come back on the data on that.
6 SENATOR GOUNARDES: Okay.
7 Well, I think based on Senator Skoufis'
8 chart, I think it would be hard to believe if it's
9 happened any time in the last 10 years.
10 I just find it hard to believe that carriers
11 would willingly come to us and say we want to make
12 less money.
13 My second question is, going back to some of
14 your discussion with Senator Kavanagh around the
15 data sharing, and the formulas and the modeling and
16 whatever.
17 It feels to me like the frustration that many
18 of us are reflecting from our constituents is that
19 they don't understand why their insurance is going
20 up.
21 It seems like a black box.
22 And when you have proprietary modeling that's
23 based on data that no one else can see, not even the
24 regulator who is going to look under the hood and
25 make sure everything makes sense, it's actually an
57
1 invitation for uncertainty and it's an invitation to
2 make things up.
3 So why should we allow, if we are trying to
4 promote a healthy and competitive insurance market,
5 why shouldn't we allow, you, as the regulator, to
6 have access to that proprietary data so that you can
7 look under the hood and provide an independent
8 analysis as to whether or not this formula actually
9 makes sense and is not designed to gouge consumers?
10 We do that at the federal level. Companies
11 have to disclose confidential data to federal
12 regulators for different industries.
13 How can we trust that -- or how can you trust
14 that what you are being asked to evaluate is
15 actually legit if it is a black box?
16 SUPERINTENDENT ASROW: I appreciate the
17 question.
18 I'll differentiate kind of climate modeling,
19 which again, is --
20 SENATOR GOUNARDES: The actuarial model, not
21 just climate, everything.
22 SUPERINTENDENT ASROW: So that's where I was
23 going.
24 So actuarial modeling, you know, as a science
25 has a long history and we do work closely with the
58
1 standard setting body, that is kind of, you know,
2 where actuaries go and get trained.
3 We are very familiar with kind of new
4 actuarial standards as they come out, right? There
5 are rate setting organizations. There's a lot of
6 strong kind of work and academics beyond actuarial
7 sciences, which, again, we have our own actuaries
8 who do that and test it.
9 In terms of overall consumer awareness about
10 actuarial science and what goes into that, again, my
11 focus is on consumer transparency and how can we
12 communicate that.
13 SENATOR GOUNARDES: But if the model is
14 proprietary and we are going to trust industry's
15 word that we can't look under the hood, how are we
16 providing transparency?
17 I don't think we actually are getting to the
18 root of the problem here, which is people don't
19 understand why their rates are going up. We have a
20 list of factors. Numbers are going into a formula
21 but no one sees what the formula is.
22 And you said in response to Senator Kavanagh
23 that the regulator doesn't get to see what the
24 formula is.
25 So how do we know that the formula is a
59
1 legitimate formula?
2 SUPERINTENDENT ASROW: To clarify, for rate
3 setting, we do see the formula. For rate setting,
4 we do have, again, the factors.
5 How much expenses are they putting in?
6 What is their projected loss?
7 What is their projected kind of income that
8 they need to maintain a surplus for a large loss
9 event?
10 So we get all of that data on the rate
11 setting which is required by statute. So we do have
12 that data. We look at it.
13 The specific pieces on the modeling, you
14 know, climate risk models are new proprietary
15 methods that we are exploring but again, to this
16 point we are not comfortable yet and we are still
17 exploring it because again, we don't understand how
18 the data is being used, what is going into it.
19 So again, that's our -- we echo your concerns
20 in terms of caution on black box models.
21 The rate setting models, we do use on the
22 actuarial side.
23 And then as I mentioned, statute does not
24 have us go in on the underwriting side, which is
25 distinct on whether a consumer will get a policy,
60
1 distinct from premiums and natural cost of the
2 policy.
3 SENATOR GOUNARDES: Got you.
4 Thank you.
5 In response to Senator Skoufis' question when
6 you were looking at the New York data and claims
7 data and historical data on all these rate settings,
8 are you evaluating just the home and property data?
9 Many carriers have multiple lines of
10 business. They operate in New York. They might
11 provide auto. They might provide life. They might
12 provide residential.
13 Are you looking at specifically that line of
14 business for the homeowners' insurance or are you
15 looking at the totality of the company's portfolio
16 here in New York when you are evaluating that data?
17 SUPERINTENDENT ASROW: So we look -- I
18 appreciate the question.
19 We look on a carrier by carrier basis which
20 typically these entities split out. So they will
21 have an auto carrier, they will have a homeowners
22 carrier.
23 Typically it's multi-peril in terms of what
24 they're insuring, so that will include kind of fire
25 as well as liability, so we don't differentiate
61
1 that. But it's on a carrier by carrier basis, if
2 that answers your question on the rates that we look
3 at.
4 SENATOR GOUNARDES: A little bit.
5 And then my last question is, it's my sense,
6 and I would love to be proven wrong, that many of
7 these insurance companies collect all these premiums
8 and then they go and they have investment vehicles
9 for private equity, venture, real estate, et cetera.
10 And that insurance is actually not their primary
11 line of business.
12 Do you agree with that assessment, and are
13 there things we can do to not allow our
14 constituents' premiums to be fuel for private equity
15 investments?
16 SUPERINTENDENT ASROW: Yeah, should I -- is
17 it okay?
18 SENATOR GOUNARDES: Yes or no.
19 Just say yes.
20 SUPERINTENDENT ASROW: As a regulator, there
21 always is, you know, an explanation, so I appreciate
22 the question.
23 So I will say we do expect income from our
24 insurance to come from the underwriting business
25 itself.
62
1 Sometimes it's not profitable on the
2 underwriting side, but that is, again, kind of
3 premiums and against losses out and the differential
4 there.
5 And then again, you know, that premium that
6 is initially collected is used to invest.
7 And then the income there is, again, we are
8 also incorporating that to measure the profit.
9 So that investment income also comes into our
10 calculation in terms of maintaining adequate rates
11 and not excessive.
12 SENATOR GOUNARDES: Thank you.
13 SENATOR KAVANAGH: Senator O'Mara.
14 SENATOR O'MARA: Thank you, Chairman.
15 Thank you superintendent for being with us
16 today and your short time in your tenure as
17 superintendent. Congratulations on that. I look
18 forward to working with you going forward with that.
19 I certainly appreciate your sharing where you
20 grew up in Cedarville, California as I represent the
21 district of seven counties largely rural,
22 agricultural in the Finger Lakes Southern Tier
23 region of the state.
24 And while our home prices, most would
25 consider very reasonable for the State of New York.
63
1 As you mentioned in your testimony, our
2 median household incomes are much lower as well. So
3 the cost of these insurance increases may have even
4 a greater impact on these lower income households
5 that we have in rural New York State. And while,
6 you know, my district, unfortunately doesn't have
7 any coastal territory, we do have a lot of hills and
8 steep hills; steep slopes.
9 And with the increase in microburst storms
10 that we've seen, with heavy downpours producing
11 large amounts of rain in short periods of time and
12 just inundating the creeks and the rivers that flow
13 through the communities, we have seen certainly
14 repetitive incidents in communities in just a few
15 years with devastation. So that has an impact
16 there.
17 So I appreciate your having that background
18 and that understanding there.
19 We have talked a little bit about it but
20 maybe you can expand a little more on it.
21 We have certainly seen in other states, that
22 more coastal states -- Florida, California -- that
23 have had I guess what we would call the larger
24 widespread disasters, as opposed to more acute
25 microburst things or straight line wind storms that
64
1 we've seen in my area.
2 What are we learning from these other states
3 that now have a shortage of carriers providing this
4 insurance, which is really driving up the rates and
5 certainly anecdotally hear a lot of stories of
6 people just foregoing insurance on their properties
7 and taking that risk on themselves.
8 What are we learning from states like Florida
9 and California and the loss of these carriers?
10 SUPERINTENDENT ASROW: I appreciate the
11 question and your background as well, Senator.
12 So, you know, we coordinate very closely with
13 the NAIC who I believe will join you today and as
14 well and to learn from their experiences and
15 understand kind of the pressures that those carriers
16 faces, what regulators there did.
17 So I will say kind of, again, we are going
18 back to that balancing act that we have to do in
19 terms of affordability and access.
20 And, you know, just given what you indicated
21 in terms of your region, I will note, as I said,
22 overall, you know, New York's premiums continue to
23 be below the national average. That being said, we
24 know consumers are feeling it. But I ask the team
25 to disaggregate the data a little bit more.
65
1 And I will say for homes that have a
2 replacement cost or a coverage amount under
3 $400,000, we are 23 percent below the national
4 average.
5 So in particular for these homes with lower
6 premium coverage, we -- or overall coverage, we are
7 doing a good job again in keeping it affordable for
8 consumers and we will continue to coordinate with
9 other states.
10 SENATOR O'MARA: Thank you for that.
11 Talked a little bit about discounts, some
12 being mandated, some being optional. What seems to
13 work and doesn't work in that area?
14 I mean, are the carriers allowed to come up
15 with -- you say there is option 1. So they're
16 allowed to come up their own -- on their own without
17 needing permission from the state?
18 SUPERINTENDENT ASROW: I appreciate the
19 question.
20 So, yes. A carrier can come to us. It has
21 to be actuarially sound, it cannot be unfairly
22 discriminatory but they can present a new discount
23 to us that does have to come to us as another rate
24 filing.
25 So if they want to put in a discount for
66
1 smoke detectors or burglary alarms, or whatever it
2 might be, they come to us and we review that.
3 I have asked the team in particular to
4 prioritize filings for consumer discounts in our
5 overall list of filings to make sure consumers see
6 those right away and then I hope to combine that
7 with an overall transparency push for consumers to
8 understand what those discounts are.
9 SENATOR O'MARA: Again, with your background
10 coming from a rural farming community, as I
11 represent a lot of, there seems to be inadequate
12 options for farmers for incidents of crop loss due
13 to these weather conditions.
14 What insight do you have on that, and what
15 maybe are you able to look at in New York to provide
16 some better options for the agricultural community
17 to protect against crop loss?
18 SUPERINTENDENT ASROW: I appreciate that
19 question.
20 So, you know, at this point in my tenure, I
21 haven't dug into that specific issue but I would
22 love to work with you more on it and we can circle
23 back and understand what we can do together.
24 SENATOR O'MARA: Okay. Great.
25 Thank you and while I also appreciate your
67
1 willingness to defer to the wisdom of the
2 legislature, that, in my experience, oftentimes ends
3 up in a veto.
4 So, you know, I would encourage a strong
5 working relationship with the legislature, certainly
6 your department comes up with program bills that go
7 through, usually the chairs of the committees for
8 those. But a give and take and just saying, as we
9 see from so many departments, sorry we don't comment
10 on pending legislation. That's the executive. So
11 we don't often get direction and answers on that and
12 would rather have a working relationship to come up
13 with a product and legislation that is acceptable
14 and works rather than just having to get a veto at
15 the end of the session and having to start all over
16 again working it up the next year.
17 So I would encourage that type of a working
18 relationship going forward.
19 SUPERINTENDENT ASROW: I appreciate that and
20 absolutely, we will coordinate.
21 SENATOR BAILEY: Senator Fernandez.
22 SENATOR FERNANDEZ: Thank you so much. You
23 mentioned in your testimony about the climate
24 change, and I don't want to talk about climate
25 change. I come from a coastal community. So every
68
1 rain storm does have a dramatic effect on my
2 neighborhoods here.
3 In 2013, we launched the New York City
4 Community Insurance Pilot Program. Could you speak
5 on that at all? It is a New York City initiative.
6 But any information on it?
7 SUPERINTENDENT ASROW: I appreciate that.
8 I'm not familiar with that, which I
9 apologize. Again, I'll make sure to understand more
10 and we can get back to you.
11 SENATOR FERNANDEZ: Okay.
12 Touching on insurance premiums on residential
13 buildings, we all know they're going up, and it was
14 identified and Governor Hochul announced a new
15 guidance, I believe in -- or last year, prohibiting
16 insurers from asking about or making coverage
17 decisions based on Section 8 status.
18 Have we seen changes since she implemented
19 this new guidance? Is there any data to show how
20 much they were raising insurance premiums based on
21 the number of Section 8 tenants? And why is that
22 even a factor in consideration?
23 SUPERINTENDENT ASROW: I appreciate the
24 question.
25 I know that DFS, before my tenure here as
69
1 Acting, worked very hard and appreciate the
2 partnership on that legislation.
3 So, you know, we are monitoring for the use
4 of that factor in rate setting, and again, that is
5 now prohibited. So we are ensuring that it is not a
6 factor moving forward.
7 In terms of kind of, you know -- because,
8 again, it was potentially permissible before, we
9 don't have the kind of before and after comparison
10 but we are happy to kind of coordinate and
11 understand that a little more.
12 We are aware and conscious of the reports of
13 affordable housing continuing to have premiums
14 increase.
15 We haven't gotten direct complaints about
16 that but we are available and to work with the
17 housing authorities to understand what they're
18 requiring and how to handle this.
19 SENATOR FERNANDEZ: Okay. Well, that seems
20 just -- I mean, obviously we know the governor put
21 this new guidance and it is direct discrimination
22 but are there any ways for residents to report
23 discrimination based on their Section 8 status right
24 now?
25 SUPERINTENDENT ASROW: Absolutely.
70
1 So we have a consumer assistance unit, and I
2 would strongly encourage all of your constituents to
3 use that.
4 That's a direct way for consumers,
5 policyholders to communicate with DFS and then we
6 make sure that insurers are following up.
7 And then it gives us an opportunity, again,
8 to flag that for an examination to go in and
9 understand more deeply what's going on beyond our
10 rate setting authority.
11 SENATOR FERNANDEZ: So since it's guidance,
12 do we know if they're asking the Section 8 tenants?
13 SUPERINTENDENT ASROW: My understanding is
14 that it is law. So it's in statute that Section 8
15 status is a prohibited factor so it cannot be used.
16 SENATOR FERNANDEZ: What is the penalty
17 enforcement if they do?
18 SUPERINTENDENT ASROW: So we would not
19 approve their rate. So they would not be able to
20 charge that premium and we would then, yes, we have
21 enforcement authorities.
22 We can go in and do an investigation if we
23 found that they violated that and they would have
24 penalties associated with it.
25 SENATOR FERNANDEZ: Thank you.
71
1 I yield my time.
2 SENATOR BAILEY: I think each of us are going
3 to take a brief second round, and Acting
4 Superintendent, we thank you for your time.
5 I just want to dovetail off something that
6 Senator Fernandez just talked about, about
7 discrimination and we know insurance is the only
8 inherently discriminatory thing, you know, that we
9 have there, but certain discriminatory things are
10 beyond the pale.
11 Have you seen even -- there was legislation
12 that myself and Senator Kavanagh, also Senator
13 Skoufis did about discrimination in insurance and
14 property holders.
15 Have you noticed in the last 2 years since it
16 has been enacted, if there is a difference in
17 coverage of subsidized housing or different types of
18 housing in addition to, you know, regular
19 residential?
20 Have more companies failed to tender policies
21 to those types -- to that type of housing? Have you
22 noticed that?
23 SUPERINTENDENT ASROW: So we are aware and
24 happy to work with you -- I appreciate the
25 question -- in more detail on this data.
72
1 The one thing I will flag is this comes under
2 commercial property insurance, given that it is more
3 than four units typically. So we have noticed a
4 slight decrease that we are monitoring for that.
5 And then, you know, in terms of the increase
6 in what is going on, again, we are available to work
7 with the housing authorities and all of you to dig
8 into this more.
9 SENATOR BAILEY: Excellent. I know we are
10 getting back to the discounts again, and I know it
11 seems like rather perfunctory but I think it really
12 is important.
13 In your practice, in the DFS' practice, do
14 discounts have to be offered uniformly through a
15 carrier?
16 For example, in Senator O'Mara's district and
17 my district, if Allstate is tendering -- just to use
18 one company, top of the alphabet, just for the
19 record, that came to my mind -- not attacking any
20 carriers, you know, we get in trouble when we name
21 names here. But if somebody that has that company,
22 in my district and Senator O'Mara's district, would
23 that policyholder be offered the same discounts,
24 provided that it's the same single-family home for
25 owner-occupied use? Is that -- would that be
73
1 accurate?
2 SUPERINTENDENT ASROW: So, I appreciate the
3 question.
4 So I think of this as kind of a series of
5 layers, the approvals that we make in terms of
6 classification.
7 So, there might be a classification on a type
8 of property, you know, whether it's side boarding or
9 whatever it may be, and then if further
10 classification indicates a discount for a smoke
11 detector.
12 So, yes, when we are approving a premium or a
13 rate that is including a discount, it's specific.
14 So it's 3 percent for having a smoke detector, but
15 an individual policyholder might feel that
16 differently because their home has a side board
17 versus wood or whatever it might be, and that
18 indicates a different kind of classification and
19 change in their rate.
20 So, again, a policyholder will not have one
21 to one of 3 percent and see that -- so 3 percent
22 will stay constant -- I apologize.
23 But, you know, how the policyholder feels it
24 in their premium will vary because of all those
25 other factors on their property.
74
1 SENATOR BAILEY: I just want to make sure
2 because I come from the Bronx, New York. And a lot
3 of the times, areas like the Bronx -- and
4 specifically the Bronx -- had been, in the past, red
5 lined and have experienced unfair discrimination.
6 And I'm not saying it is happening in the
7 form of the discounts but, I just want Bronxites and
8 Mount Vernonites -- I represent both areas -- to be
9 able to have the same discounts in any of my
10 colleagues' areas, and I understand that it may be
11 based upon how the housing stock is built.
12 But if housing stock is built differently by
13 area, these row houses that happen on East Chester
14 Road in the Bronx may be different than East Chester
15 Road in East Chester, New York, right? So I just
16 want to make sure that we are figuring out a way to
17 make sure everybody is able to get as close to the
18 same type of discount.
19 I guess a good question for you -- and this
20 is more of a consumer friendly question -- is a lot
21 of people may not have adequate coverage on their
22 home.
23 How does a New Yorker, a homeowner, property
24 owner, how can they ensure it?
25 Can DFS aid homeowners in determining whether
75
1 they have adequate coverage?
2 SUPERINTENDENT ASROW: I appreciate the
3 question.
4 One thing I will just flag from the prior
5 conversation is red lining is prohibited.
6 So, you know, we do look at that in rate
7 setting and ensure, you know, geographies that are
8 based on kind of race and ethnic background are not
9 used in rate setting.
10 And then, again, those discounts should be
11 applied overall with taking the policyholder's other
12 factors into consideration.
13 In terms of, you know, how an individual
14 would have adequate kind of coverage on their home,
15 I will say, you know, DFS, again, doesn't look at
16 that kind of policyholder data, that level of data.
17 And it would be quite challenging for us to
18 kind of go in and make independent determinations
19 given, again, the specialty of the insurance market
20 to do that work on a policyholder by policyholder
21 basis.
22 That being said, I am committed to
23 transparency for consumers.
24 And something, as I said, I'm interested in
25 is enumerating discounts, enumerating opportunities.
76
1 So I would love to partner and understand how
2 do we communicate to consumers what is adequate
3 coverage for them in a way that they can then go and
4 work with their insurers on what that is.
5 But again, you know, I don't think it's DFS'
6 place to go and do the work of the insurer.
7 SENATOR BAILEY: Certainly. I'm not saying
8 it is. I just want to make sure that because
9 constituents routinely come to us, and they have a
10 covered loss. And they come to us and they say
11 well, my policy limits were x, y and x. I didn't
12 know. And they're short $50,000 and that they have
13 to rob Peter to pay Paul because they didn't know,
14 and nobody made them aware.
15 So I'm wondering, as you said, I think we can
16 look into that, but I just want to put a fine point
17 on that as a consumer thing.
18 Last question related to the data and the
19 proprietary information conversation. And I know
20 that there is a black box on certain things and that
21 DFS has access to certain proprietary information.
22 When it comes to, by geography, by area, by
23 rate setting, by zip code, is there a way for us to
24 have a conversation about something that is commonly
25 known as geo-fencing?
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1 Does DFS have a way or an opinion on
2 geo-fencing certain areas, specifically to the
3 amount of risk that may be in a certain area as
4 opposed to the whole zip code?
5 10466 where I live, down the block may be a
6 different risk and up the block may be a different
7 risk.
8 Is there an opinion on the idea and practice
9 of geo-fencing?
10 SUPERINTENDENT ASROW: I appreciate the
11 question and happy to work with you on this.
12 As I said, the geography that we are thinking
13 about is first, again, prohibition to red lining.
14 So, making sure that is not coming into the rate
15 setting process.
16 In addition to that, they do have kind of
17 territory geography classifications. I will say
18 those tend to be at a broader kind of borough level.
19 Not even as specific as zip codes sometimes. And I
20 think what we have seen is that is kind of an
21 operational necessity, again, to kind of have their
22 portfolio be a little bit more kind of granular.
23 But, you know, opportunities to work with
24 carriers and have that be narrower or more specific,
25 again, not coming into conflict with red lining is
78
1 something I'm happy to explore.
2 SENATOR BAILEY: Certainly. I appreciate
3 your time. Thank you.
4 SENATOR GOUNARDES: A couple of quick
5 additional questions, Superintendent.
6 First, to drill down on another piece of this
7 discount conversation.
8 One of the concerns I have is it's all great
9 if these discounts exist, but they only are really
10 consequential if policyholders know they exist.
11 And so I'm curious, you know, for the
12 policyholder who changes out their roof to a more
13 resilient roof or installs the carbon monoxide
14 detectors and there are discounts available with
15 their carrier. Maybe they don't know about them.
16 Is there anything that DFS does to ensure
17 that carriers are properly, in a very forward facing
18 manner, communicating these discounts to their
19 policyholders?
20 SUPERINTENDENT ASROW: I appreciate that
21 question and I think I'm very much aligned on asking
22 the same thing when I came into this seat.
23 So I think my first step is just making sure
24 that we have an adequate count of all of those
25 discounts for all of you and for ourselves.
79
1 And then, you know, I will say there are a
2 number of vehicles that we do have at DFS, right, we
3 ensure that the files, the forms, the process when a
4 consumer comes in in terms of appropriate
5 communication.
6 So we review all of those forms and we have
7 avenues where we could request other forms, have a
8 conversation with carriers on how they're
9 communicating the discounts to consumers.
10 SENATOR GOUNARDES: I guess my question is,
11 if you are working with a broker, no doubt when you
12 are having that conversation with the broker, the
13 broker is very well versed, is -- I would like to
14 think, knowledgeable vis-a-vis the discounts
15 available and can directly communicate those
16 discounts with their client. But especially if you
17 are not going through a broker, how do you know?
18 Short of actually picking up the phone or
19 maybe digging through, you know, 17 different links
20 on the carrier's website, that maybe there is some
21 list somewhere embedded; how is one supposed to know
22 what discounts are available?
23 SUPERINTENDENT ASROW: I appreciate that, and
24 that's a question that I'm working on answering.
25 So what I want to do is understand -- and
80
1 again, I know that the majority of the carriers are
2 offering the optional discount so I think that's the
3 next step and I'm happy to partner with you.
4 DFS is happy to partner on really
5 understanding how that is being communicated to
6 consumers, both from the DFS side and from the
7 carrier side.
8 SENATOR GOUNARDES: Are there any regs or
9 statute that speaks to how these discounts are
10 supposed to be communicated? Or is it completely
11 left up to the carrier?
12 SUPERINTENDENT ASROW: I will defer. I'm not
13 sure about the discounts specifically but I know
14 there is much in statute about kind of how, again,
15 we are communicating with the policyholders in terms
16 of the filings, the disclosures that have to be made
17 to them.
18 So I will have my team go into the law and
19 understand kind of within those disclosure
20 requirements and in the form requirements that
21 policyholders have to receive, is there anything
22 specific on discounts.
23 SENATOR GOUNARDES: Great. Thank you.
24 The only other question I have, you touched
25 very briefly on file and use in your opening
81
1 remarks. This is a conversation -- or this is a
2 topic we have discussed a little bit about.
3 Given how especially uncommon the uptake is
4 for carriers, taking advantage of file and use, do
5 you have an opinion as to whether we should just do
6 away with that option for carriers as they apply for
7 rate increases?
8 SUPERINTENDENT ASROW: I appreciate the
9 question.
10 So we have not seen carriers move without our
11 explicit approval on their rate. So as I said, it
12 is file and use in name only currently.
13 SENATOR GOUNARDES: Okay. Thank you.
14 SENATOR KAVANAGH: Thank you. A couple
15 questions.
16 First I just want to note we have been joined
17 by former Senator Diane Savino is in the room and
18 also Tom O'Mara was mentioning about working with
19 the governor's office.
20 We are also ably but quietly -- the governor
21 is ably but quietly represented here in the room as
22 well, so we appreciate the partnership with the
23 executive.
24 A couple of questions. First, maybe just a
25 bit of a speed round on potential policy changes we
82
1 might make.
2 First, CRA, as we know, applies affirmative
3 obligations to various financial institutions to
4 redress -- to provide redress for the fact that we
5 had many years of red lining and other bad behavior
6 including in some neighborhoods I represent on the
7 lower east side.
8 Is CRA a potential model for increasing the
9 kind of affirmative obligations of insurers who want
10 to do business here to ensure that they are, you
11 know, meeting the needs of communities that might
12 otherwise struggle to get insurance?
13 SUPERINTENDENT ASROW: I appreciate the
14 question, and happy to, I think, work with you on
15 exploring that issue.
16 I will say because DFS is the joint kind of
17 banking and insurance side, we have a lot of
18 experience and I think technical understanding of
19 CRA on the banking side.
20 So happy to work with you on thinking through
21 that.
22 SENATOR KAVANAGH: So at least there is a
23 potentially promising idea there. Is that...
24 SUPERINTENDENT ASROW: I defer.
25 SENATOR KAVANAGH: You'll defer to the
83
1 legislature on that. We appreciate that.
2 There's other ideas. There has been talk
3 about, you know, we have had a lot of conversation
4 about reinsurance, which is less directly regulated
5 by you, but it's a tool that insurers are using to
6 spread their risk.
7 I have wondered whether that may be a
8 mechanism by which New Yorkers are paying for the
9 cost of damage in other places because reinsurers
10 are setting rates across many jurisdictions I
11 gather, and without as much regulation.
12 Is that a fair statement?
13 SUPERINTENDENT ASROW: Yeah, so appreciate
14 the kind of highlight on reinsurance. As you said,
15 it does cover national kind of carriers, and it is a
16 way to spread that risk in the insurance market.
17 As I said, previously, I believe in the
18 expense kind of category that we look at, a
19 reassurance line item has to be broken out.
20 So again, only the reassurance cost that are
21 being used to cover New York risk are included in
22 that rate filing. That being said, I think I
23 mentioned the cost of reinsurance overall has
24 doubled.
25 So that base cost, I agree, on an indirect
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1 way has to incorporate kind of the national
2 footprint.
3 SENATOR KAVANAGH: They're pricing in damage
4 that is occurring in other markets. Okay.
5 SUPERINTENDENT ASROW: Yes.
6 SENATOR KAVANAGH: Okay. There has been
7 talk -- and I think we might hear some testimony
8 today about the possibility of the state creating
9 some kind of a state-backed, sort of reinsurance
10 facility. Is that something that you've explored,
11 or is that an idea that might be worth exploring?
12 SUPERINTENDENT ASROW: I will, again, as I
13 said, I appreciate that, you know, these issues
14 require, I think action across our areas of the
15 legislature, the executive chamber and the
16 regulators.
17 I think that's a space where, again, I'll
18 defer to you all as lawmakers and the Governor on
19 how to, whether to create that, but we stand ready
20 to advise and to implement.
21 SENATOR KAVANAGH: Okay. And something less
22 hypothetical, we have, already, some captive
23 insurance entities here in New York. We'll hear
24 from at least one of them today.
25 Can you talk about how that, you know, from
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1 your perspective, how does DFS interact with
2 regulating that and to what extent do you think that
3 might be a promising solution for -- and it has been
4 particularly proposed for affordable multi-family
5 housing and other housing that the government is
6 playing a substantial role already in subsidizing.
7 SUPERINTENDENT ASROW: Thank you for that
8 question.
9 We are very aware of captive. It's a form of
10 self-insurance, and there are a number of models out
11 there. And, you know, DFS does register a number of
12 captives in this state.
13 You know, we have a different kind of
14 regulatory approach because, again, it's
15 self-insurance.
16 So what we have found, a few things to
17 highlight from our experience with captives.
18 One, of course, they can bring down costs.
19 The profit that is coming from the insurance entity
20 can be put back into reduced premiums.
21 I will say for New York, the requirement to
22 form a captive has a pretty high net worth so over
23 100 million, I believe.
24 So we do see captives more frequently kind of
25 domiciled in Vermont, for example, where there is a
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1 lower net worth requirement.
2 We do feel in New York that self-insurance,
3 it is essential to have the consumer protection of a
4 high net worth to incorporate kind of the potential
5 for losses. Because I will say, with
6 self-insurance, with captives, we don't have the
7 guarantee fund, which, again, is backstopping
8 insurers here in New York.
9 So if an insurer becomes insolvent, we do
10 have those funds as a last resort to make sure
11 claims are paid, so a captive would not have that
12 opportunity.
13 That being said, we are looking and having
14 conversations with other states on these models and
15 happy to continue to speak on it.
16 SENATOR KAVANAGH: I would just note that
17 HCR, there are housing agencies in here. But there
18 is a Notice of Funding availability right now for
19 $5 million to facilitate affordable housing
20 providers buying into existing captives. So that is
21 a topic percent think we will be discussing on an
22 ongoing basis.
23 Just briefly with 2 minutes, back to the
24 question of liability.
25 I just observed that one person's nuclear
87
1 verdict is another person's justice served. But can
2 you just talk a little bit about -- does DFS have
3 the data to certify or, you know, approve rates
4 based on a conclusion that they are actuarially
5 justified based on changes in the landscape, what
6 you are calling social inflation, including
7 litigation results?
8 SUPERINTENDENT ASROW: Yeah, so I think from
9 the aspect of social inflation, you know, we do see
10 that incorporated into the projected expenses and
11 costs of companies. And, you know, again, that --
12 those projections are based on their historic data,
13 so that's something that we can't refute.
14 And again, we go in and make sure that that
15 data is sound. We think about the credibility of
16 that data. So we are not kind of just taking the
17 data on face value. We are digging into kind of the
18 voracity of the data.
19 But again, as I said, kind of the nuclear
20 verdicts, the rising kind of jury awards, those are
21 historic data points now that are incorporated into
22 rates.
23 SENATOR KAVANAGH: And they're based
24 exclusively on New York data?
25 SUPERINTENDENT ASROW: Yes.
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1 SENATOR KAVANAGH: Just again, this is I
2 think going to be an ongoing theme today, but it is
3 perplexing to see liability rates double.
4 I mean, it's just, you know, we have talked
5 about high jury awards in certain places for many
6 years. And you know, for decades.
7 So I think that's something we are going to
8 continue to want to discuss how the data that you
9 have relates to that and how you are approving those
10 rate increases.
11 There is one question -- one more question:
12 Do you have specific -- to the extent they're
13 getting rates on liability policies, obviously some
14 people are buying policies that include their home
15 and also auto and all of that.
16 Do you have the data and do the applications
17 break out the cost of potential liability for home
18 insurance versus auto insurance and other products
19 that might be bundled together?
20 SUPERINTENDENT ASROW: So, typically -- so
21 I'll have to get back to you on kind of bundling
22 auto and home in particular.
23 I would say in homeowners we -- typically the
24 vast majority of policies are multi-peril, so
25 they're including kind of liability and casualty as
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1 well as kind of property damage but then the rates
2 and the discounts we set are for that specific
3 carrier and that line.
4 SENATOR KAVANAGH: So if I'm a homeowner and
5 I don't own a car, I might -- might my rates go up
6 because of an increase in auto in claims against
7 auto insurance?
8 SUPERINTENDENT ASROW: So I will say, you
9 know, happy to kind of dig into this, but no, those
10 again, should be separate rates that aren't coming
11 into play.
12 I will have to get back on kind of the
13 bundling discounts that are available. But, yeah.
14 SENATOR KAVANAGH: My time is up. Thank you
15 very much.
16 SENATOR SKOUFIS: All set? Good?
17 And you are good.
18 SUPERINTENDENT ASROW: Thank you.
19 I appreciate the time.
20 SENATOR KAVANAGH: Next up we have Erin
21 Collins and Robert Gordon and Cassandra Anderson
22 will have introductions as they testify but come on
23 up.
24 SENATOR BAILEY: For those observing, the
25 panel style may be a little different from what
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1 we've observed, just so that for those of you who
2 are watching their first hearing, each individual on
3 the panel will have their requisite time to be able
4 to testify. But the time that we have to ask the
5 questions does not multiply per person, just so that
6 everybody understands. We still have the same
7 amount that we had but they have the time that they
8 can testify.
9 And we are joined by Ms. Collins,
10 Ms. Anderson, and Mr. Gordon.
11 And is there an order that would you like to
12 go in? Senator Skoufis, actually before we --
13 SENATOR SKOUFIS: It is important to note, we
14 are running, at least in terms of our internal sort
15 of template or outline here, we are running a half
16 hour ahead of schedule. And so I'm going to
17 underscore triply Senator Bailey's point that he
18 just made.
19 But in the meantime, if you could all please
20 raise your right hand.
21 Do you solemnly swear that you will tell the
22 truth, the whole truth and nothing but the truth?
23 [Witnesses are sworn.]
24 SENATOR SKOUFIS: Thank you.
25 CASSANDRA ANDERSON: Senator Bailey, Senator
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1 Skoufis, Senator Kavanagh and the other
2 distinguished members of the Senate, I'm Cassandra
3 Anderson, president of the New York Insurance
4 Association.
5 NYIA is the state trade association that has
6 represented the property and casualty industry in
7 New York for more than 140 years.
8 NYIA's membership is broad and diverse,
9 consisting of stock, mutual and cooperative
10 insurance companies writing in every county of
11 New York State.
12 We represent companies from Main Street to
13 Wall Street and work collectively to promote a
14 healthy and sustainable property and casualty
15 insurance market for all of New York.
16 Thank you for the opportunity to address you
17 regarding the cost and availability of residential
18 property insurance in the state.
19 First and foremost, it is important to talk
20 about the relationship between affordability and
21 availability, as affordability cannot be achieved
22 without focusing on availability.
23 Insurance companies exist to serve our
24 policyholders, and NYIA shares the same concerns as
25 the Senate regarding the cost of insurance in
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1 New York.
2 The only way to make insurance more
3 affordable is to make it more available, by
4 concentrating on the real cost drivers that exist.
5 Carriers must be able to adequately not only
6 take on risk, but to soundly continue to write that
7 business in the state.
8 In NYIA's written testimony we have shared a
9 wide range of information about what is driving the
10 cost of insurance and propose solutions to address
11 those rising costs.
12 There are numerous challenges in today's
13 residential property market including the difficult
14 litigation environment, pervasive fraud, the
15 increase in the severity and frequency of extreme
16 weather, aging infrastructure and higher material
17 costs.
18 The challenges are multifaceted and
19 correspondingly require multifaceted legislative and
20 regulatory solutions.
21 Some of these solutions are long-term in
22 nature and others would be strong first steps to a
23 more robust marketplace.
24 On a broad level, these solutions center on
25 building resiliently to create stronger structures
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1 and to improve public infrastructure; supporting
2 loss mitigation efforts and taking advantage of
3 technology to create early detection of risks.
4 Modernizing the regulatory environment and
5 increasing regulatory capacity because it is
6 essential for legislators and regulators to take
7 steps for companies to be more responsive to market
8 conditions and their policyholders.
9 Combating fraud by providing companies and
10 law enforcement with a greater ability to prevent,
11 deter and fight the growing issue, and critically
12 addressing expansive and abusive litigation that has
13 grown exponentially in recent years when New York
14 was already known as one of the most litigious
15 states in the nation.
16 NYIA values the opportunity to share our
17 viewpoint on behalf of our membership and
18 appreciates your consideration of the
19 recommendations we are offering to improve the
20 marketplace.
21 We are seeing the experience in other states
22 and want to avoid an availability crisis, which
23 includes not taking actions that will only hinder
24 the market further.
25 Instead, we urge New York public policymakers
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1 to put measures in place that only improve the
2 health of the market.
3 The focus needs to be on keeping the market
4 stable, encouraging greater availability and in
5 turn, greater affordability.
6 Thank you.
7 ROBERT GORDON: Mr. Chairman, senators,
8 thank you for the opportunity to testify today.
9 I'm Robert Gordon, I'm the Senior Vice
10 President for the American Property Casualty
11 Insurance Association (APCIA), which represents
12 about two-thirds of the home, auto and business
13 insurance industry, including about 581 insurers in
14 New York.
15 We recognize housing affordability is at
16 record lows, and over the last 5 years, New York
17 home prices have increased 58 percent. Utility
18 rates have increased nearly 41 percent. Property
19 taxes are now median of closing in on $6,000 per
20 home and rebuilding costs have increased by
21 41 percent.
22 So all of these costs are going up
23 significantly. We understand that challenge. And
24 housing affordability is also impacted by insurance
25 costs.
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1 Fortunately for New Yorkers, as the
2 Department of Financial Services underscored,
3 homeowners insurance rates are significantly lower
4 in New York than they are nationwide.
5 And the rate increases over the last 5 years
6 in New York have been about half of the rate
7 increases across the nation.
8 But while homeowners rate increases have been
9 significantly lower than average, what we have seen
10 is the catastrophic weather risks have very
11 significantly escalated. So the number of
12 catastrophic weather events in New York in 2024
13 increased tenfold from 5 years ago.
14 In the last 5 years alone, New York
15 experienced $31 billion plus catastrophic events,
16 that compares to an average of .7 events in the
17 1980s annually. Most of those losses were
18 catastrophic wind events, which are generally
19 covered by homeowners' insurance.
20 In fact, the Federal Emergency Management
21 Agency, FEMA, ranked New York among the highest
22 disaster risk states and weather modelers predict
23 the catastrophic hurricane hitting New York would
24 cause over $100 billion in insured losses.
25 We estimate that would wipe out roughly
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1 69 years of return on net worth.
2 If the climate continues to warm two degrees,
3 expected loss in New York would increase by
4 64 percent. That's putting at risk over two million
5 New York homes.
6 "Hurricane Sandy" crashed into New York in
7 2012 causing over $19 billion of losses. That, by
8 the way, was just one year before that "New York
9 Times" graph. So maybe if you go back a year, it
10 looks a little different.
11 When the next "Sandy" hits, it's going to be
12 much, much, much more severe.
13 Also, the unusual regulatory burdens and
14 delays in New York, they add further risk.
15 Most New York businesses can adjust prices
16 daily but changing rates here up or down can require
17 several years because you have to identify and
18 document the loss trends. You have to file them
19 with the DFS. Might take over a year for that
20 review process and then you have to wait for the
21 policies to roll over, so that can take another
22 year.
23 So you are always a couple years behind
24 trying to catch up to the escalation in weather
25 losses and inflation.
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1 And additionally, homeowners insurers are
2 generally prohibited from non-renewing coverage for
3 3 years.
4 So that means not only do you have the
5 significant lag time where you are trying to catch
6 up, you can't reprice your products quickly and you
7 can't pull back from the market quickly, so you are
8 stuck on those risk exposures that can be very
9 dangerous.
10 Also in addition to the catastrophic weather
11 risks, New York now has the costliest legal system
12 in the country. The litigation costs are 67 percent
13 higher than country wide. That significantly
14 increases losses in most of the lines.
15 So in sum, the homeowners' insurance rates in
16 New York, lower than country wide average,
17 increasing less than country wide but the rates do
18 reflect the extreme escalation of costs in New York
19 from inflation, building labor expenses, climate
20 change, legal costs, regulatory costs.
21 And frankly, you know, New York has been
22 lucky. But we are going to get that next
23 "Hurricane Sandy" and that's what insurance
24 companies have to prepare for.
25 I do want to express some initial concerns
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1 about Senate Bill 8583. We just got the bill
2 yesterday. We do hope to work with all of you on
3 that.
4 But New York already has some of the most
5 costly and burdensome insurance regulations in the
6 nation. The current rate review process is among
7 the slowest in the country. And a lot of those
8 mandates are choking off competition and creating
9 some market friction.
10 You are saying well, there are some areas
11 where insurers are pulling out. That shows the
12 markets aren't as profitable as you might think.
13 Again, particularly because those catastrophic risks
14 are so high when that big event is going to hit.
15 We are, though, committed to working with
16 policymakers on solutions.
17 We fund the Institute for Business and Home
18 Safety. IBHS developed safety standards and
19 building codes to mitigate weather risks.
20 The IBHS fortified building codes against
21 wind were found in a recent study after
22 "Hurricane Sally" in Alabama to lower losses by
23 roughly 70 percent.
24 We also support the efforts to fully staff
25 the DFS to reduced review delays and we do support a
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1 number of litigation reforms, including addressing
2 the Scaffold Act and establishing reasonable caps on
3 non-economic damages.
4 And we, again, thank you for your commitment
5 to addressing these issues.
6 ERIN COLLINS: Thank you to the respective
7 chairs and to all the senators here.
8 My name is Erin Collins. I'm from the
9 National Association of Mutual Insurance Companies.
10 Thank you very much for the invitation to be here.
11 NAMIC is made up of more than 1300 member
12 companies across the U.S. We are proud to say that
13 we have the very smallest insurers in the country
14 and some of the very largest and a lot of folks in
15 between.
16 I want to start by saying that insurers are
17 incentivized to have a strong and stable insurance
18 market and drive towards those outcomes, and those
19 competitive forces benefit consumers as well.
20 So, insurers are incentivized to serve those
21 consumers to the best of their ability, and as you
22 have heard already today, incentivized and required
23 to be accurate in that process.
24 I'm hopeful that I can offer, not only some
25 commentary on pressures against the property and
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1 casualty market today, but also some proposed
2 solutions.
3 I think we see, in the P&C market across the
4 country and New York is no exception to that, four
5 key pressure areas.
6 One is extreme weather as you've heard.
7 Second, are economic factors which I will
8 talk a little bit about like inflation.
9 Third, is legal system abuse, as there has
10 been some discussion of already.
11 And the fourth factor, which we see in some
12 spaces, particularly in states where there are
13 policies that don't get at the true cost drivers, we
14 see regulatory friction that can slow the process
15 even more than the natural filing process that we
16 see in the P&C market.
17 So zeroing in on that first pressure of
18 weather, there has been some discussion already
19 today about increase and frequency in severity which
20 I concur with.
21 But I want to point to another pressure point
22 there on severity, which is the recovering process.
23 The cost to repair and recover has gone up
24 dramatically. So data suggests that since 2019,
25 repair costs have gone up 35 to 45 percent.
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1 So if you use that math, a house that cost
2 $300,000 to build in 2019, would now cost north of
3 $400,000 to replace.
4 Those are all things that have to be
5 contemplated in the premium in terms of the expected
6 loss costs as we look at frequency and severity
7 changing.
8 The path to address those things, as you have
9 heard, is through mitigation and resiliency.
10 So I would encourage a review and
11 strengthening of building codes through IBHS and
12 fortified science that can help both residential and
13 commercial properties to harden and harden at scale
14 with community strategies.
15 Really, the only way to address these things
16 is to bend the loss curve down.
17 Insurance is complex at times in its science
18 but simple in its foundation, which is insurers
19 through solvency have to have and take very
20 seriously the responsibility to have enough premium
21 and collect enough premium to pay and satisfy the
22 promises that they've made to consumers.
23 The second key area I would note for New York
24 in particular, is legal system abuse.
25 As of 2024, according to the U.S. Chamber,
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1 New York ranks second in total tort cost per
2 household at over $7,000 compared to the national
3 average of around $4,000.
4 It was made mentioned earlier what has
5 changed in the casualty market. And it is just
6 that.
7 The litigation, both in terms of, we heard a
8 focus on nuclear verdicts, but also in process and
9 presence of litigation has gone up.
10 So I would draw all of you directly to the
11 advent in growth of the litigation financing
12 business, which has reached $25 billion in 2025 and
13 is projected to be over $60 billion in the next
14 decade.
15 Additionally, strategies to address fraud,
16 which has really blossomed, unfortunately in
17 New York and other places. It's a massive drain on
18 the market and hurts law abiding consumers in
19 addition to the market.
20 So I would suggest strengthening insurers'
21 ability to identify fraud, using technology and
22 other means of investigation, and to build
23 investment and interest in the state in prosecution
24 of fraud.
25 You know, I think all of these things, again,
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1 mark a way to bend loss curves down and improve
2 New York's insurance market even more so than it
3 stands today.
4 So thank you again for the time today and we
5 look forward to working with you moving forward.
6 SENATOR BAILEY: I want to thank everybody
7 for testifying and thank you for not just reading
8 off the paper.
9 It's very helpful when you are able to
10 articulate that and it saves us all time, time I'm
11 taking up by rearticulating that.
12 I just wanted to go with what you said,
13 Ms. Collins, about fraud. I want to make sure we
14 get it for the record.
15 I know you each spoke about it on a basic
16 level, but can you tell us exactly how fraud affects
17 the cost of premium?
18 What percentage increases based upon fraud,
19 and can you get to some specifics about what you
20 want us to do about fraud legislatively?
21 ERIN COLLINS: Sure. I will speak generally
22 and then happy to follow up with some more
23 specificity.
24 But, you know, recent studies have shown that
25 there is more than $300 billion a year nationwide in
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1 the area of insurance fraud.
2 I think that those things inherently drive
3 claims costs up, but also operational costs to fully
4 investigate.
5 And, you know, it is unaided by, you know,
6 further legal system challenges where expert
7 testimony requirements have not been improved over
8 time.
9 And so where fraud may have been proven by,
10 you know, the standard of what an expert is in the
11 legal sense, is now taking three, four, five experts
12 to examine and prove that fraud. And all those
13 things, through the duty to defend, add costs to the
14 system.
15 So you are talking about not just, you know,
16 a system in which fraud occurs to draw a claim, but
17 in an effort to launch litigation.
18 So I think, in terms of your second question
19 of what can be done there, I think working with DFS
20 and the industry to understand fraud identification
21 techniques and how technology can improve upon those
22 things, really encouraging throughout investigation.
23 And then we've seen success in states that
24 incentivize law enforcement to get more deeply
25 involved, especially in the prosecution of fraud.
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1 So we look forward to working with you on any
2 of those.
3 CASSANDRA ANDERSON: I have some specific
4 ideas, too.
5 Staged construction site accidents have
6 really grown to be pervasive in addition to the slip
7 and falls.
8 And there is legislation that has been
9 introduced in the Senate by Senator Comrie that
10 would help to be able to get at that issue.
11 In addition we see that a lot of contractors
12 are very reputable. Not all are, unfortunately, and
13 we see a lot of schemes built around that.
14 We are going to be bringing forward loss
15 mitigation legislation to combat loss mitigation
16 scams.
17 Those are just two examples homeowners are
18 taken advantage of in those instances and we are
19 happy to talk with you about it further.
20 But there is a lot that can be done in the
21 fraud space to give us the appropriate tools, along
22 with law enforcement. Those are just two examples.
23 ROBERT GORDON: We, too, would support the
24 legislation to make staged accidents a felony. That
25 would be helpful.
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1 SENATOR BAILEY: Certainly.
2 I guess I have a question about -- I want to
3 expand upon the question for fraud because you
4 mentioned staged auto accidents and we talked about
5 like different lines, not necessarily having a
6 factor.
7 But in this case you are saying that the
8 fraud that occurs in other lines of insurance has an
9 effect on the homeowners policies.
10 CASSANDRA ANDERSON: It's staged construction
11 site accidents so it has to do with when buildings
12 are being constructed.
13 Staged auto accidents are also an issue that
14 would affect the auto line.
15 SENATOR BAILEY: And it's staged construction
16 accidents for single-family homes or owner-occupied
17 homes like we're speaking about today or is it
18 staged construction accidents for any type of
19 dwelling?
20 CASSANDRA ANDERSON: It can be staged
21 construction site or staged accident on a
22 construction site for any type of building that is
23 being built but we are seeing it, you know, in
24 relation to large buildings in New York City.
25 SENATOR BAILEY: I just wanted to be sure.
107
1 CASSANDRA ANDERSON: What I will say, too, on
2 the fraud piece, you know, if a building is in a
3 deteriorated state, what happens is that not only is
4 there increased liability but also those buildings
5 tend to be targeted by those that are looking to
6 commit the fraud.
7 So there is a connection there that is very
8 strong, unfortunately.
9 SENATOR BAILEY: Ms. Collins, you mentioned
10 the use of technology. And I am certainly someone
11 who sometimes falls behind the times of technology
12 but I believe in the advent of it.
13 Can that same technological, you know,
14 expertise that you wish to assert in the area of
15 fraud, can that be used in terms of the way that you
16 set data?
17 Superintendent Asrow -- Acting Superintendent
18 Asrow mentioned that sometimes data is used by
19 borough-wide data opposed to zip code data.
20 Can any of you shine a light on how your
21 companies or your member companies, are utilizing
22 data to create the risk or set rates? Like is it by
23 zip code? Is it simply by borough? Is it by a
24 section?
25 Can you talk a little bit about that and how
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1 we can use technology maybe to hone in a little bit
2 more?
3 ERIN COLLINS: I certainly can.
4 I would say this: The tools in the industry
5 vary based on both complexity of the product, but
6 also individual companies themselves.
7 But generally speaking, the goal is to use
8 the most precise information available to a
9 particular risk.
10 So I think industry uses both information
11 that is reported to them by the applicant, as well
12 as data from a variety of sources to try to get to
13 as specific information as possible to understand
14 the risks.
15 So I know that's not specific to your
16 question about zip codes but it is --
17 SENATOR BAILEY: It fits in.
18 ROBERT GORDON: A lot of the data insurers
19 are using has gotten much more granular than the zip
20 codes.
21 So I have seen, for example, I visited
22 Cotality a few weeks ago, used to be CoreLogic, and
23 they have records -- they form the backbone of the
24 MLS database used by the realtors.
25 And they have records on every single roof in
109
1 the condition, the tax records, the contracting
2 records, they know the age of the building.
3 So you can look very specifically at what the
4 risks are in that building.
5 And one of the societal benefits about that
6 is it sends appropriate risk signals. So as
7 consumers make improvements to those buildings,
8 those get reflected in the data and reflected in the
9 rates and the insurance is -- sort of accurately
10 reflects those risks.
11 SENATOR BAILEY: With those -- with that -- I
12 really want to talk more about zip codes, right?
13 In certain areas in New York City, there are
14 certain things happening in certain parts of the zip
15 code that are not happening in other parts of the
16 zip code.
17 Is the data -- is the rate setting based upon
18 that one factor, or is it based upon the totality of
19 circumstances?
20 How are we setting the rates?
21 CASSANDRA ANDERSON: Risk-based pricing is
22 based, as Robert said, on a variety of factors
23 related to that risk.
24 So even if the territory is broader, that's
25 only one factor of what is going into the rate
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1 setting process.
2 The condition of that structure is a very
3 large part of what that looks like, and insurance
4 companies are trying to be as precise as Erin said
5 and as accurate as they can be but there still might
6 be a broader territory rating.
7 It's not where they're targeting certain zip
8 codes or certain areas of certain zip codes or not,
9 to my knowledge.
10 SENATOR BAILEY: How are you using crime data
11 or crime statistics to factor into the rate setting?
12 CASSANDRA ANDERSON: We do pay often on those
13 types of losses. So that is one factor that can be
14 considered.
15 If safety is an issue and -- you know, with a
16 certain property, then that is something that would
17 be considered as far as insurance and what that
18 looks like.
19 SENATOR BAILEY: How often is that data? For
20 example, NYPD gives CompStat reports monthly, right?
21 You may not be -- you are not able to set rates
22 monthly. I'm well aware of your limitations.
23 But what I'm saying is like how often are
24 rates reviewed based upon changing data, whether
25 they be about crime, the state of the roof or the
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1 other things?
2 How often are you or your member companies
3 looking to update the data?
4 I mean update the rates based upon new data
5 that they get in.
6 ROBERT GORDON: Those are generally going to
7 be every time you do a new filing with the
8 department.
9 So, depending on how often you want to have
10 to go through that -- jump through that hoop, it may
11 be every year. It may be every couple of years.
12 Can be more frequent, but, again, it has to be part
13 of the filing.
14 So it's going to be a long process to get
15 that new data through.
16 ERIN COLLINS: I think we like to make sure
17 we have the most accurate rates possible.
18 But as the superintendent indicated,
19 resources and capacity are an issue right now at
20 DFS, and that's something we really want to work
21 with all of you on as well, along with DFS.
22 SENATOR BAILEY: You said that the rate of --
23 excuse me -- that litigation costs are going up
24 67 percent?
25 ROBERT GORDON: They're 67 percent higher in
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1 New York than country wide.
2 In fact, what is interesting, is there a lot
3 of media focus right now on the unsustainability of
4 climate change.
5 Actually, the liability costs and losses
6 nationwide are higher than the catastrophic weather
7 losses and it's increasing more rapidly.
8 So things like the other liability:
9 Commercial liability, all the commercial goods being
10 distributed, those insurance costs and losses are
11 going up very, very rapidly because increasing
12 litigations costs, nuclear verdicts and so forth.
13 SENATOR BAILEY: Okay. So that 67 percent,
14 that's --
15 ROBERT GORDON: New York is a more expensive
16 market.
17 SENATOR BAILEY: And you have empirical data
18 to back that up.
19 ROBERT GORDON: Yes.
20 SENATOR BAILEY: And where does that data
21 come from?
22 ROBERT GORDON: That comes from a number of
23 resources, but a lot of it is from S&P and from what
24 gets reported to the regulators.
25 We have data on construction costs in
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1 New York from a number of sources. A lot of vendors
2 produce this information. We made a lot of it
3 available in the report. We are happy to provide
4 additional information.
5 SENATOR BAILEY: And I want to say thank you
6 for the pre-meeting and the conversations that we
7 have had.
8 This is obviously our task, and we want to
9 thank you for your conversation. Look, this is not
10 intended to be adversarial. We want to get to the
11 bottom of this. Our constituents are hurting.
12 Your businesses, we need the insurance
13 companies to remain solvent, so we have to find that
14 middle ground.
15 I would add, as a final point, about Senator
16 Kavanagh mentioned at the opening, that there are
17 certain member companies that are not here to
18 testify individually and we'd hope that at some
19 point in the future we will be able to hear from the
20 member companies directly.
21 Thank you.
22 SENATOR SKOUFIS: Again, thank you for being
23 here.
24 Thanks for your testimony as well as your
25 conversation leading up to the testimony.
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1 I'm going to jump around a little bit and
2 have a few questions. But first, sort of top line,
3 if you can help me reconcile something. I am an
4 insurance lay person. I am a humble public servant.
5 I am having a difficult, challenging time
6 reconciling how on one side of the coin you are all
7 talking about how we have enormous climate risk in
8 this country.
9 We have the oldest building stock in the
10 country. We have, I think the word that was used,
11 choking regulations here in New York State.
12 Exponentially -- and I'm going to circle back on
13 this -- an exponential increase in litigation in
14 recent years.
15 As I mentioned before, healthy, steady
16 profits, at least within the homeowners' insurance
17 policy space.
18 And yet, on the flip side of the coin, you
19 mentioned how our premiums are below the national
20 average and our increases are below the national
21 average.
22 How in the world can all of those things be
23 true?
24 ROBERT GORDON: Senator, the first issue is
25 the catastrophic risk.
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1 So for example, if you look at earthquake
2 insurance, earthquake insurance appears to have a
3 much higher rate of return on net worth. But that's
4 because you have to collect a lot of years of
5 premium for when that big one hits. And it's the
6 same thing on the homeowners line.
7 New York is one of the top two most
8 vulnerable to 100 billion-dollar plus event.
9 Our analysis that would wipe out 69 years of
10 return on net worth for the homeowners line. So you
11 have to charge enough to be able to be solvent and
12 pay those claims. And that's what the New York DFS
13 looks at.
14 They also look to see well, how much are
15 insurers essentially charging and getting return on
16 net worth in neighboring areas with similar risks.
17 And what you see is New York is right between
18 New Jersey and Connecticut. So within a half
19 percent of each of those.
20 So it's very standard, and it's part of the
21 overall New York property casualty market actually
22 being under averaged profitability, but you have to
23 charge enough for the catastrophic risk exposure.
24 SENATOR BAILEY: So is what I'm
25 hearing amidst that response, that baked into the
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1 rates and baked into this bar graph are future
2 "Sandys," are future catastrophic events.
3 "Sandy" was, what, a 500-year storm, a
4 100-year storm, what was it characterized as, do you
5 recall?
6 ROBERT GORDON: It was actually a super
7 storm. It wasn't even categorized technically as a
8 hurricane.
9 But we know the next "Sandy," from all the
10 weather modeling, is going to be a lot worse in
11 New York.
12 SENATOR SKOUFIS: But are rates and are those
13 profit margins baked into them is what you are
14 talking about?
15 Is that what I'm hearing?
16 ROBERT GORDON: That's a significant part of
17 the rate is reflecting the catastrophic --
18 SENATOR SKOUFIS: So what happens if in the
19 next 20 years there isn't a catastrophic
20 "Superstorm Sandy"-level event? Do my constituents
21 get a refund?
22 ROBERT GORDON: And what happens if there are
23 three of them in the next 10 years?
24 SENATOR SKOUFIS: Answer my question first.
25 ROBERT GORDON: That's the way the insurance
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1 industry works is they have to collect enough money
2 whether there is one event in the next 5 years or
3 10 events.
4 SENATOR SKOUFIS: You are collecting for a
5 hypothetical prospective possible event. What if it
6 doesn't come?
7 ROBERT GORDON: But it is actuarially based
8 and that's what the New York DFS looks like.
9 SENATOR SKOUFIS: I understand.
10 ERIN COLLINS: And if we don't collect
11 enough, then the insurance company won't be there to
12 pay the claims, which that is the greatest
13 obligation that we have.
14 SENATOR SKOUFIS: But presumably you are
15 doing this, not just in New York, you do this in
16 every state.
17 You try and actuarially predict for future
18 catastrophic events and bake into those rates. And
19 yet, in so many states we don't see what is
20 happening in New York.
21 In so many states, your industry is losing
22 money more than it's actually profiting.
23 Why, in New York, are we not seeing that ebb
24 and flow?
25 ROBERT GORDON: Actually in New York, the
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1 overall property casualty return on net worth is
2 lower than the average.
3 There are some lines that reflect the
4 catastrophic risk exposure where again insurers are
5 having to protect themselves against that...
6 SENATOR SKOUFIS: This data speaks to
7 homeowners' insurance policies so let's talk with
8 that.
9 Why aren't we seeing the ebb and flow, the up
10 and down, the losses and profiting in other states
11 here in New York?
12 ROBERT GORDON: Because in a state like
13 Florida, what you are seeing is the hurricanes come
14 in every few years.
15 In New York, you are not getting that
16 "Hurricane Ian" every couple of years, but when it
17 does come, it is going to be huge and that's where,
18 again, New York is -- whether it's FEMA doing it or
19 whether it's the risk modelers, New York is one of
20 the most catastrophic exposed states and is second
21 most likely to get that $200 billion event $100
22 billion insured loss --
23 SENATOR SKOUFIS: Even if we get that
24 $200 billion event, I assume -- correct me if I'm
25 wrong -- that the next filing, after that event, you
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1 are going to be going to DFS and seeking an enormous
2 rate hike.
3 Is that a fair assumption?
4 ROBERT GORDON: I think it depends on what
5 the estimated risk is in the future.
6 You can't say -- you can't make up for the
7 past losses. You can't say, gosh, we lost a lot of
8 money on this last hurricane so we have to triple
9 rates. New York DFS is going to say, what is your
10 projected losses -- expected losses in the future.
11 SENATOR SKOUFIS: You can say right here
12 under oath that following a catastrophic event like
13 that, you are not going to see a particularly large
14 rate application submitted to DFS, your members?
15 ERIN COLLINS: What we would say with
16 certainty is that any filing that's filed with DFS,
17 either before or after a storm, has to be
18 actuarially accurate and forward looking.
19 SENATOR SKOUFIS: So the answer to my
20 question is yes from all of you. You can commit to
21 that.
22 That what I just described will not happen in
23 a subsequent rate hike.
24 CASSANDRA ANDERSON: Well, depends on what
25 the future risk looks like.
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1 So if the models say that that could happen
2 again, I can't say to you with certainty that there
3 may not be an adjustment.
4 But I think it's important that we look at
5 this from the perspective of it's always based on
6 what that future risk looks like.
7 SENATOR SKOUFIS: So it sounds like legally,
8 maybe you can't look backwards and recapture for
9 losses that had just happened a year prior, a year
10 and a half prior from a catastrophic event.
11 But if that event happens, then in your next
12 rate application, you will tell DFS, your members
13 will tell DFS that well, this just happened and so
14 it's probably going to happen more often now.
15 That's why we need a 10 percent or 15 percent
16 increase.
17 CASSANDRA ANDERSON: Well, the New York City
18 comptroller said it is happening more often now.
19 So I think what we are seeing is that there's
20 more and more studies coming out where the risk gets
21 greater and greater.
22 So I'm not saying that that one scenario is
23 going to tell that we are already seeing even state
24 bodies, state officials, saying that we're seeing
25 greater risks related to extreme weather and
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1 climate.
2 ROBERT GORDON: What we have seen in
3 California, where the state suppressed the
4 homeowners' insurance rates, is then when you did
5 get a record wildfire this year in January, a
6 majority of the homeowners insurers have pulled back
7 from the marketplace.
8 And so now...
9 SENATOR SKOUFIS: How many carriers do they
10 have left in California?
11 ROBERT GORDON: They have a number of
12 carriers, but I'm only aware of four that are open
13 to writing new homeowners coverage in the wildfire
14 prone areas.
15 And of those four, most of them are only
16 writing if you have essentially the IBHS wildfire
17 prepared standard.
18 So there is very limited coverage and that
19 has caused an explosion into the bare bones
20 government residual marketplace and the --
21 SENATOR SKOUFIS: I don't dispute any of that
22 and all of that tracks with my understanding.
23 So four at least in those wildfire prone
24 areas that we are talking about. How many carriers
25 do business in this line here in New York?
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1 CASSANDRA ANDERSON: Homeowners?
2 SENATOR SKOUFIS: Yes.
3 Property and casualty.
4 CASSANDRA ANDERSON: Less than 100 -- to my
5 recollection -- well, property and casualty as a
6 whole I think just over 200.
7 Again, I'm doing this off the top of my head,
8 but as far as groups of companies, there are less
9 than 100 that rate homeowners -- there may be
10 multiple companies that are part of those groups.
11 SENATOR SKOUFIS: The "Times Union" reports
12 the number is in excess of 1,000 and so there is
13 clearly some discrepancy there.
14 But even if it is 200 --
15 CASSANDRA ANDERSON: A thousand regulated
16 entities by DFS?
17 SENATOR SKOUFIS: That's what the "Times
18 Union" reports.
19 CASSANDRA ANDERSON: That could be agencies.
20 That could be other types of entities.
21 That doesn't mean it's insurance companies
22 only who are underwriting the risk.
23 SENATOR SKOUFIS: Let's even take your 200
24 number, just a nice rounded number.
25 That is literally, if I'm doing the math
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1 correctly, 50 times the number of carriers that
2 exist in California.
3 So clearly carriers are looking at New York
4 as a profitable space to do business. Otherwise,
5 there wouldn't be 50 times as many carriers.
6 Am I wrong to read it that way?
7 ERIN COLLINS: I think the comparison was how
8 many insurers are writing new business currently?
9 So I think that there are a multitude of
10 companies that still write in California. There are
11 a multitude of companies that write right here in
12 New York.
13 As Cassandra noted, you know, the groups
14 often consist of multiple companies that file into
15 that group structure all regulated by DFS.
16 Here is what I know to be true about the
17 insurance industry.
18 They want to write insurance.
19 They absolutely want to write insurance.
20 They want to write in more places for more
21 types of coverage and have done so over the course
22 of several hundred years now to the highest rate
23 that we've seen in an industry, and they want to
24 continue to grow and expand in that area.
25 If we are to continue to do that and be able
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1 to do that and remain solvent, I would say that the
2 best path forward to that is to focus on resiliency
3 and mitigation to help bend that loss curve down.
4 And I refer to that both in physical
5 resiliency and mitigation and also resiliency from
6 the casualty line.
7 So addressing those cost drivers as well.
8 That will incentivize more competition and for the
9 companies that are all writing here in New York, to
10 write more of it. And so I would suggest a focus on
11 those areas.
12 SENATOR SKOUFIS: I have a couple more but
13 I'll come back for a second round.
14 Thank you.
15 SENATOR KAVANAGH: Thanks.
16 Again, thank you all for your testimony and
17 for your ongoing discussions that we have been
18 having.
19 I want to just start with liability and the
20 notion that there is legal system abuse going on.
21 How do you know that fraud is pervasive in
22 New York?
23 And how do you know that it is growing?
24 ERIN COLLINS: I was referring to some
25 industry and independent research that shows or
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1 estimates fraud at over $300 billion nationwide.
2 Happy to provide that study to the committee.
3 I think that that comes from a variety of sources.
4 Obviously it's very difficult to --
5 SENATOR KAVANAGH: Sorry to interrupt.
6 Just to make my question more pointed.
7 Does anybody on this panel have evidence that
8 fraud is pervasive in New York and that fraud is
9 growing in New York?
10 CASSANDRA ANDERSON: I think what even law
11 enforcement are seeing and what we have documented
12 video evidence of, it is pervasive, and it is
13 growing.
14 We see where -- and it goes back to no fault
15 auto insurance. There was a playbook that was used
16 to stage accidents and that's -- for a while.
17 Now we see where it is also with staging the
18 construction site accidents. That didn't exist, you
19 know, a few years ago.
20 I don't know how exactly how many years when
21 it started. But we are seeing where the schemes are
22 changing.
23 The schemes are growing, and they're looking
24 to go after different lines in different ways.
25 SENATOR KAVANAGH: Again, I don't mean to
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1 interrupt.
2 I want to try to stick to property, you know,
3 auto insurance and their other insurance. It was
4 actually a separate -- there's been a separate
5 conversation about auto insurance going on in the
6 legislature.
7 I just want to focus on property. I have
8 seen some videos that have been provided by property
9 owners.
10 I have not seen any evidence that legal
11 system abuse or fraud are either pervasive or
12 increasing in New York, and that's after numerous
13 conversations with insurers, with folks like
14 yourselves with property owners.
15 I've seen, you know -- one thing is when you
16 have video, it's presumably the availability of
17 video evidence has increased as cameras have become
18 pervasive.
19 Cameras, of course, are a good way of
20 demonstrating that you shouldn't pay a claim as much
21 as they might be an opportunity to demonstrate that
22 something that is compensable happened.
23 We are trying to understand, not just whether
24 New York is high or low relative to other states,
25 but how things are changing.
127
1 Why we are seeing a doubling of liability
2 rates that are imperiling our ability to provide
3 affordable housing across the state?
4 And so I'm concerned that there is a lot of
5 talk about this but not a lot of evidence, and so
6 again, is there any evidence of rates that -- of an
7 increase in the number of circumstances where fraud
8 is proven to have occurred?
9 ROBERT GORDON: Senator, I'll comment on the
10 legal system abuse overall.
11 We do have a lot of evidence that the
12 litigation costs in New York are not only higher
13 than average, but they have been getting worse. And
14 we are seeing, for example, bodily injury claims,
15 6.6 times worse than the national average.
16 Second worse nuclear verdicts, 67 percent
17 higher costs, as Erin said, about $7,000 cost per
18 household. So we have a lot of evidence that --
19 SENATOR KAVANAGH: That costs are growing.
20 ROBERT GORDON: That the litigation costs in
21 New York are growing, are significant and are
22 growing.
23 SENATOR KAVANAGH: We know we live in a
24 country where large industry associations of all
25 kinds, not singling out insurance, have made a great
128
1 effort to diminish the access to courts, so people
2 have the access to federal courts that people have,
3 the access to class-action causes, the access to
4 courts in various states.
5 So just again, I happen to have been involved
6 in an actual nuclear verdict, it was a nuclear
7 contamination case. I was working with a law firm
8 on the plaintiff's side many years ago, and the size
9 of that verdict struck people as justice, not
10 excessiveness.
11 I just -- understanding that your costs are
12 going up for litigation -- and we would like to see
13 as much data you have on that.
14 I think it's important to distinguish the
15 question of whether costs are going up from whether
16 there is abuse and whether there is fraud.
17 Do you pay claims that you know to be
18 fraudulent?
19 CASSANDRA ANDERSON: We look to fight the
20 fraud and to be able to determine what is fraud.
21 Obviously fraud is not something where it's
22 completely clear cut. We don't always have the
23 appropriate tools.
24 What I will say, too, on what you are asking
25 about, as far as whether we've seen increase in
129
1 justice.
2 We don't always have a good sense, for
3 example, we don't always know when third-party
4 litigation funding is part of a case. And that is
5 driving verdicts in a lot of ways.
6 We have heard case after case where the
7 settlement could be hundreds of thousands of
8 dollars.
9 And by the time the litigation funding
10 company and the attorneys take their piece of it,
11 the claimant, who even seems to go through
12 unnecessary surgeries to be able to drive up that
13 number, is left with just a mere thousands of
14 dollars.
15 So I think that is important to understand in
16 the context of justice.
17 SENATOR KAVANAGH: How many instances of
18 proven insurance fraud could you point these
19 committees to?
20 ERIN COLLINS: When you say proven insurance
21 fraud, I assume you mean in a court of law.
22 SENATOR KAVANAGH: I mean, again, we just had
23 testimony that people are getting unnecessary
24 surgery in order to get increased payments.
25 We all hear those things. They may occur.
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1 CASSANDRA ANDERSON: I can give you links to
2 the cases, especially through the Southern District.
3 SENATOR KAVANAGH: Again, with great respect
4 and we really appreciate this conversation.
5 Is there data that demonstrates that fraud --
6 I mean, again, the assertion was that these costs
7 are increasing exponentially and that that is driven
8 in a substantial way by fraud and abuse.
9 Is there evidence that fraud and abuse have
10 increased exponentially in New York?
11 ROBERT GORDON: So Senator, we can also
12 provide to you data provided from LexisNexis showing
13 that as attorney involvement in some of these cases
14 has increased, people surveyed indicate that the
15 attorneys are directing them to get more and more
16 medical treatment so that it essentially builds up
17 the case value.
18 SENATOR KAVANAGH: And your assertion is that
19 that is bad advice from their attorneys?
20 ROBERT GORDON: It appears to be clearly
21 geared towards maximizing the damages rather than
22 actually providing needed medical treatment is what
23 the survey suggests.
24 SENATOR KAVANAGH: Whatever evidence you have
25 that people are getting medical treatment that is
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1 not -- that doctors are providing medical treatment
2 violating the oaths they take and their role as
3 doctors, at the behest of their attorneys and that
4 that is pervasive and growing, we would like to see
5 that.
6 Again, I want to emphasize that we believe
7 that these things occur.
8 Any human behavior occurs across different,
9 you know, situations.
10 The idea that that is causing this enormous
11 problem for us as we try to provide affordable
12 housing for people is something that we would not
13 just like to assume is happening based on anecdotal
14 evidence. But some harder evidence that those
15 things are occurring.
16 Again, I have not seen that evidence yet and
17 I haven't heard it today but that does not mean it
18 does not exist. And obviously we'll have an
19 opportunity to follow up.
20 I want to shift gears to the questions of
21 insurance costs and particularly what a couple of
22 you mentioned, which is the question of whether
23 people get discounts for engaging in -- sorry,
24 whether the insurance system and the building codes
25 and all the other systems that we run, are
132
1 encouraging appropriate behavior to minimize risk.
2 We heard the superintendent say that they are
3 gathering, kind of data that might be presentable to
4 customers and to the public about discounts that are
5 available.
6 Not someone on this panel, but when we were
7 having some meetings in advance of this hearing, I
8 had an insurance industry executive tell me that the
9 fortified group system is working very well because
10 they got a fortified group and they called their
11 insurance company and the insurance company said yes
12 there is indeed a discount and they got the
13 discount.
14 And in my mind, you know, the fact that
15 you're an insurance executive and you have to pick
16 up the phone and ask, inquire whether there is a
17 discount, suggests to me that maybe the system is
18 not as kind of seamless or smooth as it ought to be.
19 Are insurance companies being transparent
20 about discounts that are available?
21 Is there a place we can go to figure out what
22 discounts each company is offering and how much the
23 discount is and what behavior would get you the
24 discount?
25 ROBERT GORDON: Senator, there is one
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1 additional piece to this.
2 So APCIA and our members, we have been having
3 a lot of conversations with the realtors and the
4 builders and the lenders and we have included the
5 NAIC and others in those conversations.
6 One of the things that has come up is the
7 real teachable moment when consumers are going care
8 about this and listen to it.
9 It's actually not when they're talking to
10 their insurer, it's when they're talking to the
11 builder or when they're talking to the realtor.
12 That's one of the things we are in the
13 process of doing is getting more granular
14 information to the realtors, to the builders so that
15 they can make better informed, better empowered
16 decisions at the right moment.
17 SENATOR KAVANAGH: And again, there is a lot
18 changing in this space and we would like to work
19 with you on that.
20 But for existing homeowners, if the behavior
21 we are trying to incentive is providing a different
22 kind of roof when you need to replace a roof, I
23 think it's incumbent on all of us and on the
24 industry to make sure that...
25 CASSANDRA ANDERSON: I know there are a lot
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1 of education efforts, and the New York Insurance
2 Association certainly is part of that. I think
3 others in the industry are as well.
4 I will say with fortified, it's important
5 that we recognize there are actually five roofs
6 currently in New York State that are fortified.
7 So as the program hopefully builds, I think
8 we will see much more in that space.
9 SENATOR KAVANAGH: My time is up.
10 Thank you. I'll probably come back.
11 SENATOR O'MARA: Thank you for being here.
12 Appreciate your testimony.
13 We have talked a lot about fraud here and
14 nuclear verdicts. Nuclear verdicts is a new term to
15 me, and I have been a litigator throughout my
16 career. Is that different than what, I guess, I
17 would traditionally call a runaway verdict?
18 ROBERT GORDON: It's usually verdicts that
19 are $10 million or more defined as nuclear verdicts.
20 Now we are also talking about thermonuclear verdicts
21 that are $100 million plus.
22 SENATOR O'MARA: And is the fraud, in your
23 opinion, is this fraud that you speak of, the cause
24 of these nuclear verdicts or is there a correlation
25 there?
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1 ROBERT GORDON: So one of the really
2 interesting cases out there is in the early 90s, you
3 had the woman who spilled McDonald's hot coffee on
4 herself and it was $2.7 million award. It was
5 economics and punitives.
6 This year you had a delivery man who spilled
7 Starbucks hot tea on himself and instead of
8 $2.7 million, it was $50 million and it was entirely
9 non-economic pain and suffering.
10 So they didn't even put into the record the
11 evidence on the cost of the economic damages. And
12 so it's not necessarily an issue of fraud per se
13 other than, you know, how you try and frame this for
14 the jury.
15 But when the costs of spilling some hot
16 liquid on yourself, which is something that is going
17 to happen a lot in society, when it goes up from
18 2.7 million to 50 million, that is going to create
19 more cost for insurers, more costs for consumers.
20 SENATOR O'MARA: So are you saying then that
21 the laws in New York are inadequate as to how to
22 deal with an excessive verdict?
23 And do you have recommendations on what
24 New York should be looking at and how to provide
25 maybe better appellate review of these types of
136
1 verdicts that you are talking of.
2 ROBERT GORDON: Yes. I think consumers want
3 a legal system that is fair, timely, reasonably and
4 efficient but our system is not really any of those.
5 So you have a small number of people who are
6 getting these mega awards. You are not having a lot
7 more people accessing justice. And it ends up
8 creating a lot of additional costs.
9 So we do think legislation to make staged
10 accidents a felony would help.
11 Reasonable limits on non-economic damage.
12 I know there is legislation already from
13 third party litigation financing regulation.
14 We think disclosure would help enforce that.
15 So there are a lot of solutions that can
16 bring New York costs back in line with the country.
17 SENATOR O'MARA: Along those lines, what
18 specifically have you seen other states have done
19 that have had an impact on this?
20 ROBERT GORDON: Well, I think the best
21 example is Florida.
22 Florida had some of the worst litigation
23 costs in the nation. They enacted some very
24 significant reform, and their homeowners rates this
25 last year have been the lowest increase in the
137
1 nation.
2 They have been only 1 percent, which is,
3 post-inflation, a real drop. So we know that
4 reforms can help.
5 That was things like assignment of benefit --
6 SENATOR O'MARA: What reforms were they?
7 ROBERT GORDON: One of the biggest one
8 was assignment of benefits reform.
9 Also there was some peculiar attorney fee one
10 way payments in Florida that were addressed; a
11 number of others.
12 We are happy to sort of give you a table of
13 all of the reforms.
14 We think non-economic damages making those
15 reasonable is one of the most important things.
16 Again, you look at the Starbucks case.
17 Spilling hot tea in your lap. Is that 50 million
18 and then how many spills are you going to get and
19 how much is that going to cost consumers ultimately.
20 SENATOR O'MARA: Okay, well, this is kind of
21 off the topic of what we are here for today on
22 property insurance I suppose so I'll change the
23 subject at this point.
24 So, with the issues of reinsurance, captive
25 insurance, how is it that we, in New York, are not
138
1 bearing some of the burden of other state's
2 catastrophes and the rate setting in New York?
3 ROBERT GORDON: I think first of all,
4 Senator, is the New York Department of Financial
5 Services said they do not allow it.
6 No state would allow it. It's against state
7 law. It's against actuarially practices.
8 And frankly, insurers are not going to want
9 to put more resources in a state where they're
10 losing money and take it from a state where they're
11 making money.
12 So that's not going to happen in the
13 marketplace. So, it's not something insurers are
14 allowed to do, nor would they want to.
15 CASSANDRA ANDERSON: Risk-based pricing --
16 cost optimization runs completely counter to
17 risk-based pricing.
18 We want to accurately determine the risk of a
19 specific -- writing a specific policy. And that is
20 how we operate.
21 Those are the -- not only does DFS certainly
22 prohibit it, but on top of that, that's the
23 actuarially standards that we use.
24 ROBERT GORDON: If one insurer raised their
25 rates to try and make up for losses in another
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1 state, then they would lose market share to other
2 insurers.
3 Not every insurer does business in, say,
4 New York and California. So --
5 SENATOR O'MARA: Doesn't the reinsurance
6 market goes across state lines?
7 ROBERT GORDON: The reinsurance market is
8 global.
9 So yes, the amount of reinsurance capital can
10 fluctuate based on events.
11 But again, they're going to be looking at
12 future risk and there is competition in the
13 reinsurance market so if one company got hit, for
14 example, from losses in California, they tried to
15 raise their rates significantly, they would just get
16 outbid by other reinsurers.
17 ERIN COLLINS: One important note in the
18 reinsurance space and a trend to note is that
19 reinsurers, they're not immune from any of these
20 dynamics we have talked about today.
21 It's a way for the industry to write and have
22 more capital in a state. But also terms of
23 reinsurance have been trending such that companies
24 are holding more capital or more retention.
25 So more claims are happening at the direct
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1 carrier level before reaching the reinsurance layer.
2 SENATOR O'MARA: Do you have any -- the
3 minute I have left, do you have any specific
4 recommendations for us in New York to avoid what's
5 happened -- we talked about in Florida, California,
6 other states where there has been a real reduction
7 in the number of carriers out there?
8 You generally mentioned don't take actions
9 that hinder insurance and take actions that, you
10 know, help provide the insurance.
11 What specifics do you have other than saying
12 DFS, don't take actions that hinder our ability to
13 provide this?
14 ERIN COLLINS: I think looking to joint
15 strategies between the industry and regulation to
16 bend the loss curve down through resiliency.
17 You know, New York has been helpful in terms
18 of categorization -- not just of discounts -- but
19 also resiliency measures, carriers that offer
20 mitigation techniques like water sensors or things
21 of that nature to consumers, to monitor their own
22 risk in their home.
23 So I think things like that have been
24 beneficial. But I think the strongest step forward
25 would be to address some of the litigation changes.
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1 And to your note, there are a lot of
2 possibilities there. And we are happy to follow up
3 with sort of a list of suggested reforms.
4 But I would suggest starting there as Florida
5 has done.
6 SENATOR O'MARA: Thank you.
7 SENATOR SKOUFIS: Senator Fernandez.
8 SENATOR FERNANDEZ: Thank you.
9 All this talk of lawsuits and the data and
10 what we know. Is all this data collected on your
11 own or is there any peer reviewed studies that you
12 are looking into, too, to support these claims?
13 CASSANDRA ANDERSON: What I will say, too,
14 and Robert, you can certainly expand further, it is
15 not just insurance that is reporting on the
16 litigation.
17 New York City has more than a billion dollars
18 in litigation annually is what they have reported.
19 The city is largely self-insured and that's
20 what they are reporting as far as their own
21 litigation. Just the municipality itself. Not the
22 amount of litigation in the city. But that is how
23 much they are paying the city in litigation costs.
24 Just the settlements, is my understanding, is
25 more than a billion dollars annually.
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1 So I think that's important to know that it's
2 not just an insurance-specific statistics that we
3 are even talking about.
4 SENATOR FERNANDEZ: What is the timeline for
5 these settlements, for them to get determined, when
6 they're first filed?
7 CASSANDRA ANDERSON: I think it was Robert
8 that said about the length of the court process
9 right now, the judicial process, is quite lengthy.
10 And that's because of, you know, the delays that
11 exist.
12 It's not, you know, with -- the courts are
13 very burdened in trying to work through that. It's
14 challenging for everyone.
15 ROBERT GORDON: One of the things that I
16 think is very important that we are trying to work
17 on with the regulators, a lot of people don't know,
18 a lot of consumer policyholders don't know, if you
19 have a complaint, you can go to the regulator and
20 they'll help you navigate that complaint.
21 And what is good about that is the regulator
22 doesn't take 40 percent or a third of your
23 compensation.
24 And so I think one of the things we need to
25 do better as an industry -- and we are trying to
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1 talk to our regulators about it is letting people
2 know of the existing system that is designed to
3 serve them without taking any compensation.
4 SENATOR FERNANDEZ: Okay.
5 Ms. Collins, you said before that you want
6 to give insurance. You want to make sure people are
7 covered.
8 I mentioned before I represent a coastal
9 community and from "Sandy" to "Ida" to every storm,
10 it always happens, oh I don't have insurance. Okay,
11 let's try to get you flood insurance for the next
12 time. They won't give it to me. Why?
13 Why is it so hard for coastal communities
14 that literally are on the border of where the zoning
15 is to be able to get flooding insurance when we see
16 and know that it's a continual problem?
17 ERIN COLLINS: Flood is a peril that is
18 written through the National Flood Insurance Program
19 and is certainly available.
20 SENATOR FERNANDEZ: There is nothing we can
21 do at a state level?
22 ERIN COLLINS: I think the biggest challenge
23 with flood insurance -- and the NFIP would hopefully
24 reiterate this -- is the lack of take up rate.
25 People just don't buy it.
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1 I think it would serve communities well to
2 push information about the flood insurance program
3 and the exposure that individual consumers may have
4 in that space and how they can purchase that policy.
5 And certainly any agent can direct them to that
6 information as well.
7 And, you know, I have personal knowledge of
8 carriers when they're asked about a flood insurance
9 policy.
10 If they don't -- many of them do a
11 write-your-own program in collaboration with the
12 National Flood Insurance Program but they certainly
13 have that information available for a consumer.
14 CASSANDRA ANDERSON: And just to clarify, the
15 National Flood Insurance Program is a program of the
16 federal government. So that is how flood is largely
17 provided.
18 And the way that those policies are written,
19 the way that the claims process works, that is all
20 through how the federal government has structured
21 it.
22 SENATOR FERNANDEZ: The federal government is
23 a little unreliable so I want to know how we can do
24 it on the state right now.
25 ROBERT GORDON: Senator, if I may, the flood
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1 exposure is by far and away the biggest protection
2 gap for New York consumers. Only 3 percent of
3 homeowners in New York have flood insurance.
4 There is both federal insurance available and
5 private insurance available.
6 But not only is flood the most common peril,
7 it's particularly an extreme risk for New York when
8 you look at the catastrophic maps.
9 And formerly that risk was mostly from storm
10 surge but now because of the changes in climate, we
11 are seeing a lot more flash flooding and that
12 causes -- they call it pluvial flooding -- but it's
13 basically you get these short heavy rains and the
14 storm drains in New York City and elsewhere are not
15 designed to absorb that much water.
16 So you get flooding and that's not covered in
17 the standard homeowners policy.
18 And, again, there is federal insurance
19 available. There is private flood insurance
20 available but only 3 percent of the people have it.
21 That is a rapidly escalating risk that people
22 are vulnerable for.
23 CASSANDRA ANDERSON: We talked about
24 resilient buildings but also making the public
25 infrastructure, particularly in New York City -- I'm
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1 not saying it is the only municipality but I know
2 and seeing the experience here trying to improve
3 that public infrastructure is going to be very
4 important moving forward.
5 SENATOR FERNANDEZ: We know that is part of
6 the problem, too.
7 But in the last few years, a number of
8 insurance companies have withdrawn from New York
9 insurance -- the market for a number of reasons.
10 I'm not sure if we said all of them.
11 But as some of the surviving companies, what
12 are you doing to ensure that insurance and therefore
13 homeownership remains affordable in this competitive
14 market?
15 ROBERT GORDON: I really think it goes back,
16 Senator, to resiliency.
17 As we have all said on this panel,
18 insurers -- some insurers have been withdrawing or
19 pulling back because of the enormous aggregation of
20 risk that is escalating with the climate change.
21 So they know that big one is going to hit and
22 a lot of them just don't have the kind of capital to
23 allocate for that escalating exposure.
24 We can bend the cost curve.
25 We can make it safer with more resiliency.
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1 We have the standards.
2 They have been proven effective.
3 We need to get those to the builders.
4 We need to get them to consumers early in the
5 process.
6 We need to create incentive programs whether
7 it's tax incentives or grants.
8 Or we see a lot of credit unions now offering
9 HELOC loans for mitigation.
10 Lots of solutions we are working on but we
11 have to get people more resilient to make them safe
12 and reduce their costs.
13 ERIN COLLINS: Senator, if I could connect
14 one more dot there.
15 This is an area where accurate risk-based
16 pricing really assists the market.
17 So I mention how insurance companies really
18 want to write insurance. Well, to the extent in
19 this part of the state over here, I can be as
20 accurate as possible through risk-based pricing.
21 That leaves me capital available to write
22 property in other parts of the state where risk may
23 be higher.
24 So the ability to write more insurance in
25 more places, and for different risk profiles is
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1 directly impacted by the ability to use the most
2 accurate tools in the market at the time.
3 SENATOR FERNANDEZ: Thank you.
4 SENATOR BAILEY: Round two.
5 Senator Skoufis will start us off.
6 SENATOR SKOUFIS: Thank you, Senator Bailey.
7 First, Mr. Gordon, the Starbucks
8 $50 million payout that you referenced before, what
9 state was that award granted in?
10 ROBERT GORDON: I don't remember, Senator.
11 I wasn't using that as a New York specific
12 example.
13 Just an example how the cost -- it's not just
14 fraud it's the escalation of the cost --
15 SENATOR SKOUFIS: I just wanted the record to
16 reflect that that did not occur in New York. It
17 occurred in California.
18 My first question is what percent of claims
19 would you all characterize as being fraudulent?
20 We've talked a lot about fraud. And I echo a
21 lot of what Senator Kavanagh mentioned, where there
22 is clearly a lot of anecdotal evidence. I have yet
23 to see any harder evidence.
24 I'm trying to get an understanding -- we all
25 are -- of just how pervasive this is.
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1 In your estimation, what percent of claims
2 are fraudulent?
3 CASSANDRA ANDERSON: The New York State
4 Department of Financial Services issues a report
5 every year on fraud. So that is one indicator.
6 Fraud is something that is not always easy to
7 identify.
8 And as I mentioned, it's hard to be able to
9 tell when there are certain elements of it.
10 On the litigation side with their
11 pre-litigation funding, because there is not the
12 transparency in discovery, we are not always aware
13 of what the role is there as well.
14 SENATOR SKOUFIS: Understood. This is
15 strictly an opinion question I'm asking.
16 Is it 1 percent, 5 percent, 10 percent?
17 CASSANDRA ANDERSON: I wouldn't want to
18 speculate. I can't say with absolute certainly in
19 this moment so I want to get back to you.
20 But the National Insurance Crime Bureau works
21 very closely with law enforcement and there are some
22 statistics there as well and we are happy to get
23 back to you on this.
24 But I do think the issue with fraud is, you
25 know, we have individual state -- excuse me,
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1 investigative units with special investigative units
2 in our companies.
3 We, you know, engage in all sorts of
4 different efforts to fight fraud but it is something
5 that you are not always going to be able to
6 determine every piece of fraud, which is why we are
7 trying to strengthen the laws and get closer and
8 closer to be able to determine all the fraud that
9 exists and try to address it better.
10 SENATOR SKOUFIS: I don't think you are going
11 to find any disagreement from anyone up here or our
12 colleagues that fraud does, on some level, exist.
13 And we want to do whatever we can to try and
14 rein it in as you have described.
15 But clearly you have all thought about the
16 issue of fraud and understandably so.
17 You must have some opinion as to ballpark how
18 pervasive it is in New York or at least nationally.
19 Is it a fraction of 1 percent? Is it
20 1 percent? Is it double digits? Ballpark?
21 ERIN COLLINS: Senator, we are going to have
22 to get back to you because candidly I feel like I
23 might underestimate the amount.
24 SENATOR SKOUFIS: What is a conservative
25 estimate?
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1 What is your most very conservative estimate?
2 ERIN COLLINS: We'll commit to the following
3 up.
4 But let me give you a practical application
5 of how I think this is pervasive in New York and in
6 other places.
7 SENATOR SKOUFIS: I have a few other
8 questions.
9 I don't think I'll get an answer to that
10 question so I'll move on. I'll ask another sort of
11 percent question.
12 Whatever that denominator is that you are
13 going get back to us with that represents the
14 percent of claims that you believe are fraudulent,
15 what percent of those claims actually wind up in
16 court?
17 ROBERT GORDON: Senator, I think there is a
18 little bit of a disconnect.
19 We are not just talking about fraudulent
20 insurance claims, but rather the whole realm of
21 fraud committed against businesses that insurance
22 ends up having to pay for.
23 SENATOR SKOUFIS: I understand that, but I'm
24 specifically asking about claims.
25 So what percent of the fraudulent claims --
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1 you are going to get back to us with what you think
2 that percent is -- what percent of those claims wind
3 up in court?
4 ERIN COLLINS: You mean criminal court?
5 SENATOR SKOUFIS: No, I do not mean criminal
6 court.
7 ERIN COLLINS: Again, we'll follow up with
8 more information.
9 But I think a lot of fraud ends in
10 litigation. Whether or not that ends in a court, is
11 a different situation.
12 I think part of the challenge --
13 SENATOR SKOUFIS: That's really what I mean.
14 What percent winds up in litigation?
15 ERIN COLLINS: I think it's a lot. I think
16 it's very high.
17 SENATOR SKOUFIS: Three quarters? Almost
18 1 percent. Almost all of them?
19 ERIN COLLINS: I don't have those
20 figure percent available. Obviously, that would be
21 largely circumstantial.
22 But I think anecdotally speaking, what we see
23 from the SIU units Cassandra mentioned and from how
24 litigation trends, what we see is a lot of
25 litigation is filed in cases where there is
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1 suspected fraud and then it moves into, you know,
2 the legal standard of how those two entities
3 interact.
4 I think the exposure for that case on the
5 litigation side because of this legal system
6 abuse --
7 SENATOR SKOUFIS: So I'm getting to that
8 piece.
9 This is sort of a three-step question here.
10 So, is it safe to say a majority ends in
11 litigation?
12 A majority of the claims you suspect as
13 fraudulent end in litigation? I think the words you
14 used was it is very high. I'm trying to understand
15 what that means.
16 Is it at least a majority or can you not,
17 with confidence, even say that?
18 ERIN COLLINS: I can't with confidence give
19 you a number.
20 What I can tell you is that we have seen both
21 an anecdotal and some independent research from, you
22 know, these antifraud organizations.
23 SENATOR SKOUFIS: Okay.
24 So you can't even say that at least half,
25 more than half of these claims you believe are
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1 fraudulent -- whatever number that is -- winds up in
2 litigation and being challenged.
3 That raises a whole series of additional
4 questions in my mind.
5 ERIN COLLINS: I'll answer it this way.
6 We have seen a drastically increasing -- and
7 I will get you the number -- drastically increasing
8 number of cases that involve retention of an
9 attorney and filing of litigation even prior to
10 communication with the insurance companies.
11 SENATOR SKOUFIS: Understood. I'd love to
12 see those numbers. We would all love to see those
13 numbers.
14 I have another question and I'm almost out of
15 time. I apologize.
16 Now, whatever that number is, that second
17 percent, what percent of those claims that wind up
18 in litigation ultimately see a verdict, not a
19 settlement?
20 CASSANDRA ANDERSON: We are still trying to
21 establish the first numbers and I think that that's
22 the challenge, trying to --
23 SENATOR SKOUFIS: Give me a sense, just a
24 sense. Is it a tiny -- is it a fraction of
25 1 percent?
155
1 CASSANDRA ANDERSON: Part of the issue is to
2 prove fraud is not always easy.
3 So how much do we suspect versus how much
4 there is to whole scheme versus an element.
5 There is a lot of variation.
6 SENATOR SKOUFIS: No doubt but if you don't
7 even see it through the process, it strikes me as
8 odd that this is such an enormous concern on your
9 end.
10 My concern is that whatever number of claims
11 are actually fraudulent, you all make a
12 determination that is just easier to sort of bake
13 that into your next rate application instead of
14 seeing it through to a verdict and fighting it and
15 creating case law.
16 That's my concern because that takes time and
17 energy and costs.
18 It's just easier, we'll add a couple points
19 to our next application.
20 So I would love to see those number when you
21 do circle back.
22 CASSANDRA ANDERSON: We are happy to provide
23 more information about all of what we do to fight
24 fraud.
25 SENATOR BAILEY: I have a second round of
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1 questions and I want to start off with where
2 Mr. Gordon left off with Senator O'Mara.
3 You talked about the side of nuclear verdict.
4 Nuclear verdict is a definition of is it just
5 $10 million more? It has nothing do with the
6 portion of possible loss.
7 So even if the losses were 9.99 million, we
8 refer to it as a nuclear verdict if it is exactly
9 $10 million?
10 ROBERT GORDON: If it is 10 million or more,
11 then it's a nuclear verdict.
12 SENATOR BAILEY: So the nomenclature has
13 nothing to do with the excessive nature above the
14 laws, it's just the number of the dollar amount?
15 ROBERT GORDON: The issue is just how much it
16 is increasing cost for society.
17 You can argue with each case whether it's
18 reasonable or not but what we are seeing, again, is
19 spilling hot liquid on your lap went up from
20 2.7 million to 50 million, those costs get added
21 into the costs of all sorts of consumer products
22 ultimately.
23 SENATOR BAILEY: I agree with that
24 assessment.
25 I just want to make sure that we are clear
157
1 about not painting a broad brush because when one
2 hears the phrase "nuclear verdict," it sounds as if
3 it's well beyond the, you know, any loss.
4 And if somebody's reasonable losses were
5 9.9 million, that nuclear verdict is not nuclear.
6 It is just -- it is on par.
7 ROBERT GORDON: Although what we are seeing
8 is the driving factor appears to be the non-economic
9 damages.
10 So it's not that the economic losses have
11 scaled up as much in terms of, you know, the cost of
12 a knee injury or a back injury, but rather what the
13 jury decides or a judge decides is an appropriate
14 pain and suffering award.
15 And for whatever reason in society, those
16 numbers have escalated very significantly and so
17 it's taking more money out of the system.
18 SENATOR BAILEY: I think that's a number
19 of -- factor of things that are not the subject
20 matter of this hearing about how people are feeling
21 about the world in general, how they want to give
22 someone else a break so to speak.
23 If we could talk about juries and jury pools
24 at a different time.
25 And I believe in representation. The people
158
1 should be represented. I'm sick and tired of the
2 top dog law, commercials on the radio just like you
3 are. But I do believe that people deserve fair and
4 adequate representation.
5 So I think that we should get more data
6 around what these litigation costs are so we can
7 have a concrete conversation together. Because I
8 understand how you are seeing it.
9 But on the other side, you wouldn't want to
10 send somebody into a court unrepresented going as a
11 Pro Se litigant for a possible loss of $50 million.
12 The two are not -- we want to make sure that that's
13 happening properly.
14 ROBERT GORDON: But I think the key there,
15 Senator, is we're not seeing more people getting
16 justice.
17 We are just seeing a small number of these
18 very high verdicts that then drive up costs broadly
19 in society.
20 SENATOR BAILEY: I would love for us to have
21 that data.
22 To that point, we talked about factors, I
23 want to talk about solutions. Let's talk about
24 solutions.
25 From the relative -- from the perspective of
159
1 each of your associations, what are the solutions?
2 What are the tangible takeaways that we can
3 walk into session, at the state level in January,
4 and have a reasonable conversation about doing
5 something about it.
6 I want to talk about solutions.
7 ROBERT GORDON: I think, overall, we have all
8 talked about resiliency is the most important
9 solution.
10 It's building codes, mitigation incentives:
11 Whether those are grants, loans, waiver of fees, tax
12 credits, encouraging free inspections.
13 A lot of states have had success with all of
14 those.
15 Infrastructure is important, education,
16 having more risk disclosures. Those can be
17 targeted.
18 You can say all right, for affordable housing
19 we are going to create more mitigation incentives to
20 help affordable housing.
21 That's really the key long-term to bending
22 the cost curve and making housing more affordable.
23 SENATOR BAILEY: Anyone else?
24 CASSANDRA ANDERSON: Certainly modernizing
25 the regulatory environment and making sure that DFS
160
1 has the regulatory capacity.
2 There is a bill for them to be able to use
3 consultants, to be able to get through that process.
4 Loss mitigation efforts. Insurance is very
5 involved in this space. But it's very hard for us
6 to be able to engage with our policyholders and to
7 be able to give them the tools or to provide them
8 with the service that would go with detecting fires,
9 for example.
10 There are devices that will do that. Water
11 sensors, as Erin mentioned earlier. Something we
12 really want to see more and more of.
13 I've talked about third-party litigation
14 funding and to be able to address the transparency
15 and discovery that needs to happen.
16 There's a lot in the litigation space.
17 We talked about, not only capping
18 non-economic damages in a reasonable way, but
19 potentially capping attorneys fees. I certainly
20 think that that's something that could be discussed
21 as well.
22 So we are happy to have a conversation on a
23 wide range. That's just a sampling of things we
24 would be happy to talk about.
25 SENATOR BAILEY: Ms. Collins.
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1 ERIN COLLINS: I would agree with all those
2 things.
3 I would also add this, and I think this is in
4 part an answer to Senator Skoufis, your question
5 about fraud and the resolution of the court cases.
6 So I want to make sure that there is a distinction.
7 When we are talking about a civil case, it
8 would be, you know, one party versus another party
9 and a finding of liability.
10 And it's either a go or no go. And that's
11 what is reported about that case. That's not a
12 finding of fraud.
13 So, I think a positive thing for us to look
14 at here, and to your point, is to incentivize and
15 empower law enforcement to really go after and
16 investigate fraud and then prosecute it.
17 And so I think, you know, in terms of
18 measures that are actionable that you can do in
19 states, and we are very anxious to continue this
20 conversation, states that have seen higher
21 conviction and interest from law enforcement and
22 insurance fraud have seen some of those loss curves
23 bend down.
24 SENATOR BAILEY: Those of my colleagues who
25 know me from coded committee days know that I do not
162
1 believe in incarceration as a societal method of
2 improving people's lives at large.
3 But I'm always happy to have a conversation
4 about making sure that people who are bad actors and
5 are proven to be bad actors -- the proof is in the
6 proof, not proof is in the pudding -- and making
7 sure that those folks are held accountable.
8 And the last thing I'll say is this:
9 Mr. Gordon, you mentioned previously that the
10 non-tendering of policy takes roughly 3 years.
11 If a policy is not going to be tendered, it
12 takes about 3 years.
13 Was that something that you said earlier?
14 ROBERT GORDON: So there is a general
15 prohibition on non-renewals after the -- that lasts
16 for 3 years.
17 So that's one of the things insurers have to
18 worry about is you know that inflation is
19 increasing.
20 You know climate losses are increasing. But
21 it's going to take you a couple of years potentially
22 to get a rate increase through the system.
23 And at the end of that approval, you have to
24 wait for the policy, 12-month policy to renew.
25 So if you can't reprice it quickly and you
163
1 can't non-renew, then you are very exposed to those
2 increasing losses. And that's one of the friction
3 points in New York.
4 SENATOR BAILEY: Thank you for that
5 clarification.
6 As I close, I look forward to having many
7 conversations about this and consumer awareness.
8 I'll just make this point, like I said to
9 DFS, maybe they're not as -- maybe your hands are
10 not as tied as the regulators are.
11 I would implore you to please make sure that
12 the policyholders within the State of New York have
13 the information about all of the discounts and
14 things that they possibly may have.
15 My time is up. Thank you.
16 CASSANDRA ANDERSON: I will say we have a
17 thank goodness for insurance website that provides a
18 lot of tips and information.
19 Our goal is to increase financial literacy
20 and we welcome working with all of you in that
21 space.
22 SENATOR BAILEY: Thank you very much.
23 SENATOR KAVANAGH: For the record, we all
24 thank goodness for insurance.
25 Just a couple of followup questions.
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1 First of all, so you mentioned litigation
2 costs.
3 Do you have data that distinguishes the cost
4 of litigating, the cost of your attorneys and
5 investigations versus the cost of paying out claims
6 or settlements after that are litigated?
7 ROBERT GORDON: We have what is called the
8 defense cost and containment expense ratio, where
9 essentially they look at your -- how much you are
10 spending on lawyers in the system and then as a
11 percentage of your payout and that's something that
12 we track generally nationwide. And we can get that
13 on a state by state basis.
14 SENATOR KAVANAGH: I think I followed that.
15 You have data for how much is spent on
16 lawyers and the cost of actually engaging in the
17 litigation versus what gets paid out at the end?
18 ROBERT GORDON: Yes.
19 And that's one of the concerns is the amount
20 of money society is paying on -- the legal system is
21 increasing and the U.S. is an outlier in the world
22 in terms of how much we spend.
23 SENATOR KAVANAGH: We are also an outlier in
24 the world in not having people have their medical
25 costs covered when they are injured.
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1 So the McDonald's case, it's odd -- I was a
2 law student in a foreign country in 1997 and the
3 case happened in 1994.
4 It's all lawyers and law students from
5 outside the U.S. wanted to talk about at the time.
6 But my understanding of the case is that
7 somebody was injured and had $20,000 in medical
8 bills and McDonald's flatly refused to pay
9 anything and so then it went to court and resulted
10 in a verdict that was something in today's dollars
11 as 5 or $6 million.
12 But we digress.
13 Do you have data the extent to which the
14 assertion of the insurance company in litigation was
15 about the claim being falsified or fraudulent in
16 some way versus a dispute about how much to pay?
17 Like, if my home -- presumably if my roof is
18 ripped off by a storm, you are not going to assert
19 that there was a fraudulent storm.
20 But you might say we don't owe you as much as
21 you think, you know, as much as you are trying to
22 claim for the roof versus a situation where you are
23 asserting that the claim itself was defective or
24 false in some way?
25 ROBERT GORDON: I have not seen a national
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1 database on that. There may be some individual
2 insurers who track that. We would have to go back.
3 SENATOR KAVANAGH: I know this has been a bit
4 contentious here.
5 We really are trying to get to the bottom of
6 what is actually known because if we are going to
7 act on this, we need to understand the dynamic.
8 Shifting gears a bit. Robert, you mentioned
9 a number of ways we might incentivize to people to
10 engage in behavior that would reduce harm to people,
11 reduce property damage, reduce risk. None of those
12 incentives involve discounts from insurers.
13 And your list -- I'm not saying that that may
14 have been an oversight -- but I mean, insurers are
15 engaging in discounting in this.
16 Is it in your view, all of you, would it be
17 useful to have a more systematic approach to make
18 sure that all the people we talked about -- we
19 talked about contractors and property owners and
20 agents -- are aware of the behaviors that diminish
21 risk and are incentivized to diminish those risks by
22 actual reductions in premiums?
23 ROBERT GORDON: So that information is
24 generally available through the IBHS website.
25 But what we have been talking with the
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1 builders and realtors and others about doing is
2 trying to help them with essentially more cost
3 benefit analysis; how much of those different
4 techniques in different states going to help, not
5 only save money with insurance but reduce losses,
6 protect people and enhance resale value.
7 So we are trying to package that together
8 with some education. So this is a project we are
9 all working on together.
10 SENATOR KAVANAGH: We would very much like
11 that.
12 CASSANDRA ANDERSON: We are happy to discuss
13 what discounts would look like.
14 As I mentioned before, there are currently
15 five fortified roofs in the entire state of New York
16 so fortified hasn't even come here yet.
17 How we determine the discounts is if there is
18 actuarial significance.
19 So we need to see what that looks like in
20 New York State.
21 We believe in the science but we need to be
22 able to determine what that would look like in the
23 state.
24 We are actively working with state agencies
25 right now to bring fortified to the state and to
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1 encourage it, and I think the insurance industry
2 will be more than happy to continue to be part of
3 that conversation.
4 SENATOR KAVANAGH: Fortified is obviously a
5 newer -- it does seems from other states there's
6 some evidence that it's effective and I think there
7 have been some studies that have noted reduced costs
8 both to insurers and in terms of deductibles.
9 Some of the things you mentioned -- Sandra, I
10 think you mentioned this before -- much more routine
11 technology that is not about, you know, climate
12 disaster and other extreme weather but just more
13 routine disasters in individual homes.
14 Some of these technologies have been around
15 for quite sometime.
16 Water sensors to make sure you don't have a
17 catastrophic pipe burst. Fire guards, fire
18 detectors, smoke detectors.
19 Again, is there a systematic approach within
20 the industry to determining whether a discount
21 should occur for the presence of those things?
22 Cameras, by the way, for litigation we
23 mentioned before. Presumably if there are cameras
24 present, that might diminish the risk you are going
25 to make a payout on that property.
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1 I mean, how do you price and -- how do you
2 price those things and how do we explain what
3 appears to be quite different approaches by
4 different insurers to those, you know, those
5 features that have been around for a long time?
6 CASSANDRA ANDERSON: Again, each insurer is
7 figuring out what that meaning is for them.
8 They're coming up with an actuarially
9 analysis -- an actuarial analysis, what that looks
10 like.
11 What I will say, though, is we actually, as
12 an insurance industry, are very interested in
13 increasing the amount of devices that people have;
14 whether it's water sensors, and it's very difficult
15 for us to even provide that device to a
16 policyholder.
17 We have to file for it right now as it
18 stands.
19 We have actually sought legislation when
20 trying to work with DFS to increase or to create
21 more flexibility so insurance companies can offer
22 those types of devices to their policyholders before
23 we can even get to the discount part of the whole
24 equation.
25 But we like to be more engaged with our
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1 policyholders in that space and carriers would
2 welcome that flexibility.
3 SENATOR KAVANAGH: We would like to engage
4 and just to note -- I'm not going to have time to
5 explain this -- but it is perplexing that, I mean
6 actuarial science should not vary that widely from,
7 you know, if you are talking about whether a, you
8 know, a water sensor is likely to diminish risk.
9 Presumably there is quite a bit of data on
10 that at this point in the industry.
11 It is perplexing that, you know, discounts
12 are offered by some companies and not others for
13 some features and not others.
14 So I think this is an issue we're going to
15 want to explore on an ongoing basis.
16 One more question. Do any of your
17 associations dispute that climate change is driven
18 by, at least substantially, by human activity on
19 this planet?
20 ERIN COLLINS: I think in terms of our
21 association, what we are focused on is the response
22 to climate change and extreme weather and how to
23 mitigate against it.
24 SENATOR KAVANAGH: Your association is not
25 sure whether climate change is caused by, you know,
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1 increased greenhouses in the environment?
2 ERIN COLLINS: What I'm saying is that we
3 don't have a position on that as that is not our
4 area of expertise.
5 What is our area of expertise is how to
6 harden ourselves against extreme weather.
7 We can recognize the pattern of change in the
8 weather, but we don't employ scientists for causes
9 and I'm not -- as a trade association, that is not
10 our area of expertise.
11 SENATOR KAVANAGH: I'm aware that I am over
12 time here.
13 But just to be clear, you don't -- for
14 example, if the federal government pulls back on
15 policy that is likely to dramatically increase the
16 greenhouse gas content of the atmosphere, you don't
17 consider whether that will increase the likelihood
18 of bad weather events?
19 ERIN COLLINS: Senator, I'm happy to give you
20 my personal opinion.
21 SENATOR KAVANAGH: No, I'm not asking for
22 your personal opinion.
23 Again, I'm surprised; I thought this was a
24 throw away question.
25 CASSANDRA ANDERSON: I think what Erin is
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1 saying and it's important to recognize, is we look
2 at it from the effect on the extreme weather.
3 The industry doesn't have experts who are
4 engaged in how that occurs. I'm not disputing it.
5 I'm just saying that we have our area of
6 expertise and we stay in that lane.
7 SENATOR KAVANAGH: Again, I'm very surprised
8 if your industry is taking -- if your organization
9 is taking a position that you don't assess whether
10 policy and industrial activity are increasing or
11 decreasing the amount of greenhouse gases in the
12 environment and whether that is likely to lead to
13 greater or lesser risk, I think -- I mean, that
14 strikes me a policy that would constitute putting
15 your head in the sand.
16 Again, I wasn't trying -- this wasn't a
17 gotcha.
18 ERIN COLLINS: Senator, if the question is do
19 you dispute it, the answer is no.
20 SENATOR KAVANAGH: So again, maybe I asked or
21 phrased the questions incorrectly.
22 And I do want to wrap here, but you, as an
23 industry, your associations and your companies,
24 assess the likely increase in greenhouse gases in
25 the environment based on human activity as a factor
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1 that will have an effect on risk, on future risk.
2 Is that a fair statement?
3 ERIN COLLINS: I think so.
4 SENATOR KAVANAGH: Okay. All right. I'm
5 over time so I will leave it there. But thank you
6 for -- and a follow-up.
7 Thank you.
8 SENATOR FERNANDEZ: Very quick, out of
9 curiosity, because rates are going up, we are paying
10 more, the average person is not getting paid more.
11 The members of your -- well, your members,
12 their executive pay, has that gone up in recent
13 years or down?
14 ERIN COLLINS: We don't track payment. What
15 I would say is this: Every insurance company has a
16 Board of Directors that is representative of their
17 policyholders.
18 And they establish their, you know, overhead
19 for all levels of operation to be substantial
20 representation of their policyholders and their
21 needs in order to remain competitive in the market
22 and deliver the best products.
23 SENATOR FERNANDEZ: Okay.
24 ROBERT GORDON: Senator, I can give you a
25 couple of quick data points.
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1 For the top 350 public firms, the realized
2 compensation averaged nearly $23 million last year.
3 Average property casualty CEO compensation
4 was under $10 million and there were only four to
5 five property casualty CEOs who had compensation
6 exceeding that average, most of which are CEOs of
7 global companies.
8 SENATOR FERNANDEZ: I'm glad you had that
9 information. Thank you.
10 I yield my time.
11 SENATOR KAVANAGH: I think that wraps up.
12 Again, thank you all for your testimony, for
13 all the information you provided and including
14 written, and we look forward to a continued
15 conversation. We appreciate you.
16 We are going to take a 5-minute break before
17 the next panel, literally only 5 minutes. So at
18 1:11 we will reconvene.
19 Thank you all.
20 (The hearing stands in recess.)
21 So at 1:11 we will reconvene. Thank you all.
22 (The hearing resumes.)
23 SENATOR SKOUFIS: All right. We are going to
24 get back to it here.
25 Welcome to the Acting Commissioner and Deputy
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1 Commissioner. Appreciate you both being here.
2 Before we get to your testimony, if we can
3 swear you in, please raise your right hand.
4 Do you solemnly swear that you will tell the
5 truth, the whole truth and nothing but the truth?
6 COMMISSIONER AHMED TIGANI: I do.
7 SENATOR SKOUFIS: Great, thank you. Please
8 proceed.
9 COMMISSIONER AHMED TIGANI: Good afternoon,
10 Chair Bailey, Chair Skoufis, Chair Kavanagh, members
11 of the Senate Committee on Insurance, the Standing
12 Committee on Investigations and Government
13 Operations and the Standing Committee on Housing,
14 Construction and Community Development.
15 My name is Ahmed Tigani. I'm the Acting
16 Commissioner of the New York City Department of
17 Housing Preservation and Development.
18 I'm testifying alongside my colleague
19 Lucy Joffe, Deputy Commissioner for Policy and
20 Strategy.
21 Thank you for the opportunity to testify
22 today on the impact of insurance markets in
23 preserving and developing affordable housing for
24 New Yorkers.
25 HPD’s mission is to promote quality and
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1 affordability in the city's housing, and diversity
2 and strength in the city’s neighborhoods.
3 In service of that mission, we dedicate
4 significant time and resources to studying the
5 housing market, examining indicators that place at
6 risk our ability to create and sustain New York’s
7 housing market and neighborhood vitality.
8 Unfortunately, the current challenges are
9 abundant: Supply chain and labor shortages,
10 elevated interest rates and operating costs, federal
11 uncertainty, and persistent rent arrears since the
12 pandemic.
13 Each of these conditions has the capacity to
14 harm building viability individually; collectively,
15 they can create havoc on the market.
16 Tenants themselves have not been immune and
17 are also struggling to keep up with costs.
18 We collectively need to commit to protecting
19 homes, and this is critical for both the occupants
20 and the owner’s well-being.
21 One way to do so is to examine the regulatory
22 and administrative burdens that weigh on our housing
23 stock, as well as focus on lowering the cost of
24 operating existing housing to keep buildings stable
25 without significant rent increases.
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1 Among the various rising costs, we see a
2 particularly disturbing trend in the cost of
3 insurance, and we are not the only ones sounding an
4 alarm.
5 For many in the housing sector, these trends
6 present a complex and growing problem for our
7 housing preservation efforts.
8 For public agencies focused on maximizing
9 resources to make impactful, sizable, and efficient
10 investments, these costs, including insurance, are
11 one factor that is diminishing the stability and the
12 building health we strive to achieve.
13 We work carefully with development partners
14 to structure loan packages and financing that
15 balance public policy goals -- such as
16 aging-in-place improvements and homeless
17 set-asides -- while still ensuring that buildings
18 are self-sufficient and that existing projects can
19 be recapitalized to meet new needs and maintain
20 stronger fiscal foundations.
21 Meanwhile, escalation of insurance costs have
22 made those guardrails much more difficult to
23 maintain.
24 Some of the ways this has been evident
25 include: Seeing insurance premiums are generally --
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1 seeing that they are generally increasing rapidly,
2 while coverage is decreasing or can be difficult to
3 find; estimates suggest recent average annual
4 increases around 25 percent for existing affordable
5 housing and 100 percent over the last four-year
6 period.
7 Among the list of rising costs, insurance has
8 been the biggest increase for many housing
9 providers.
10 Housing providers report finding limited
11 options and rapidly growing premiums, indicating
12 particular challenges with recent pricing of
13 liability insurance.
14 While we know that rising insurance costs are
15 a national problem, liability insurance appears to
16 be a comparatively bigger challenge in New York.
17 Insurance costs are uneven across the market
18 and across HPD’s portfolio, with significant
19 variation between projects, even for those in the
20 same loan program.
21 As insurance costs rise, it costs HPD more to
22 build and preserve each new home, reducing our
23 impact.
24 And when costs increase for buildings already
25 in HPD’s portfolio, those buildings can struggle to
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1 meet their monthly obligations and can experience
2 significant instability.
3 While we have the most direct involvement
4 with buildings in HPD’s portfolio, increases even
5 nearing these levels are risky and destabilizing for
6 our entire housing market.
7 HPD maintains insurance requirements for
8 preservation, new construction, and our Mitchell
9 Lama projects and developments.
10 These include comprehensive property and
11 liability coverage during the property’s operating
12 period.
13 Simply put, buildings cannot operate and we
14 cannot create and preserve affordable housing if
15 that housing is not insured.
16 This steep and rapid cost escalation not only
17 strains HPD’s ability to build, renovate, and
18 finance, it also places existing affordable housing
19 under serious financial strain and becomes a growing
20 threat to affordability.
21 These conditions impact owners, tenants, and
22 communities, and the harm is increasing.
23 We thank the State Senate for taking up this
24 issue, including by passing legislation in the FY25
25 budget prohibiting insurance carriers from
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1 discriminating against affordable housing with steep
2 penalties for failure to comply.
3 We hope, though, this is only the first of
4 many interventions to stem this tide.
5 We look forward to answering your questions
6 today and continuing to partner with you to identify
7 solutions to this pressing issue.
8 SENATOR SKOUFIS: Senator Fernandez is going
9 to lead us off.
10 SENATOR FERNANDEZ: Thank you so much. You
11 ended off with the anti-discriminatory laws that we
12 implemented. How are you seeing that being
13 affected? Like, are we seeing the intention
14 happening or not?
15 COMMISSIONER AHMED TIGANI: I know that once
16 the bill was passed, there was a great amount of
17 interest from the housing sector and those who were
18 working with us in our project loan packaging, both
19 in new construction and preservation, there was a
20 lot of education work that we did in our individual
21 conversations, so we made sure that at least the
22 sector and the industry was well informed.
23 In our conversations with DFS -- and I'm
24 sorry I wasn't here this morning to hear their
25 testimony -- we understand that they are still, you
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1 know, looking and evaluating what impact this is
2 having on the provider side.
3 There has been some information out there
4 about national trends that show, sort of
5 stabilizing. But we are still seeing, I guess in
6 our portfolio, increase in liability.
7 SENATOR FERNANDEZ: Are we seeing our
8 enforcement working?
9 COMMISSIONER AHMED TIGANI: At this point,
10 insurance costs are continuing to increase in our
11 portfolio. Like I said, we are seeing a lot -- we
12 are concerned about the rise in our liability
13 insurance particularly.
14 And we are still worried about how this
15 impacts our costs.
16 We have talked to -- there are different
17 attorneys and representatives in the legal world
18 that are looking to see --
19 SENATOR FERNANDEZ: Have any penalties been
20 paid?
21 COMMISSIONER AHMED TIGANI: Again, I would
22 defer to DFS as to whether that.
23 HPD is, in many cases, like other housing
24 operators, we are a provider, right?
25 We are funding projects and then we are
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1 looking at the underwriting and we are trying to
2 make sure that they are out there competing for
3 their best options.
4 The fact that our developers are not seeing
5 best options are the reason why we are concerned and
6 we are pushing for more tools to see that insurance
7 premiums are brought down.
8 SENATOR FERNANDEZ: Okay, because I do hear
9 from property owners, developers that they are
10 seeing terrible options.
11 COMMISSIONER AHMED TIGANI: Yeah.
12 SENATOR FERNANDEZ: I want to switch to a new
13 program. I brought it up earlier, the New York City
14 Community Insurance Pilot Program. This was created
15 in '23 in response to the storm surges that have
16 happened and the damage to communities and for
17 insurance that won't give flood coverage. This is a
18 pilot program to help pay for immediate repairs.
19 But, in '23 and '24, we haven't had a big
20 enough storm, that to my knowledge, these payments
21 haven't gone to anybody.
22 Could you speak about this program and if you
23 see it going into effect? And what criteria of a
24 storm and damage do we need to have for people to be
25 able to get some funds?
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1 COMMISSIONER AHMED TIGANI: So there is a
2 number of different pilots around climate resiliency
3 and flood response that don't operate through HPD.
4 I can talk to our colleagues at the Mayor's
5 Office of Climate and Environmental Justice and get
6 back to you with answers about that program.
7 I will say proactively, what we have been
8 trying to do over the last couple of years is design
9 projects from the start, which, through our new
10 construction work, so that they're flood resilient,
11 that they're climate resilient.
12 In our preservation work, we had the
13 opportunity to get about $800,000 of federal money
14 where we are looking at about eight or nine
15 different Mitchell-Lama campuses.
16 And doing technical assistance reviews so
17 that we can map out new construction -- I mean, new
18 capital improvements so that they can make
19 improvements in the building using capital dollars
20 and hopefully use that to bring down insurance
21 costs.
22 We also have a pilot out in Howard Beach with
23 one to four-family homes.
24 SENATOR FERNANDEZ: Has there been a
25 successful building that insurance costs have gone
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1 down because of your assistance?
2 COMMISSIONER AHMED TIGANI: Where we are
3 seeing the ability to control for costs, really
4 comes from the fact that there are a number of
5 different ways that people are out there competing
6 for insurance, whether it's through bulk purchasing
7 or being part of the existing captive options.
8 We are seeing there are developers --
9 particularly those who have an economy of scale, a
10 larger footprint -- able to compete and get better
11 rates. But it's not uniform. It's not a general
12 market solution. The general market issue is that
13 we are seeing premiums increase. But individually,
14 either because of scale of your building, your
15 participation --
16 SENATOR FERNANDEZ: That's an oxymoron that
17 we are seeing solutions because premiums increase.
18 COMMISSIONER AHMED TIGANI: We are seeing
19 solutions because of the scale of your building,
20 because of the fact that you participate in either a
21 national or local captives, because you are using
22 the ability to ensure among a group that is also the
23 providers of that housing, like the captive
24 discussion. They're able to control and make
25 different decisions about the premiums that they're
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1 charging. So one of the -- a lot of the
2 conversation over the last couple of years --
3 SENATOR FERNANDEZ: Okay, a decision as to
4 why they're putting certain premiums -- they're
5 making decisions as to what premiums they're giving.
6 And I mentioned it before that Section 8 tenants is
7 a reason why premiums tend to go very high. And to
8 the discrimination laws that we've seen, again, I've
9 heard many times that it is still happening.
10 COMMISSIONER AHMED TIGANI: So I think the
11 misinformation about buildings that rent to
12 individuals who have vouchers, which is something
13 that is disastrous for HPD, we oversee 43,000
14 households, nearly 8200 individuals, who benefit
15 from and contribute to the city in an incredible
16 way. And they're able to live in New York City
17 because of housing vouchers.
18 So we are aggressively pushing to make sure
19 that they're protected, not only by making sure the
20 buildings that they are in have financing if they're
21 available, but as they bring those issues about
22 insurance to them, we are in a position where we
23 have to fund those insurance premiums higher, making
24 it less possible to use that money to do more
25 projects or we are bringing that information to our
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1 state partners since insurance is regulated at the
2 state level and the federal level and not the city
3 level.
4 DEP. COMMISSIONER LUCY JOFFE: If I could
5 add.
6 We share your concern about the impacts of
7 discrimination on insurance, not just for the
8 buildings that are within our portfolio or
9 generally. So, you know, I think nothing that we
10 are saying is disagreeing with that point.
11 We would certainly expect, based on our
12 experience -- we don't enforce any discrimination
13 laws, but we work closely with partners at the city
14 level who do. Oftentimes, we are looking for two
15 different effects.
16 One is the change in behavior that happens
17 just as a result of the passing of the law if people
18 fear enforcement. And then there is the actual
19 enforcement itself.
20 The second one can take longer in our
21 experience.
22 So while we are not able to talk about today,
23 speak to whatever enforcement has happened because
24 we are not necessarily directly involved, though we
25 remain open and willing to work with anyone who is
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1 interested, we see that is what is happening.
2 SENATOR FERNANDEZ: Increases are happening
3 based on voucher number and buildings.
4 DEP. COMMISSIONER LUCY JOFFE: So what we
5 are seeing is a range of factors that we see are
6 driving them and we are definitely concerned about
7 the way that discrimination is impacting playing
8 into that. So we are hoping that the law that you
9 all passed will help us deal with that piece. And
10 that that is hopefully happening now and will
11 continue to grow as the law really takes hold and
12 lawyers and other folks figure out how to really
13 best capitalize on the law.
14 And then we are also hoping that we can work
15 together to find solutions to the other parts of the
16 other challenges that we are seeing. We are hearing
17 from building owners like you that are also driving
18 up costs so we think it is going to need to be a
19 multipronged approach.
20 SENATOR FERNANDEZ: Thank you. Thank you for
21 the time.
22 SENATOR KAVANAGH: Thank you, Senator
23 Fernandez. And thank you both for testifying and
24 for -- HPD is really a remarkable institution,
25 having such a large and sophisticated agency at the
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1 city level, it really is a blessing for New Yorkers
2 and we appreciate all the work you do and your time
3 here today and your testimony.
4 I just first just want to highlight something
5 you said and make sure I understand it. You are
6 saying that over a four-year period, the cost -- the
7 average cost of insurance over an entire portfolio
8 of affordable housing doubled?
9 COMMISSIONER AHMED TIGANI: So some of the
10 factors that we are seeing in terms of numbers over
11 the last couple of years, so since 2020, estimates
12 for increases in new buildings have been around
13 15 percent annually, while in existing buildings, we
14 have seen about 25 percent annual increase. This is
15 based on a number of different things.
16 But specifically, you know, we are
17 requiring -- we have to require comprehensive
18 insurance on our buildings to make sure that they're
19 protected. And as we start seeing that come in
20 through the loan packaging process, we are noticing
21 and we are recognizing its impact since it's taking
22 money that otherwise would go to build more
23 affordable housing.
24 SENATOR KAVANAGH: Right. But it's a
25 doubling of costs. Do you have any indication of
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1 the extent to which that is driven? I mean, a lot
2 of these buildings are probably insured as sort of
3 packages of different insurances bundled together.
4 But do you have any indication of how much of
5 that is driven by increases in concern about
6 liability, which we have been discussing this
7 morning, and increases and concern about replacement
8 costs and extreme weather and those things?
9 COMMISSIONER AHMED TIGANI: We don't have
10 that break down for you. We can see what
11 information we can put together.
12 But generally speaking, we have tried to
13 recognize that in the standards that we have set and
14 we have seen a total increase in that period around
15 94 percent.
16 And then also when we talked to our lenders
17 who are also looking for that information, we are
18 comparing notes with them.
19 So right now, from the -- and again, because
20 there are five or six different models of insurance
21 that we see our providers use, it gets a little bit
22 hard to do apples to apples. So we are taking the
23 best information that we have to set our baseline
24 standard.
25 And then when we look at where they're having
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1 difficulty finding that insurance and where the
2 costs have been the highest, it has been around
3 liability insurance.
4 DEP. COMMISSIONER LUCY JOFFE: These
5 estimates are not a measure of changes within our
6 portfolio. They're how we are -- we are
7 underwriting projects how we are seeing other folks
8 report on that. And there is very wide variation
9 between buildings even within the same program.
10 So certainly there are going to be some
11 buildings that don't have significant increases of
12 this amount and some for whom it has been even
13 larger.
14 SENATOR KAVANAGH: Do you, as an agency with
15 kind of a bird's eye view of lots of different
16 projects going on, you mentioned a couple of times
17 that there is sort of variations from one building
18 to another, even within the same program, which
19 means presumably they're broadly speaking the same
20 kinds of housing. They're multifamily, rental,
21 being funded in a particular way.
22 Do you see different outcomes when property
23 owners are getting insurance that are kind of hard
24 to explain? Or do you see, well, this one is higher
25 and it's easier to understand why that's higher and
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1 this one is lower?
2 COMMISSIONER AHMED TIGANI: I think in
3 situations where we see a strong property management
4 framework; where there is a risk assessment process
5 in place, where the building is kept in strong and
6 good state of working order.
7 And again, going to the idea where there are
8 collaborations, portfolio-wide economies of scale,
9 we are seeing those factors contribute positively to
10 getting, you know, better quotes and better
11 insurance offerings.
12 It's really -- it's really about the state --
13 you know, state of the building that we are seeing
14 opportunities to save money on insurance.
15 SENATOR KAVANAGH: But in terms of the
16 overall -- like the cost drivers are presumably not
17 because all those factors you just mentioned. Those
18 factors are ways of mitigating otherwise increasing
19 costs. You are not suggesting that buildings have
20 gotten worse on those measures over the...
21 COMMISSIONER AHMED TIGANI: No, no, I'm
22 suggesting there are two pieces.
23 We are concerned about information, both
24 anecdotal and research that is done that's impacting
25 the affordable housing portfolio or the larger
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1 housing market, where as the Senator suggested,
2 there is affordable housing connection to it.
3 And then we are looking through our
4 processing of either new construction or
5 preservation projects, we are looking at the factors
6 that contribute to the quotes that our providers are
7 getting.
8 And we are seeing that we do have a wide
9 variety of projects from supportive to multifamily
10 to HDFC co-op, et cetera.
11 And these baseline factors about property
12 management, risk assessment, condition of building,
13 that all feeds into their ability to get quotes in
14 their particular work streams.
15 SENATOR KAVANAGH: I mentioned earlier in
16 this hearing -- I think you weren't in the room
17 yet -- but that the state has taken a step to
18 encourage captive insurance, basically smaller -- I
19 mean, we have been aware there are very large
20 housing providers that are kind of effectively
21 self-insuring, but we have a notice of funding
22 availability out on the street that this HDR has put
23 out to allocate $5 million that was in last year's
24 budget to subsidize companies in joining captives.
25 Can you just talk about your perspective on
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1 how captive insurance operators might play a role in
2 the affordable housing sector?
3 COMMISSIONER AHMED TIGANI: I think one
4 thing -- one top line highlight is that with some of
5 the ones that we've seen in particular, it involves
6 the individuals who are also providing the housing
7 that is being built and being maintained and
8 preserved.
9 They have firsthand knowledge as operators of
10 that housing, they have history with that housing,
11 to talk about what the situation day to day is and
12 what the outcomes are of situations that occur.
13 So that firsthand knowledge is unique to them
14 and they're able to really move forward with that.
15 We are open and very interested in seeing as
16 many different ideas that can be tested or explored
17 to see what will drive down the ability to save on
18 insurance premiums; particularly in our housing
19 stock, you know, and our affordable housing stock.
20 I think some of the things that we have seen
21 come up as questions about viability is getting that
22 initial capital investment, making sure that the
23 pool is large enough in order to deal with things
24 that come up or maintain the costs of
25 administratively making that continue, the technical
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1 expertise that is required.
2 Again HPD, we are not insurance experts, but
3 in talking to those who have formed them or looking
4 to form them, and members of the insurance
5 community, that technical expertise is key, being
6 able to assess what the future is and make sure that
7 they're solvent. And then there is the idea of how
8 do you approach different housing stock types.
9 And so how do you approach, you know, sort of
10 general market versus supportive housing project,
11 Mitchell-Lama projects have other standards and
12 requirements. Their formation might be different.
13 And so ensuring that we have different types is
14 important. Making sure that we have different types
15 that are available and can match up with the
16 different types of housing that we organize and
17 create in New York State, also important.
18 SENATOR KAVANAGH: You mentioned requirements
19 that you have as part of underwriting. For
20 instance, HPD and HTC have -- basically are
21 requiring insurance to secure the asset that you are
22 financing against.
23 Is there -- I mean, presumably those have to
24 be adjusted as replacement costs go up and other
25 factors. But has there been any recent change in
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1 kind of the way you think about those requirements?
2 Like, have those requirements become more stringent?
3 Or is there any aspect of that that might be driving
4 changes in cost of insurance?
5 COMMISSIONER AHMED TIGANI: I think first and
6 foremost, like many people, we are concerned about
7 the rising impact of climate change and want to make
8 sure that our buildings are secure for that.
9 The leading angle on that is making sure that
10 we are addressing it through any capital rehab work
11 that we do and doing the examination as part of our
12 discussions with them.
13 Sustainability, energy efficiency, all of
14 these factor in to the larger operating costs and
15 management of these buildings.
16 So, you know, while not directly related to
17 insurance, there is this bigger picture of just
18 making sure our stock can maintain the operating
19 costs that they're enduring now; which we note here
20 in testimony and we have talked about before, we are
21 seeing operating costs increase across the board.
22 So by trying to maintain and solve for in
23 other areas, it allows us to free up the cash flow
24 that may need to go to increasing insurance
25 premiums.
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1 But on the insurance premium side, we are
2 definitely concerned about things like climate
3 change; however, property insurance, general
4 liability, worker's comp, you know, flood coverage,
5 disability benefits, all of that remains the same.
6 And we do absolutely evaluate regularly
7 whether the management and operating standards we
8 set for projects that are coming in and gets
9 approved can meet that standard.
10 DEP. COMMISSIONER LUCY JOFFE: We have not
11 made any changes in recent years so we can't trace
12 that to a general cause here.
13 SENATOR KAVANAGH: Time is up. Thank you,
14 both.
15 SENATOR BAILEY: Thank you very much. I want
16 to thank you for your testimony and for your time.
17 I want to start from the year 2022. I don't know if
18 either of you were in your roles or with the
19 administration but I want to say that this was a
20 catalyst in the way that I started thinking about
21 this as a problem.
22 Tracey Towers, which is an HPD Mitchell-Lama,
23 had a significant insurance increase of roughly what
24 I recall to be 500 percent. That insurance increase
25 priced a lot of residents, even out of Tracey
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1 Towers, which is supposed to be affordable housing.
2 It's a beacon of affordability in the borough of the
3 Bronx. And that priced a lot of people out because
4 they were no longer able to live there.
5 When things like that happen, there becomes a
6 societal domino effect of unfortunate things. I
7 don't want to make it too dramatic, but of
8 unfortunate things. Back to what HPD's role is in
9 this. R.Y. Management is the management company at
10 Tracey Towers, I've had good relationships with
11 them. This is not to target them specifically but
12 what is the relationship between the management
13 companies that are subcontracted under some of these
14 Mitchell-Lamas -- and you mentioned some of the
15 formations are different -- how can we figure out
16 like, if risks are coming down the pike, and we
17 possibly have seen that they may see this as a major
18 increase, what can we do to be responsive as opposed
19 to reactive like in the event of the next Tracey
20 Towers' 500 percent increase?
21 I know that was a lot and was a really
22 nebulous question. I can narrow it if you want.
23 COMMISSIONER AHMED TIGANI: No, no, it's the
24 right question, Senator.
25 So, we have our housing supervision team that
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1 has multiple parts but one of which does maintain
2 a -- sort of an asset manager, which each of the
3 city oversight -- overseeing Mitchell-Lama
4 properties. They're the ones who would be talking
5 with R.Y. or any property manager about what is
6 coming up down the pike. We have both annual
7 information that we collect.
8 But there is also specifically ongoing
9 discussions about the state of their property.
10 Often they are looking at maybe meeting the
11 obligation of a local law, like local law 11 or
12 local law 97. Or they have a board because they're
13 a co-op and they see that they want to advance
14 capital improvements. So then they come in to start
15 discussing that with our preservation and finance
16 team.
17 And in those conversations, we are looking at
18 their operating costs now, we look at the past and
19 we project what they might look like in the future
20 because their vendors are giving them estimates
21 about what increases might look like.
22 So there is a proactive point in where we are
23 asking questions about their ability to meet their
24 obligations on their local law requirements.
25 There is a point -- I wouldn't call it
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1 reactive, but where they're coming to us because
2 they're planning proactively and need financial
3 assistance from the city in order to plan for those
4 repairs.
5 And then there is reactive ways, where there
6 are issues that come up, maybe brought by an elected
7 official. Or you are talking to them because you
8 are providing reso-a or you're providing funding for
9 a project.
10 And then we package that into something and
11 say if the elected official wants to give money, we
12 want to be able to come in and do a real full
13 substantial scope, how do we work with you?
14 That said, on the insurance piece, I think
15 that's something where we regularly recommend to our
16 property managers and the owners of these buildings,
17 if you are seeing issues, please come to us.
18 We want to have a productive discussion about
19 all the tools that are on the table so that both
20 them and the tenants that they're trying to serve
21 are not caught by surprise.
22 SENATOR BAILEY: I know you said that you are
23 not insurance experts, so I'm not going to ask you
24 to specifically opine on the very specific granular
25 data. But I will ask the question about -- and I'm
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1 going to use the Tracey Towers example again.
2 It was said that the increase was based upon
3 certain statistics of certain risks that became
4 higher than not in that area. And we are wondering,
5 you know, does HPD take a position on how these
6 insurance companies are assessing risks?
7 Because if you specifically look at Tracey
8 Towers, it's two hospitals, you know, DeWitt Clinton
9 High School, Lehman College and the Bronx Science
10 High School where lots of trouble happens, right,
11 and wondering, this area is not a bad area, but yet
12 the conversation was that risk was significantly
13 increased.
14 Is there a position that you are having about
15 how these insurance companies are arriving at the
16 manner in which they are assessing risk for HPD
17 properties?
18 DEP. COMMISSIONER LUCY JOFFE: To your
19 point -- or you said it for us. We are not experts.
20 We are also looking at the patterns across our
21 portfolio and attempting to try to derive what is
22 going on.
23 You know, the Commissioner talked a lot about
24 what we can do to help when it happens. I think we
25 are actually coming to a similar conclusion that you
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1 are, which is we don't know how to explain and would
2 defer to other people about how to explain why the
3 increases are happening.
4 What we are best able to say is this is an
5 unsustainable place. It is very hard for us to do
6 our jobs. It's very hard for the management
7 companies, the owners, the impacts are trickling
8 down to the residents and the occupants so long as
9 this is happening.
10 So we would defer to others who have
11 testified so far today as to why, what the factors
12 are. But there has been a number of questions --
13 and we are not able to explain it as sort of the
14 regular course of, you know, because this and this
15 is happening.
16 COMMISSIONER AHMED TIGANI: The only thing I
17 would add is that we have made clear that we are
18 available to talk with entities in the insurance
19 world or our partners at the state level about how
20 we work and support our buildings so that they're
21 safe, that they are running well. And that they are
22 in a condition that warrant being able to work with
23 them to come up with reasonable expectations and
24 solutions.
25 So that's something that HPD is very
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1 interested in continuing that conversation.
2 SENATOR BAILEY: And we're speaking about
3 affordability, again, the topic du jour of the day.
4 Mitchell-Lama and other housing stock like
5 that, it's supposed to be the beacon of
6 affordability. And when Mitchell-Lama housing
7 becomes unaffordable, we are having a larger
8 societal problem.
9 But about, not just the coverage of that,
10 it's fair to say that HPD's portfolio does include
11 certain Section 8 tenants. Is that fair to say?
12 COMMISSIONER AHMED TIGANI: We oversee about
13 43,000 federal vouchers. 38,000 of those federal
14 vouchers are specifically housing choice vouchers,
15 which is normally referred to as Section 8.
16 SENATOR BAILEY: So with that Section 8 or
17 those types of housing, are you seeing insurers
18 pulling out of those markets greater? Because we
19 are talking about declination of insurance. Less
20 people are looking to cover certain places in other
21 areas.
22 Are you seeing that they're coming out --
23 that they're pulling out of that type of housing
24 stock more often than not or is it equal across the
25 board? If people are pulling out of the market,
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1 they're pulling out of the market, or is it
2 happening more in lower income areas?
3 COMMISSIONER AHMED TIGANI: We are seeing
4 general difficulty with being able to access
5 insurance options. And a lot of our housing -- a
6 lot of housing in HPD's portfolio is both a
7 combination of subsidized buildings with city or
8 federal resources and vouchers.
9 So, you know, I can say that the folks who
10 are coming to us, either who are in our portfolio
11 and trying to re-up and extend their loans, or
12 individuals who are coming to us as part of projects
13 who want to come and be part of an HPD loan process,
14 both are seeing issues with availability, with
15 pricing.
16 And it's not so much that Section 8 is the
17 factor, but we are talking more generally in the
18 housing stock but particularly affordable housing.
19 SENATOR BAILEY: The reason I'm stating these
20 things is simply for the record. When people come
21 to us with certain complaints and we're reading in
22 the media about certain complaints, it's important
23 that we elevate these conversations.
24 Just, these are not accusations that anybody
25 is a bad actor but when people bring us stuff, it's
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1 irresponsible if we don't bring it to those,
2 especially those in municipal government.
3 I guess the last thing I will say is this.
4 As you continue to strategize and look towards and
5 continue to look towards and do the great work that
6 you are doing, are there any state level
7 conversations that you would like us to be having
8 that we can work in complement with the city that --
9 legislatively or otherwise?
10 COMMISSIONER AHMED TIGANI: I would say there
11 are a couple of things. Our continued collaboration
12 and I would say this in any room, you know, the HCR
13 Commissioner and the entire team works hand in hand
14 with us to make sure that we have resources, either
15 tax credits or capital, so that we are investing in
16 these buildings. The stronger we make our existing
17 portfolio, the better they can withstand any of
18 these issues that come up.
19 So continuing to be -- and the Senate and the
20 Assembly and the Governor's support of over a
21 billion dollars in housing funds, actually is going
22 to connect directly to what we are talking about
23 here and help us moving forward.
24 So more of that support is always great. And
25 then as far as the legislation that we are seeing
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1 here, I think across the board we are very
2 interested in seeing if there are different
3 alternative methods that either create new pathways
4 to better premium options, better quotes. Or if
5 there are other things we can do with the standard
6 way.
7 So we are interested in talking about all the
8 options that are on the table. We defer to our
9 colleagues at the state level, especially about the
10 mechanics of the insurance industry.
11 But as far as an operator and funder of
12 housing, we would like to be in the conversation on
13 all of these.
14 SENATOR BAILEY: Thank you, Commissioner and
15 Deputy Commissioner.
16 Senator Kavanagh.
17 SENATOR KAVANAGH: In recognition of your
18 time and your staff's excellent work reminding us
19 that you have other things to do today, I think I'll
20 forego the opportunity to ask another round of
21 questions. But just again, thank you for your
22 testimony and for all that you do. And we will be
23 in touch about some of the followup. Thank you.
24 COMMISSIONER AHMED TIGANI: Thank you guys
25 for the opportunity.
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1 SENATOR KAVANAGH: Andrew Finkelstein is
2 next.
3 SENATOR SKOUFIS: Thanks for joining us,
4 Mr. Finkelstein. Can I swear you in?
5 ANDREW FINKELSTEIN: Sure.
6 SENATOR SKOUFIS: Do you solemnly swear that
7 you will tell the truth, the whole truth and nothing
8 but the truth?
9 ANDREW FINKELSTEIN: I do.
10 SENATOR SKOUFIS: Thanks very much. Go right
11 ahead.
12 ANDREW FINKELSTEIN: Chair Bailey, Skoufis,
13 Kavanagh and members of the committee, thank you for
14 the opportunity to testify today. My name is Andrew
15 Finkelstein. I'm president of the New York State
16 Trial Lawyers Association.
17 NYSTLA represents New Yorkers injured through
18 unsafe property conditions; tenants, workers and
19 community members, who rely on property owners
20 liability insurance to obtain the protection and
21 compensation those policies are meant to provide.
22 Residential insurance is prohibitively
23 expensive in New York because the system rewards
24 delay, secrecy and profit sharing instead of
25 protecting policyholders. At the same time,
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1 industry profits have never been higher. The
2 property and casualty insurance industry earned
3 $88 billion in 2023, it's most profitable year of
4 all time, even as insurance executives claimed the
5 sky was falling and insurance companies jacked up
6 rates with these great profits.
7 In addition, AM Best reports that 2024 saw
8 profitability continue to surge with net income
9 reaching $130 billion in the first quarter of the
10 year -- 148 percent increase, putting the industry
11 on pace to shatter 2023 records. The major driver
12 of this imbalance is the rise of illusory insurance.
13 These policies look like insurance on paper but
14 offer little or no useable protection in practice.
15 Families pay premium believing they're
16 covered, yet when they need the insurance company,
17 they evaporate and deny the claim. The result is
18 simple: New Yorkers think they are insured, but
19 when disaster strikes, they find out they are
20 effectively on their own.
21 Trial lawyers see this reality every day,
22 particularly in affordable housing communities that
23 are hit first and hardest by climate disasters.
24 These households take two or three times longer to
25 recover from storms, are twice as likely to suffer
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1 heat-related harm, and are more likely to be
2 underinsured when catastrophe strikes.
3 To address these failures today, I'll focus
4 on three ways New York State can help affordability
5 of insurance.
6 First, sunlight. Sunlight laws are essential
7 because New York cannot fix or regulate what it
8 cannot see. We heard today from the Chair of DFS.
9 She specifically said they do not get claim level
10 data to rely on any increases. When she is blinded
11 as to what she is attempting to regulate, she cannot
12 properly regulate. And it's the industry that is
13 withholding that information. So if the legislature
14 was -- had the wisdom to actually put true sunshine
15 laws in place, we would be able to see why they
16 claim these premium increases without what appears
17 to be justification.
18 Secondly, New York urgently needs a strong
19 bad faith law, because it would protect
20 policyholders and significantly reduce the burdens
21 on our court. Today when an insurer wrongfully
22 delays or denies legitimate claims, the only
23 consequence is that they may eventually have to pay
24 what they owed from the start. The structure
25 rewards delay and encourages denials that individual
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1 homeowners and affordable housing providers cannot
2 afford to fight. And when a property owner is
3 wrongly denied coverage, the ripple effects extend
4 further. Injured New Yorkers lose their only source
5 of recovery, their medical care does not disappear,
6 it only shifts to Medicaid and public hospitals.
7 That means taxpayers bear the cost that should have
8 been paid by the insurers who collected premiums
9 specifically for those losses. The state has a
10 direct financial interest in ensuring coverage is
11 honored and enacting bad faith law.
12 And third, New York must confront fraud
13 wherever it occurs, including widespread often
14 hidden fraud committed by the insurers themselves.
15 NYSTLA is unequivocal. Fraudulent claims by anyone
16 is unacceptable. But we cannot ignore the
17 documented misconduct within the industry.
18 After "Sandy," for example, multiple insurers
19 were sanctioned for manipulating engineering reports
20 to understate their own insured losses or deny
21 claims entirely. These practices mislead
22 policyholders, distort pricing, destabilize the
23 market. We have heard very quickly a lot about
24 fraudulent claims without any support or data. I'm
25 here to tell you there are far more fraudulent
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1 defenses that are put forth than any fraudulent
2 claims that are brought.
3 In closing, insurance is a promise. A
4 promise that when disasters strike or when someone
5 is injured, the protection paid for will be there.
6 But a promise requires transparency, enforceability
7 and honesty.
8 I commend the committee for examining the
9 true cost drivers behind rising premiums, by
10 ensuring transparency, enacting a real bad faith law
11 and scrutinizing misconduct wherever it occurs,
12 New York can restore fairness and stability to its
13 insurance markets.
14 Thank you for the opportunity to present and
15 I welcome any questions you have.
16 SENATOR SKOUFIS: Thank you,
17 Mr. Finkelstein. You alluded to it. I think it's
18 fair to say that we were all non-plussed with the
19 lack of data that was provided by one of the
20 previous panels, the association, the trade
21 associations.
22 I'm curious, they made a lot of assertions
23 about how litigation has quote unquote exponentially
24 increased. Spoke a lot about nuclear payouts. I'm
25 wondering, they clearly didn't have the data at,
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1 sort of, their finger tips. We will see if they
2 have the data at all, as they circle back.
3 Does NYSTLA have any data that speaks to the
4 volume of cases that have moved in this policy area,
5 in the property and casualty insurance?
6 Do you want to just generally respond to
7 those assertions that we heard before?
8 ANDREW FINKELSTEIN: Well, first, I want to
9 put context in the, frankly, flippant phrase of
10 nuclear verdicts. They define a nuclear verdict as
11 something in excess of $10 million. But what we did
12 not hear is how much is actually paid on that claim.
13 And what we did not hear is why did a jury
14 have to decide that. And most importantly, let's
15 not ever overlook the fact that six individuals from
16 our community sat and heard all of the evidence and
17 determined that that was fair and appropriate.
18 But what we also did not hear, importantly,
19 is that the structure in New York provides that the
20 trial court judge reduces those verdicts and the
21 appellate court judge reduces those verdicts.
22 But the most important comment about nuclear
23 verdicts and why it has no impact on the cost of
24 insurance is because at no point in time in New York
25 do insurance companies ever pay more than the policy
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1 that they wrote.
2 So if there is a million dollars of insurance
3 and there was a nuclear verdict of whatever number,
4 $15 million, as they define it, doesn't affect the
5 insurance company in any way because that is a
6 policy of only a million dollars of which they would
7 have to pay; which they chose not to pay, to avoid a
8 trial.
9 And most importantly, that's for premiums
10 they've collected for 6, 7, 8 years previously.
11 It's not forward-looking, it's rear-looking. So the
12 whole disinformation related to nuclear verdicts is
13 just that: Disinformation.
14 With respect to the quantity of cases moving
15 forward, the challenge is that the insurance
16 companies often require, and for a settlement to
17 occur, confidentiality. So we don't have access to
18 the information to provide you.
19 I would love to be able to provide it all to
20 you, but they, in fact, create the cloud of secrecy
21 in their resolutions so as to then hide it from the
22 DFS and come in and, frankly, all I heard today was,
23 I remember when my kids were little and they were
24 like there is a monster in the closet, there is a
25 monster in the closet. And I would say what does
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1 the monster look like? Oh, I don't know. There is
2 a monster there though and I'm really afraid. I
3 would open the door and there is no monster there.
4 Until they show me the monster and the numbers, I
5 can't accept any of it.
6 SENATOR SKOUFIS: So you talked about
7 sunshine or sunlight before. Do you think that
8 should extend to doing away with these
9 confidentiality agreements?
10 No doubt in a non-identifiable way for the
11 policyholder, but do you think we should
12 legislatively take action on that?
13 ANDREW FINKELSTEIN: I do. The only party
14 that is advantaged through confidentiality is the
15 insurance company. There is no reason why a person
16 who brings a claim ever seeks confidentiality.
17 It's always a part of a settlement that's
18 required when it is required. In order to resolve
19 this case, we must have confidentiality. Well, who
20 are they hiding that result from? They're not
21 hiding it from their shareholders. They're hiding
22 it from DFS. And they're hiding it from other
23 community members so they don't see how somebody
24 else was fairly compensated.
25 SENATOR SKOUFIS: You raised an interesting
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1 point about the defensive fraud, the fraud, alleged
2 fraud on the side of the insurers. But I do want to
3 drill down on to the extent that it occurs, the
4 fraud that does happen by policyholders with claims.
5 They clearly did not want to opine.
6 I'm curious if you would like to opine on
7 what percent of claims you believe are ultimately
8 fraudulent.
9 ANDREW FINKELSTEIN: This is not supported by
10 anything other than my personal experience and I'm
11 happy to share it. I am an attorney 34 years now,
12 doing exclusively this type of work. Everybody in
13 my association does this type of work and we work on
14 what is called a contingency. We are only
15 successful if we -- we only get a legal fee if we
16 are successful. If we are not successful, we do not
17 get a legal fee.
18 I, personally, do not know an attorney who
19 brings forward claims that don't have merit and are
20 fraudulent. Now, can I suggest that in any
21 structure where the net outcome is money, that there
22 is not some element of fraud? I personally have not
23 seen it, but I will accept that some of it exists.
24 But if I had to venture a guess as to a percentage,
25 less than one half of 1 percent.
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1 SENATOR SKOUFIS: Okay. That's more than
2 what we got from the other panel, so I appreciate
3 that. Now, of, sort of, the pool of claims that
4 leads to litigation, what percent of that pool,
5 litigated claims, winds up moving to a trial and has
6 a verdict rendered? Ballpark.
7 ANDREW FINKELSTEIN: Here, too, I would, in
8 my personal experience and the attorneys I know, I
9 would suggest it's one half of 1 percent of cases
10 actually go to a verdict.
11 SENATOR SKOUFIS: Why do you think the
12 insurance companies settle 99 plus percent of those
13 litigated claims?
14 ANDREW FINKELSTEIN: Well, I think it's the
15 business model. And it's the business model that I
16 call the 5Ds, which is deny, delay, defend, defraud
17 and disinform. That's the business model that I
18 have experienced of insurance companies.
19 So part of the deny is they are holding, in
20 reserves, anything that they ultimately would pay
21 out. And the longer that they can extend the
22 litigation, the more they earn on their reserves.
23 That's exactly what happens.
24 So if they put in -- I will define them as
25 fraudulent defenses that then require motions and
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1 delays the litigation, rather than handle the case
2 properly up front -- because the defense lawyers
3 know, the vast majority of them, they know what the
4 ultimate outcome will be but they also know that
5 their job is, you know, is to delay that case. So
6 that's the litigation problem that we have.
7 Now that would go away in large part --
8 certainly not entirely -- if we had some teeth to a
9 bad faith law.
10 Because all of that is acting in bad faith in
11 delaying meritorious cases.
12 SENATOR SKOUFIS: And how many states have a
13 bad faith law?
14 ANDREW FINKELSTEIN: I don't know in total.
15 I didn't do that study but I know more than
16 20.
17 SENATOR SKOUFIS: So roughly at least half?
18 ANDREW FINKELSTEIN: Yes.
19 SENATOR SKOUFIS: In those states, do you
20 have a sense -- I assume the way it works is if an
21 insurer is found to have been acting in bad faith,
22 there is some sizeable financial penalty. Is that
23 generally how it works?
24 ANDREW FINKELSTEIN: This is generally how it
25 works. The claimant puts forth in clear unambiguous
217
1 terms, why the case has merit, why the case should
2 be resolved now and why it's worth in excess of the
3 policy amount. In every state that has bad faith,
4 they then give the insurance company an opportunity
5 to comply. It's not an automatic we just say you
6 are in bad faith. They have been given the
7 opportunity to comply.
8 If they choose to not comply, and they're
9 wrong, they're then on the hook for anything in
10 excess, and would have exposure to those nuclear
11 verdicts.
12 SENATOR SKOUFIS: So in your experience in
13 these other states, does having a bad faith law
14 deter the bad faith? Or do we wind up with outcomes
15 where there are just an enormous volume of penalties
16 for bad faith?
17 ANDREW FINKELSTEIN: It deters the bad faith.
18 SENATOR SKOUFIS: It does.
19 ANDREW FINKELSTEIN: Absolutely. And then
20 those cases resolve as they should, timely.
21 SENATOR SKOUFIS: And in those states that
22 have more recently adopted bad faith laws, do you
23 have any sense as to what the impact on premiums
24 have been in those states?
25 ANDREW FINKELSTEIN: I don't but I can try to
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1 find that out.
2 SENATOR SKOUFIS: All right. Great, thank
3 you.
4 SENATOR BAILEY: Thank you, Mr. Finkelstein
5 for your testimony. Just a couple of brief
6 questions. I just want to underline a finer point
7 about what you said about the willingness of an
8 attorney to bring a fraudulent claim. Would that be
9 a disbarrable offense? If someone knowingly and
10 intentionally filed a false claim, is that
11 attorney -- could that attorney be brought before
12 the grievance committee and be disbarred?
13 ANDREW FINKELSTEIN: Right, they would lose
14 their license if they knowingly filed a fraudulent
15 claim.
16 SENATOR BAILEY: I just want to set the
17 foundation for that because that's important to know
18 that while fraud does occur, that, one, to risk
19 their livelihood on setting a fraudulent claim
20 doesn't seem like it's the smartest thing to do.
21 And bad faith laws you just mentioned --
22 ANDREW FINKELSTEIN: And I just want to
23 follow up on that --
24 SENATOR BAILEY: Sure.
25 ANDREW FINKELSTEIN: -- because there was
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1 some testimony, well, these claims have been
2 brought. They've all been dismissed. Every claim
3 where there was these theory of fraudulent claims,
4 they -- and where the attorney was involved, they
5 have been litigated and dismissed.
6 SENATOR BAILEY: I bring that up, not as an
7 attack on the insurance companies but as an attorney
8 myself knowing that I know what Rule 1.1 is, you
9 know. And you have to make sure you comport
10 yourself like a lawyer at all times and that's
11 grounds for disbarment.
12 I want to talk about the bad faith laws again
13 that Senator Skoufis was talking about. Roughly 20
14 states may have it. Could you talk to us about what
15 you think operationally it would do in New York?
16 From what you described, it seems like it
17 operates like a de facto motion for summary
18 judgment. But if you could describe what you would
19 want the bad faith law to look like in
20 New York State.
21 ANDREW FINKELSTEIN: I would want it to
22 require a notice provision by the claimant, the
23 attorney, a clear delineation as to why the damages
24 are far in excess of the policy limits. That bad
25 faith triggers once liability is generally secure.
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1 We are a comparative liability state. We need not
2 have 100 percent liability. So even if the
3 liability is generally secure, and the damages are
4 far in excess of the policy limits, it's clearly
5 communicated. Then there is a 30-day window to
6 review and decide. And the insurance company has to
7 own that decision. Right now there is no teeth to
8 that. They can just say we deny, we delay and we
9 are going to defend. And there are no consequences
10 for that.
11 When they know those are cases that should be
12 resolved and ultimately we know when we show up for
13 jury selection they pay the policy.
14 And the only person who suffered is the
15 injured claimant and the insured, the policyholder
16 who has gone through many sleepless nights, worried
17 and concerned that their insurance company is not
18 protecting them the way that they paid the policy
19 premium for them to do so.
20 SENATOR BAILEY: Let's switch gears a little
21 bit. While it was necessarily stated -- it might
22 have been mentioned briefly -- the concept of tort
23 reform is something that is brought to us as
24 legislators and me, as the chair of the Insurance
25 Committee, quite frequently as a way to possibly
221
1 defray costs, as a way to lower costs for
2 policyholders.
3 Can you talk to me about the association's
4 thought process on what tort reform -- would that
5 lead to that type of declination of a premium or
6 what would that do in general in your opinion?
7 ANDREW FINKELSTEIN: All it would do is take
8 away individual's rights without any proven benefit
9 because they -- there is no sunshine laws, right?
10 I'll give you a perfect example. We heard a little
11 comment about construction and labor law 240.
12 Several years ago there was a study that was done by
13 the Empire Center for Public Policy where there was
14 a discussion as to whether or not 240 was the reason
15 why construction insurance premiums were high.
16 And the DFS was involved in an investigation
17 and when they asked the insurers -- and I'm going to
18 quote directly from our FOIL response. When they
19 asked insurers, can you identify your claims that
20 you have paid 240 claims out on to justify it, their
21 response is no company tracks the requested
22 individual features. We receive no meaningful
23 response to the questions requesting comparison to
24 other jurisdictions.
25 So again, I'll just refer to my monster in
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1 the closet that 240 and these construction liability
2 costs are out of control without any justification
3 or support.
4 So to answer your question specifically, the
5 suggestion of tort reform just means taking away
6 individual rights to the benefit of insurance
7 companies.
8 SENATOR BAILEY: I think it's important to
9 put a finer point on that and what it would mean
10 from the trial lawyer perspective, not just the
11 insurance company perspective. I think that your
12 testimony to Senator Skoufis' questions I think have
13 been sufficient to me, so I will defer the rest of
14 my time.
15 Senator Kavanagh.
16 SENATOR KAVANAGH: Thank you.
17 My colleagues have asked both Senator Bailey
18 who is a lawyer and Senator Skoufis who sometimes
19 plays one, and I'm a recovering lawyer myself. But
20 I think we've covered a lot of ground and your
21 testimony was very clear and helpful.
22 I want to raise just one issue that was
23 raised earlier, which is there were a couple of
24 allusions in testimony earlier to the notion that
25 litigation financing is something that incentivizes
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1 bad behavior on the part of lawyers -- plaintiffs
2 lawyers, property owners making claims. Do you have
3 a perspective on, you know, sort of organizations
4 that finance litigation in advance?
5 ANDREW FINKELSTEIN: I do.
6 First, there is a current bill that the
7 Senate has passed, the Assembly has passed and we
8 are waiting, hopefully the Governor will sign, that
9 is supported by NYSTLA; which caps litigation
10 funding at 25 percent of any recovery, requires
11 regulation of the entities and I think it will go a
12 long way to regulating the industry.
13 But the position related to litigation
14 financing is one that it is -- and the reason why
15 insurance companies don't like it is because it
16 levels the playing field. It gives -- when somebody
17 has suffered a catastrophic or traumatic event and
18 they can't work, and they have medical bills coming
19 in, and they have no resources to pay their rent,
20 pay their insurance coverage, they are left with no
21 choice but to borrow against a future recovery. And
22 this industry, the litigation finance, gives people
23 a bridge to get from the catastrophic event to the
24 resolution.
25 Now we would never need the litigation
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1 finance company if insurance companies did what is
2 embedded in their policy premiums, which is to act
3 in good faith. Having litigated against insurance
4 companies for 34 years, I have yet to see that.
5 So now the necessity of these litigation
6 companies, to give the bridge for injured people to
7 get from the event to the resolution, I will just
8 define it as a necessary evil.
9 SENATOR KAVANAGH: I think, again, with great
10 appreciation for your testimony, but I think given
11 the passage of time here we will wrap up. Thank you
12 so much.
13 ANDREW FINKELSTEIN: Thank you.
14 SENATOR KAVANAGH: So next up we have
15 Robert Hartwig.
16 SENATOR SKOUFIS: If you wouldn't mind
17 raising your right hand.
18 Do you solemnly swear that you will tell the
19 truth, the whole truth and nothing but the truth?
20 PROFESSOR HARTWIG: I do.
21 SENATOR SKOUFIS: Thanks very much.
22 PROFESSOR HARTWIG: Thank you. Good
23 afternoon, Mr. Chairman and Senators and thank you
24 very much for the opportunity to testify before the
25 committee today. My name is Robert Hartwig and I'm
225
1 a Professor of Risk Management Insurance and Finance
2 at the University of South Carolina. But prior to
3 joining the university, I spent 23 years in the
4 property casualty insurance and reinsurance worlds,
5 mostly right here in Manhattan as the president and
6 economist of the Insurance Information Institute.
7 So I'm going to speak to you about some of
8 the drivers of residential property insurance costs
9 and more or less from the perspective of an
10 economist here, which I am.
11 So for the purposes of this testimony, I will
12 be focusing on four principle factors driving costs
13 and thus premiums upward in recent years, inflation,
14 demographics, climate risk and a bit about legal
15 system abuse.
16 First on inflation. Inflation in the
17 aftermath of the COVID-19 pandemic surged to a
18 40-year high. And inflation, as experienced by
19 property insurers, however, was materially higher
20 than the general level of inflation.
21 From January 2020 through mid 2025, the cost
22 of construction materials rose 45 percent, nearly
23 double the 24 percent increase in the overall
24 Consumer Price Index over the same period. Likewise
25 the cost of residential construction trade services
226
1 was up 42 percent.
2 And more broadly, home values here in
3 New York State are up 94 percent over the past
4 decade and the trajectory of home insurance premiums
5 logically tracks the increasing costs of the homes
6 themselves. And you will see this in Exhibits 1 and
7 2.
8 In fact, you will see sharp increases even
9 for some of the most mundane of construction
10 materials: Plastic pipes up almost 100 percent
11 compared to about 24 percent for the CPI overall.
12 Now tariffs are the latest in terms of adding
13 cost pressures and builders point to the 10 percent
14 tariff on lumber, 50 percent tariffs on steel,
15 aluminum, copper products, as particular challenges.
16 And the National Association of Home Builders
17 estimates that a new home nowadays would cost nearly
18 $11,000 more to build than it would prior to the
19 tariffs.
20 And the National Association of Home Builders
21 also makes clear that current immigration policy
22 threatens to increase home prices. They're very
23 clear about that.
24 Now in terms of population and urbanization
25 and such. Since 1970, the U.S. population has
227
1 increased by 65 percent and rising population leads
2 directly to the accumulation of property values and
3 property asset values and increases concentrations
4 of risk in vulnerable areas.
5 And while New York State's population growth
6 has been much slower over the past half century than
7 most south -- in states in the south and west, the
8 same fundamental demographic principles apply.
9 New York's exposure to climate risk
10 accumulated over the course of centuries is
11 enormous. New York is the nations's fourth most
12 populous state and New York City remains by far the
13 nation's most populous city. It is also the most
14 densely populated city in the country by far.
15 Thus what New York State lacks in terms of
16 the frequency of exposure to extreme climate events,
17 it makes up for in the aggregate value of exposed
18 property, which is highly concentrated in the
19 state's most vulnerable areas.
20 Now, along those lines, recent models -- and
21 I think you heard of this in some earlier
22 testimony -- recent models suggest that a category 3
23 hurricane making land fall in Queens or Long Beach,
24 New York, could result in a loss -- insured losses
25 exceeding $100 billion with 40 to $50 billion in
228
1 insured losses in areas for a similar event out on
2 Long Island.
3 Now, you will see that in Exhibit 3, in my
4 testimony, you will see it's a vivid illustration of
5 the economic toll of climate-driven risks in
6 New York as the number of billion-dollar events that
7 have affected New York State has been increasing
8 rapidly. Reinsurance costs are another important
9 driver of property insurance premiums. And that is
10 displayed in Exhibit 4, where you can see that the
11 price of reinsurance is very sensitive to the
12 frequency but especially to the severity of
13 catastrophe losses. And that impacts every insurer
14 in every state.
15 On the issue of litigation, and legal system
16 abuse, we've heard quite a bit about this but this
17 is certainly a cost driver. It is an element in
18 driving property insurance upward.
19 According to the U.S. Chamber of Commerce,
20 liability costs associated with homeowners'
21 insurance policies increased at a 5.1 percent annual
22 clip in recent years.
23 And multi-unit dwellings which carry
24 liability insurance coverage, usually with much
25 higher limits of course, in 2024 insurers writing
229
1 commercial multi-peril liability policies paid out
2 nearly $115 in claims and expenses for every $100
3 they earned in premiums.
4 Now let me talk to you about some market
5 forces that are at work in New York State. In terms
6 of residual market shares, markets of last resort.
7 Legal system abuse and fraud brought Florida's
8 homeowners' insurance markets to the brink of
9 collapse in 2022. And in California an archaic
10 regulatory structure made offering private insurance
11 coverage amid rising wildfire risk economically
12 unfeasible.
13 So consequently, the population of each
14 state's residual market grew rapidly, doubling or
15 tripling in size.
16 But in stark contrast to Florida and
17 California, New York's markets of last resort
18 accounted for a shrinking share of the property
19 insurance market.
20 New York's favorable residual market
21 experience in recent years compared to other large
22 states and the nation as a whole indicate the
23 property insurance market conditions in the state
24 are relatively stable.
25 Just one more point on this. In terms of
230
1 another, I would call it sort of success story in
2 New York, data on homeowners' insurance non-renewal
3 rates also highlight the relative stability of
4 New York's property insurance markets.
5 Not only are non-renewal rates in New York a
6 fraction of those in troubled states like Florida
7 and California, but they are consistently about half
8 the non-renewal rate for the country overall and the
9 average non-renewal rate in New York from 2018 to
10 2023 was 0.49 percent, which implies that
11 approximately 99.5 percent of homeowners' insurance
12 policies in the state were renewed each year.
13 I will simply conclude there. My time has
14 elapsed. I would be happy to answer any questions
15 that you have. Thank you very much.
16 SENATOR BAILEY: Thank you, Dr. Hartwig, I
17 appreciate your testimony. Just a couple of
18 questions.
19 First question I guess I will start where you
20 left off briefly about the excess markets so to
21 speak, right?
22 PROFESSOR HARTWIG: Residual market.
23 SENATOR BAILEY: Residual market. Are you
24 referring to the excess market in New York State?
25 PROFESSOR HARTWIG: No, I'm not. I'm talking
231
1 about the market of last resort for property
2 insurance. So excess, in my interpretation of it,
3 would be for high-level liability claims, unusual
4 sorts of risks like that, which have to be insured
5 outside the so-called admitted market.
6 SENATOR BAILEY: I just wanted to make sure
7 because I want to talk about, like, whether DFS --
8 because DFS does not regulate the excess market.
9 PROFESSOR HARTWIG: That's a different
10 market.
11 SENATOR BAILEY: So I was wondering if there
12 was a correlation with that.
13 PROFESSOR HARTWIG: They are completely
14 different.
15 SENATOR BAILEY: I'll ask you the question
16 about the -- the fraud question that we've asked I
17 think everybody here.
18 Do you have requisite data that would show us
19 that fraud is a significant cost driver? And if so,
20 where does that data come from?
21 PROFESSOR HARTWIG: No, I do not. During my
22 time here in New York State when I was president of
23 the Insurance Information Institute, I did work
24 coincidently on some fraud issues here in New York.
25 We really dug into the issues. They were with
232
1 respect to no fault auto insurance very, very
2 specifically.
3 And we have very, very hard numbers
4 associated with that that measured in the hundreds
5 of millions of dollars in terms of the fraud that
6 was associated with that. We were able to determine
7 that through very hard work working with the largest
8 automobile insurance companies in this state,
9 digging into thousands and thousands of individual
10 claims.
11 We were able to essentially map networks
12 between what we would call crooked medical
13 providers, gangs or rings that were actually
14 orchestrating these sorts of accidents. And they
15 were doing it for payment. There were attorneys who
16 were associated with them.
17 And we would put this all together and
18 essentially hand this on a silver platter to
19 district attorneys for prosecution.
20 SENATOR BAILEY: I believe I found my
21 question that I'm going to be asking to everyone, so
22 everyone please be forewarned.
23 The tort reform question. What is your
24 opinion on the tort reform question? And does it,
25 is it a significant cost driver of insurance rates
233
1 in the State of New York? And I'll -- let me just
2 ask the question first.
3 PROFESSOR HARTWIG: Right.
4 So the tort environment in every state is
5 idiosyncratic, okay, because many of the laws which
6 govern the tort environment arise or originate in
7 state legislature.
8 So, but I would say that many in cases, in
9 most states, in fact there is probably some role for
10 tort reform; for example, we can think of very
11 reasonable reforms such as caps on non-economic
12 damage awards; all right? The sky should not be the
13 limit on those sorts of things.
14 We've heard different things about approaches
15 towards third-party litigation funding. For
16 instance, the insurance industry is pushing towards
17 mandatory disclosure there. Is there some reason
18 why judges and juries should not know that a third
19 party potentially stands to profit off the
20 misfortune of another individual? It fundamentally
21 violates the principle of what we call insurable
22 interests in an insurance policy.
23 So there are some -- and these are completely
24 disinterested third parties who, again are there
25 purely for the profit motive, which you have to ask
234
1 yourself. That doesn't quite -- if you are a member
2 of a jury, that's probably going to put a bad taste
3 in your mouth when you think about that.
4 But, yes, so in each and every state, we can
5 think about a way that tort reform could improve the
6 availability and affordability of various types of
7 insurance coverage.
8 I was recently involved in efforts in liquor
9 liability reform, okay, in another state because
10 it's a huge problem there. Restaurants were
11 actually closing down as a result of that. And so
12 you know, some sort of compromise was reached in the
13 state legislature that got us, I would say, part way
14 there.
15 So every single state has an issue that needs
16 to be addressed, could probably benefit from. But
17 ultimately the focus is what can you do to contain
18 or drive down the costs of certain types of
19 insurance and make it more available to whatever
20 segment of the insurance buying population is
21 affected?
22 So I mention in one state it's restaurant
23 owners. In another state it might be property
24 owners. In another state it might be doctors, okay?
25 Every single, you know, sector of the economy is
235
1 going to have an issue that they might feel that
2 might be able to be addressed through tort reform.
3 SENATOR BAILEY: And so based upon that
4 answer there, would that encapsulate what your
5 section on litigation and legal system abuse was on
6 page 8 of your testimony?
7 PROFESSOR HARTWIG: Let me just take a quick
8 look here. What I did here is I simply focused a
9 bit on the residential property element here. So I
10 didn't talk about commercial auto or doctors or
11 anything or liquor liability or anything here. So,
12 yes. I looked to see, well, okay. Your typical
13 homeowners policy, renters policy, they contain a
14 liability element to them. Your typical homeowners
15 policy, renters policies actually includes $100,000
16 of liability coverage.
17 Many people don't know that but it's actually
18 part of the sort of multi-peril package that you are
19 buying when you have these policies. And if you
20 look at the underlying increases associated with
21 costs there, you will see it is about 5 percent a
22 year. That isn't enormous in -- so this is for
23 homeowners, all right?
24 Where the problem really begins is when we
25 are talking about commercial liability policies.
236
1 And there we have more significant issues. Why?
2 Because the pockets are deeper, they're much, much
3 deeper. Oftentimes a million or multiple millions
4 of dollars of limits are potentially at stake there.
5 So it's not surprising that, you know, deep
6 pockets are a greater attraction.
7 SENATOR BAILEY: Certainly. Are there any
8 suggestions that you have in terms of New York
9 specific -- and I know your expertise is more vast
10 than just this state -- but are there New York
11 specific ideas or thoughts that you may have, things
12 that the state legislature can do to assist in
13 achieving this goal?
14 PROFESSOR HARTWIG: There are a couple.
15 Let me get back to this idea of looking at
16 non-economic damages again. I mean, that is a
17 significant problem across the country. I don't
18 know the magnitude of it specifically here in
19 New York State. But I can be quite certain that
20 that's going to be an element of it.
21 I should also suggest that in terms of the
22 prior -- you know, when you heard the panel from the
23 insurance industry speak earlier and you asked them
24 for suggestions about things they could do in terms
25 of improving availability and affordability of
237
1 insurance in this state, they talked about investing
2 in mitigation and resilience and these sorts of
3 things.
4 I have never heard in my life a solution to
5 affordability and availability that involved
6 encouraging more lawsuits. Okay? That's what we
7 just heard. We just heard that. Pass a bad faith
8 law, you get more litigation and that is going to
9 somehow solve availability and affordability issues
10 in this state?
11 I don't believe it. I don't think anybody
12 believes that. I think that proceeding very, very
13 carefully in the state legislature with advice like
14 that, I would certainly caution.
15 But I do think that if you were to solicit,
16 from insurers, where they believe, and also from
17 property owners themselves, where they believe they
18 are seeing the most, in terms of their exposure and
19 their vulnerability to these types of lawsuits.
20 Because remember, ultimately, yes, you are
21 talking about rising insurance rates. But the
22 reason why the insurance rates are rising, whether
23 it's on the property dimension or whether it's on
24 the liability dimension, is because of the
25 underlying claim activity.
238
1 It is the property owner that is being sued
2 here, it is not the insurer that is being sued.
3 It's the insurer is very much kind of a messenger of
4 this risk. And the insurer is attempting to try to
5 manage this risk in a way that will lead to the best
6 of outcomes for all parties that are involved here,
7 but particularly their policyholder. So it's a
8 complex issue. And like I say, it's very, very
9 idiosyncratic.
10 But I do believe that you would be able to
11 quite quickly find from property owners themselves
12 what they believe to be the leading issues that are
13 driving this.
14 You discussed this with their insurers and I
15 think from that you can develop real solutions that
16 can meaningfully contain the costs.
17 SENATOR BAILEY: The final question I have
18 for you -- and thank you for that answer -- is based
19 upon your expertise -- and you have a lot of great
20 data in here, very prospective forward looking.
21 I'm going to ask you -- and I'm not going to
22 ask you to have a crystal ball but I want to ask you
23 kind of a crystal ball-like question.
24 If this continues to happen and insurers
25 continue to pull out of markets and people are not
239
1 able to tender policies on places, are we going to
2 have certain zones, certain areas, certain
3 neighborhoods in our communities that will be, for
4 all intents and purposes, inhabitable because people
5 will not be able to get the proper coverage, the
6 proper insurance on their homes? Is that something
7 that we can foresee in the next 15, 20, 30 years?
8 PROFESSOR HARTWIG: You know, right now in
9 New York State, again, particularly compared to
10 other states, you don't really see it here, okay?
11 Are there periods in time when coverage
12 becomes more or less available and the terms and
13 conditions on which that coverage is offered may be
14 more stringent or more lax than others, absolutely.
15 But right now, particularly in the
16 residential property insurance market in
17 New York State, you are actually performing better
18 than many other states.
19 When you look -- again, as I already
20 mentioned -- states like Florida and California, you
21 are the fourth largest state.
22 Those are two of the three other largest ones
23 and Texas is the other.
24 Your markets are performing in some ways
25 better than those by -- in terms of whether I look
240
1 at non-renewal rates or whether I look at the size
2 of the residual markets.
3 What you don't have here is literally in the
4 State of Florida, you had hundreds of thousands --
5 in fact more than a million at some point in 2023, I
6 believe, the State of Florida became the largest
7 home insurer in the state, superceding companies
8 like State Farm and so forth. That's not where you
9 want to be. So you are doing something right here
10 already.
11 SENATOR BAILEY: Thank you, Dr. Hartwig.
12 Senator Skoufis?
13 SENATOR SKOUFIS: Thank you, Senator Bailey.
14 Thank you, Dr. Hartwig for your testimony. I want
15 to ask you a few questions, versions of which I've
16 asked prior panels.
17 The first -- and I don't know if you were
18 here at the start of the hearing, but there was a
19 "New York Times" article from May of last year that
20 looked state by state, prior 10 years, specifically
21 at the homeowners' insurance space and how the
22 industry was fairing in each of those states in each
23 of the past 10 years.
24 Here is a sampling of some other states
25 around the country. And you can see, you know, the
241
1 bar graphs, they ebb and they flow.
2 In California, for example, the industry lost
3 money in six of the past 10 years. But that's not
4 an outlier. North Dakota, seven of the past
5 10 years they lost money. Many, many states,
6 they've lost money, 4, 5, 6 of the past 10 years.
7 This is the New York bar graph. What is your
8 immediate reaction to this?
9 PROFESSOR HARTWIG: I love it. I love it. I
10 love to see that New York State homeowners'
11 insurance business is consistently profitable. And
12 you reap the benefits of that every day.
13 99.5 percent of your policyholders are getting
14 renewed every year. It's not like that in Florida.
15 In fact, in the data you see in my testimony,
16 in Florida, for instance, the most recent number is
17 about 3 percent are non-renewed. In California,
18 it's closer to 2 percent are non-renewed. So you
19 are like one-fourth, one-sixth of those numbers.
20 And part of the reason why --
21 SENATOR SKOUFIS: It also explains why there
22 are exponentially more carriers in New York than
23 some of those other states you just rattled off.
24 PROFESSOR HARTWIG: So you should have more
25 competition. You have fewer market disruptions in
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1 terms of people being non-renewed.
2 SENATOR SKOUFIS: No question.
3 PROFESSOR HARTWIG: People will have, not the
4 chance of four insurers, but 40 insurers potentially
5 who are willing to underwrite their business.
6 That's a wonderful story to be able to sell.
7 I think sometimes it's hard to -- you can
8 look at the problems in a particular market. We
9 could have a hearing about why this market is good
10 as well.
11 SENATOR SKOUFIS: So you have no concern
12 whatsoever that the DFS, that regulators are
13 approving excessive rates?
14 PROFESSOR HARTWIG: No, I don't and here's
15 why.
16 I believe the data that appeared in "The New
17 York Times" showed the last 10 years or so of data,
18 okay? When we think about the major whether related
19 risks that New York is vulnerable to -- let's think
20 of, again, the cat 3 storm, barreling into Long
21 Island or God forbid into New York City.
22 We are talking about events that don't
23 necessarily occur on a decade by decade time scale.
24 I can pull out points in history where it looks like
25 the State of Florida homeowners' insurance market is
243
1 wildly -- is wildly profitable. Same thing in
2 Louisiana.
3 But even in those states, you can go a
4 decade, 15 years, without a major loss and then you
5 have it, okay, and then it occurs. So it's not a
6 matter of if. It's just a matter of when.
7 Even in this hearing notice, it concedes that
8 we here in New York State, you here in
9 New York State are more vulnerable than ever to
10 these sorts of events. So it's a matter of being
11 prepared.
12 And so insurers wake up every morning -- and
13 this is what I tell my students -- I say -- and I'm
14 sure this doesn't help recruit people to the
15 industry --
16 SENATOR SKOUFIS: I have a number of other
17 questions.
18 PROFESSOR HARTWIG: They wake up every
19 morning as today is a potential dooms day. And I
20 worked down at the World Trade -- near the World
21 Trade Center site on September 11, 2001. I was
22 there. I watched one of those dooms days with my
23 own eyes. And I watched insurers pay $35 billion
24 for that event, an event that they hadn't even
25 planned for, okay?
244
1 So that's the sorts of things that -- that's
2 what is lying behind those numbers that you see
3 right there.
4 SENATOR SKOUFIS: Thank you for that
5 response. What percept of claims do you feel are
6 fraudulent?
7 PROFESSOR HARTWIG: It's a small number.
8 It's a small number. I don't have a specific
9 number.
10 SENATOR SKOUFIS: The rhetoric from the trade
11 association panel would suggest that it's not a
12 small number.
13 PROFESSOR HARTWIG: I think they may have
14 been referring to the fact that it's probably
15 pervasive, but it doesn't necessarily mean that it's
16 anywhere near the majority of claims, okay? Most
17 people are honest.
18 SENATOR SKOUFIS: Do you have an opinion as
19 to ballpark? Are we talking a fraction of
20 1 percent, 1 percent?
21 PROFESSOR HARTWIG: I know that from my
22 experience in the New York no fault issue, it was a
23 low single digits number.
24 But those actual claim numbers were very,
25 very large when they actually did occur. And that
245
1 fraud was actually orchestrated and there was
2 organized crime involved in that.
3 SENATOR SKOUFIS: So the insurance panel,
4 they were uncomfortable stating that they felt half
5 of those, or at least half of those allegedly
6 fraudulent claims actually went to litigation.
7 But putting that aside, the pool of claims
8 that are in litigation, why, in your opinion, why do
9 so, so, so few of them actually go to trial and
10 receive a verdict?
11 PROFESSOR HARTWIG: Well --
12 SENATOR SKOUFIS: If the insurers are so
13 adamant that there is pervasive fraud; that this
14 pool that I'm talking about is riddled with fraud,
15 why aren't they going to trial and proving that
16 they're fraudulent?
17 PROFESSOR HARTWIG: So you are talking about
18 taking cases to trial that are specifically related
19 to fraud as opposed to going to trial for some other
20 reason.
21 SENATOR SKOUFIS: Yes.
22 PROFESSOR HARTWIG: As we all know,
23 litigation is a very long and very expensive and
24 very uncertain process, whether it's related to
25 fraud or whether it's related to other things.
246
1 SENATOR SKOUFIS: Wouldn't you agree that if
2 you are settling 99.5 percent of these allegedly
3 fraudulent claims, that is an incentive for others
4 to bring similar claims?
5 Whereas if you are actually going to trial
6 and the payout is zero, if there is actually fraud
7 associated, then people aren't going to bring those
8 fraudulent claims, don't you think?
9 PROFESSOR HARTWIG: What I know from my
10 experience, say for instance, working in the
11 New York fraud situation, for instance, is that the
12 threshold, okay, to prove the fraud in a court is a
13 very, very, very high bar, okay?
14 In my case, where we were referring cases for
15 criminal prosecution, I mentioned that we had to
16 bring these cases on a silver platter to the DA.
17 SENATOR SKOUFIS: Well, that's criminal and
18 it should be a higher bar than what we are talking
19 about.
20 PROFESSOR HARTWIG: Right. But it's still
21 going to be an uncertain process, okay? And so I
22 think that's largely the reason behind it.
23 You know, what is the magnitude of the fraud?
24 Is it a few thousand dollars or is it 30, 40, 50, or
25 $100,000? It depends on what type of cases we're
247
1 talking about here.
2 But it's a pervasive problem, in an aggregate
3 it's an expensive problem. It's also illegal. But
4 it is very difficult to observe. No one raises
5 their hand and says hey, I'm committing insurance
6 fraud. So it's difficult to observe and it's very,
7 very costly to root out and even more costly to
8 prosecute.
9 I would say that is the -- that would be the
10 ultimate, if we could bring everyone who we
11 suspected of fraud, ultimately charge them
12 criminally, in a way that would be expeditious but
13 there is just no way to actually do that in reality.
14 SENATOR SKOUFIS: Do you think that some
15 insurers prefer to settle, even if they have a very
16 high level of certainty that there is fraud just
17 simply because it's easier to setter, it's less time
18 consuming to settle?
19 And by the way, you can just bake those
20 settlements into your next rate application.
21 PROFESSOR HARTWIG: I'm not involved in those
22 discussions so I can't really say. I would say that
23 insurers do their best to identify and to root out
24 the fraud, even before you get to the point where,
25 you know, you are thinking about a trial, insurers
248
1 are working to identify fraud.
2 For instance, there is a lot of hope that new
3 technologies will help insurers identify fraud, you
4 know, more readily than in the past. And that
5 potentially could help lower the costs associated
6 with that as well. But it's a problem. But it is
7 one element of everything we have been talking about
8 here today but I would not say that it is the major
9 driver associated with the availability and
10 affordability issues across the country in terms of
11 property insurance.
12 SENATOR SKOUFIS: Okay, fair enough. We
13 heard a little bit from NYSTLA about confidentiality
14 agreements. I'm curious if you have a position on
15 whether the legislature should take some action to
16 either make it more difficult or impossible to enter
17 into confidentiality agreements as it relates to
18 settlements and payouts in this space.
19 PROFESSOR HARTWIG: I would say I have not
20 really thought about that issue at all. It's not
21 specifically an economic issue, which is where I
22 would say my expertise is. So I couldn't really
23 comment on that.
24 SENATOR SKOUFIS: Okay. You suggested in one
25 of your answers to Senator Bailey's questioning,
249
1 that adopting a bad faith law would lead to an
2 increased volume of cases being brought in this
3 space. Why do you think that?
4 PROFESSOR HARTWIG: Well, typically in a bad
5 faith situation -- I don't know what the law would
6 be here in New York State -- but oftentimes it might
7 be something like the plaintiff would receive triple
8 damages or something like this in that particular
9 case, so it clearly creates an incentive to try to
10 gin up these cases on the part of trial lawyers.
11 They have a greater economic incentive to try
12 to convert a case into one where they could
13 potentially make a bad --
14 SENATOR SKOUFIS: Do insurers have an
15 incentive to delay cases?
16 PROFESSOR HARTWIG: No, they do not. There
17 are -- in all 50 states there are already laws that
18 require insurers to adhere to I think very, very
19 stringent rules and regulations with respect to
20 treating everyone in a fair and expeditious manner
21 with respect to claims.
22 And if there is -- if it seems that there is
23 any failure to do so or an insurer seems to be
24 falling short in that respect, the DFS, the
25 regulator in any state, has the right and the
250
1 ability to go in and conduct, for instance, a market
2 conduct exam, which would allow it to go through
3 individual claims files and see, is there something
4 systematic going on here?
5 Is an insurer dragging its feet with a
6 specific type of claim or is there taking a long
7 time to try to settle or whatever it is.
8 The DFS has every single bit of authority
9 that it needs today --
10 SENATOR SKOUFIS: Have they ever engaged in
11 that kind of practice?
12 PROFESSOR HARTWIG: I don't know if DFS has
13 specifically. But I do know that regulators around
14 the country do engage in market conduct exams from
15 time to time and some of those involve claims
16 handling practices.
17 But by and large, you don't hear a lot about
18 this being a problem, okay? Insurers are settling
19 the claims fairly and expeditiously for the vast,
20 vast majority of policyholders, even after very
21 complex events like major hurricanes.
22 SENATOR SKOUFIS: Thanks very much.
23 SENATOR KAVANAGH: Thank you. I am enjoying
24 going third because lots of great questions are
25 being asked and covered. I also understand you have
251
1 a plane to catch back to South Carolina. So just a
2 few questions here.
3 First -- so, first of all, thank you for your
4 testimony and for being here.
5 PROFESSOR HARTWIG: My pleasure.
6 SENATOR KAVANAGH: You very succinctly
7 articulated a lot of the factors that are going into
8 increasing insurance costs to address extreme
9 weather events and other events that might be driven
10 by climate change.
11 I want to just -- I want to just continue a
12 little bit of the conversation about liability.
13 So you said -- if I understood your testimony
14 when you were speaking with Senator Skoufis
15 correctly -- you were saying that you do not believe
16 that fraudulent claims and how they're being handled
17 could be a primary driver of really large increases
18 in liability insurance costs; is that right?
19 PROFESSOR HARTWIG: I would say that is not
20 the principal driver associated with it.
21 SENATOR KAVANAGH: So this is -- I think you
22 were here for some of the testimony earlier -- but
23 this is one of these things that I think is still
24 mystifying.
25 We had HPD come and testify, which, again
252
1 they're responsible for many thousands of -- they're
2 involved in developing housing but they're also
3 involved in overseeing very large amounts of
4 affordable housing. We are going to hear other
5 people, I think, who have submitted written
6 testimony and will testify to this effect. But we
7 are seeing very large increases in liability
8 insurance, in many cases doubling over the course of
9 3 or 4 years. And we are seeing that in the
10 affordable housing sector.
11 We are seeing it in the -- you know, we are
12 going to have folks testifying from the for-profit
13 sector that they're seeing similar phenomena.
14 Are you aware of any explanation of what
15 might cause those rates to double in the course of a
16 four-year period, from, you know, 2019-20 through...
17 PROFESSOR HARTWIG: Right. So what you are
18 experiencing in New York is not unique,
19 unfortunately. And it's not confined to property
20 liability insurance either. We see it in commercial
21 auto insurance. We see it in medical professional
22 liability. We see it in a variety of other areas.
23 And so that is part of this phenomena that I heard
24 in earlier testimony referred to as social
25 inflation. And sometimes that's used as a synonym
253
1 for legal system abuse.
2 But what it does illustrate is the fact that
3 there is a social element to it in the sense that,
4 in society today, for a variety of reasons, we see
5 plaintiffs -- we see plaintiffs being viewed more
6 sympathetically in the eyes of juries, for instance.
7 There is an increased propensity to sue. And part
8 of that is due to what is record amounts of spending
9 on legal services advertising.
10 You literally can't go down the road in most
11 parts of the country without seeing numerous trial
12 lawyer billboards and advertisements and social
13 media, TV radio or these sorts of things.
14 So we are surrounded by it everywhere that we
15 are. So in many ways, it has been normalized. And
16 I would say that, unfortunately, what has happened
17 here is that many people have come to believe that
18 if you are involved in an automobile accident or you
19 are in a slip and fall, that your first call
20 shouldn't be to your insurer, to file a claim, it
21 ought to be to the guy on the most recent billboard
22 that you saw.
23 That's problematic because what is going to
24 happen there is, even if you are successful, a chunk
25 of that, 30 to 40 percent of that is going to wind
254
1 up going in the pockets of the lawyer.
2 That process is likely going to take longer.
3 There are more frictions in that system than if you
4 just kind of go direct.
5 Now are there times when someone might need
6 some legal assistance and some redress in that
7 matter? Sure. No one is not saying that.
8 But the problem is, is that we've added a
9 frictional cost into the system. And the incentives
10 on that part, on that element that have been added
11 to kind of throw the spaghetti against the wall and
12 see what sticks but also go for the sky is the limit
13 sort of a situation.
14 I'll tell you another area we are seeing it.
15 For instance, we have heard about liability costs
16 rising for affordable housing and we've seen it
17 everywhere else. We see other insurers that offer
18 what is called commercial umbrella coverage.
19 That is the type of liability coverage that
20 actually sits at a high level on top of the
21 liability coverage that you might have on a
22 residential structure, or that you might have on
23 motor vehicles that you operate for a business.
24 That part of the business, too, is actually being
25 hit very hard.
255
1 Those -- that is actually the line of
2 commercial insurance today that is seeing the
3 largest increases of all others. And what that says
4 to me is that we are seeing the complete
5 penetration, through the liability limits that many
6 organizations carry, like affordable housing, and
7 like anybody else, and into those, what we would
8 typically think of non-working layers, layers of
9 insurance that are not normally dinged. That is
10 something that is adding to costs as well.
11 So it is a societal issue. And it's -- it's
12 one that is very, very difficult to address. Like I
13 said, essentially, it has been normalized in
14 culture.
15 I think it's somewhat consistent with some
16 populous sentiments today as well that the big guy
17 is against you. You should go after him, you should
18 punish him. Generally people don't make the
19 connection between the fact that, you know, if there
20 is $100 million award against the pharmaceutical
21 company or a $50 million award against Starbucks, or
22 a $5 million award against a local hospital, that
23 that ultimately raises the price of housing and
24 raises the cost of medical care or raises the cost
25 of everything that you service and commodity and
256
1 good that you buy.
2 And there have been various efforts to try to
3 quantify this. You hear New York State, I think you
4 heard a number about a so called tort tax of about
5 $7,000 per household. Nationally that number is
6 about $4,000 per household. You can argue about
7 what the number might be, but it does very much
8 function like an albatross around the neck of the
9 economy. It's a dead weight loss.
10 SENATOR KAVANAGH: Thank you for the thorough
11 answer. But is there a reason to think that that --
12 that those factors would cause a doubling of the
13 cost of this in a 4-year period? Like social change
14 generally takes longer...
15 PROFESSOR HARTWIG: If you take about
16 20 percent per year compounded, and you also -- you
17 heard some testimony earlier that these trends most
18 likely began before that. So the insurers began to
19 observe these trends. They record these trends.
20 They analyze these trends. They make new rates with
21 these trends.
22 So what happens is, is the insurer is
23 automatically 2 to 3 years behind the curve when
24 these things begin. And so it's going to take a
25 number of years for them to catch up.
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1 SENATOR KAVANAGH: And are you aware -- we've
2 talked about this and you were asked this a little
3 bit by one of my colleagues a minute ago -- but hard
4 data on the extent to which these phenomena are
5 driving.
6 We talked about how DFS doesn't -- they may
7 have the ability to investigate particular market
8 behavior, but generally when they're reviewing
9 rates, they're not actually looking at claim data
10 and other things. Are you aware of data sets that
11 would demonstrate --
12 PROFESSOR HARTWIG: Let me give you one I'm
13 familiar with. Commercial auto is one of the most
14 problematic areas here. Auto insurance bought by
15 businesses, right? And it has a gigantic target on
16 its back literally. Even the billboards down the
17 highway advertise for you to file a claim against
18 truckers and so forth.
19 So what is happened here, insurers have many,
20 many years of data and they have a good sense of how
21 much these claims are typically going to occur and
22 actuaries at the companies will make adjustments
23 based on ordinary economic inflation and these sorts
24 of things and any inherent trends that were in the
25 data generally speaking.
258
1 Now, in the last decade or so, we begin to
2 see numbers that can't be explained by actual
3 historical inflation trends or the inflation that we
4 are seeing today.
5 And so what we are seeing is that insurers
6 are having to pay more on these claims than they
7 expect. So they have to set aside a reserve for
8 these claims.
9 The claims ultimately cost far more than the
10 reserves so they can observe the fact that the
11 reserves are inadequate by a certain amount.
12 So an exact number, a specific number is that
13 the latest actuarial analysis and commercial auto is
14 that this kind of social inflation is costing about
15 $8 billion a year.
16 SENATOR KAVANAGH: It has been interesting to
17 me that whenever we talk about this, the insurance
18 industry or experts who have spent time in the
19 insurance industry, that we immediately go to other
20 kinds of insurance and, you know, McDonald's
21 getting coffee spilled in your lap. Are you aware
22 of data about this trend specifically as it relates
23 to property insurance?
24 PROFESSOR HARTWIG: Right. So in my
25 testimony, I did cite, I think a commercial
259
1 multi-peril liability component in that the most
2 recent year, 2024, insurers paid out about $115 for
3 every $100 they earned in premium.
4 SENATOR KAVANAGH: And multi-peril was by
5 definition something that a property owner would
6 have that covers many --
7 PROFESSOR HARTWIG: The liability component
8 of it. So it's kind of like your homeowners policy
9 which is the liability piece. This is just the
10 liability piece of the equivalent for a business,
11 right? It was about $110 being paid out for every
12 $100 they earned in 2023.
13 In fact, there has not been a break even
14 number in that type of insurance since 2016, I
15 believe.
16 SENATOR KAVANAGH: That's nationwide.
17 PROFESSOR HARTWIG: That's a nationwide
18 number.
19 SENATOR KAVANAGH: Are you aware of any
20 comparable data at the state level?
21 PROFESSOR HARTWIG: I don't have that at my
22 fingertips.
23 I would have to check on that.
24 SENATOR KAVANAGH: We're running out of time
25 but if you would, I would appreciate it. And again,
260
1 I appreciate you taking the time and testifying far
2 from home today, your former home.
3 PROFESSOR HARTWIG: My students are glad I'm
4 not there right now.
5 SENATOR KAVANAGH: Again, I will end there,
6 but thank you very much.
7 PROFESSOR HARTWIG: Thank you.
8 SENATOR BAILEY: Thank you, Dr. Hartwig.
9 SENATOR SKOUFIS: I would love to ask a
10 followup, if I can -- well, two, actually.
11 First, and again, thank you for your
12 testimony. The $115 - $100 sort of dichotomy that
13 you have referenced a couple of times, how much on
14 average does an insurer make on the investment side
15 with that $100 they collect in premiums?
16 PROFESSOR HARTWIG: Depends on the year.
17 Depends on interest rates.
18 SENATOR SKOUFIS: Give me a sense.
19 PROFESSOR HARTWIG: Let me give you a sense,
20 I think in typical years over the past decade,
21 somewhere around 6 to 8 percent on that.
22 SENATOR SKOUFIS: And how much of --
23 PROFESSOR HARTWIG: Now mind you, I should
24 qualify here. It depends on the type of insurance
25 as well. Some types of insurance, the money may be
261
1 invested for a longer period of time than other
2 types of insurance. In property insurance, it's
3 typically shorter than it would be in something like
4 workers' compensation insurance.
5 SENATOR SKOUFIS: And roughly on average,
6 what percent of an insurer's profit is made up of
7 the investment side of the ledger?
8 PROFESSOR HARTWIG: Well, you know, that's
9 not quite an easy question to answer because
10 sometimes there might be no profit at all in a given
11 year and in some years there might be profit both
12 generated from the investment income side as well as
13 from the underwriting side, from the sale of the
14 insurance itself. It will vary extensively.
15 In a year, when an insurer has, for instance,
16 where it pays out pretty much exactly what it takes
17 in, you could argue in that case that -- and apart
18 from some other accounting issues that can happen --
19 that all of it's profit in that year was generated
20 by its investment side of the equation, okay?
21 In a year when the insurer is paying out $115
22 for every $100 it took in in premium, even if you
23 assume they earned 8 percent, they still recorded a
24 loss in that type of insurance.
25 So what is earned on the investment income
262
1 component is independent of what is earned on the
2 underwriting component. The investment income
3 component can potentially be the only source of
4 profit in some years. And in some years, it can
5 offset a net loss to some extent.
6 SENATOR SKOUFIS: Got it. My last question.
7 I'd love for you to respond -- I would like
8 to give you the opportunity to respond to something
9 that the trial lawyers, the president of the Trial
10 Lawyers Association mentioned.
11 And that is that he almost sort of diminished
12 the consequence as it relates to escalating premiums
13 of these nuclear payouts, because if you have a
14 $15 million payout or settlement, or verdict, I
15 guess, as rare as those may be, but your policy is
16 for, you know, capped at a million dollars in
17 liability, then the insurer is not liable for the
18 other 14, the subsequent $14 million of that
19 $15 million payout, according to them. And so
20 why -- are they wrong?
21 PROFESSOR HARTWIG: Yes, they're wrong.
22 SENATOR SKOUFIS: Explain your perspective.
23 PROFESSOR HARTWIG: The reason why they're
24 wrong is because typically when we are talking about
25 large commercial risks, there are many insurers,
263
1 numerous insurers on that liability program.
2 There might be one insurer that has the first
3 million and then there's another insurer that has
4 the next two million and a third insurer that has
5 the next two million and that will take you up to
6 $5 million. That might be the total limits that
7 that particular entity has purchased.
8 So it winds up frequently or it winds in what
9 we call the excess layers, okay?
10 This is the high level liability coverage
11 that sits above a commercial property policy but
12 also simultaneously sits above your commercial auto
13 policy.
14 So very often, yes, the primary insurers
15 limit might be exhausted in one of these cases, but
16 some part of the residual, the remaining amount is
17 going to be absorbed by one or more additional
18 insurers.
19 SENATOR SKOUFIS: How common is that?
20 PROFESSOR HARTWIG: Very common.
21 SENATOR SKOUFIS: Roughly how common?
22 PROFESSOR HARTWIG: It depends on the size of
23 the enterprise. So if we are talking about a large,
24 a large commercial enterprise, it would be virtually
25 100 percent.
264
1 SENATOR SKOUFIS: We are talking residential
2 here. Give me a sense of you have a large
3 multi-family building here in Manhattan, and there
4 is a slip and fall. How often are there multiple
5 policies associated with that property?
6 PROFESSOR HARTWIG: I would say it would be
7 frequent for there to be multiple insurers on a
8 single liability program.
9 SENATOR SKOUFIS: Okay.
10 PROFESSOR HARTWIG: And/or for there to be a
11 commercial umbrella policy sitting above the primary
12 policy.
13 SENATOR SKOUFIS: Is it fair to say that,
14 absent multiple insurers, that the trial lawyer's
15 point stands that this is not a driver of premiums,
16 given that, again, using the same example for that
17 $15 million payout, insurers are only liable for
18 $1 million of the 15 and so why are we talking about
19 nuclear payouts.
20 PROFESSOR HARTWIG: What you are seeing here
21 is -- so we have a million dollars. Suppose that if
22 we went 10 years ago and there was only a 5 percent
23 chance, a 10 percent that you would exhaust or
24 $1 million limit.
25 Now here we are in 2025 and there is an
265
1 80 percent chance you are going to exhaust your $1
2 million limit. That alone is going to drive up
3 rates. Exhausting your million dollar limits didn't
4 used to be the norm, okay? Now it is. So instead
5 of that being a rarity, it's a common event.
6 And so whether we are talking about one
7 million or two million, the probability of reaching
8 somewhere higher --
9 SENATOR SKOUFIS: Regardless of how common it
10 is, if you don't have that multiple policy scenario
11 that you outlined, why is it relevant?
12 PROFESSOR HARTWIG: Because you are
13 exhausting the limits more frequently than you did
14 in the past. 10 years ago if I were an owner of a
15 condo complex here in New York City, it would be
16 maybe a rarity to see a million dollar claim, maybe
17 one out of 100 claims might wind up in the million
18 dollar area, maybe even less than that. If this
19 year it's 5 percent, that's an enormous difference
20 from an actuarial perspective. That's an enormous
21 difference.
22 SENATOR SKOUFIS: So you are arguing that the
23 relevance is whether it's a half million coming in
24 versus a million. Not relevant whether it's above a
25 million.
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1 PROFESSOR HARTWIG: That part is going to be
2 relevant, too, because you can see why policyholders
3 are going to want to carry more coverage if the
4 probability of exhausting your $1 million limit is
5 much higher today than it was 10 years ago.
6 If I'm their insurance broker and I'm looking
7 at the data and I say 10 years ago, you know what,
8 there was a 1 percent chance you would exhaust your
9 million dollar limit, today it's a 5 percent chance.
10 My recommendation as the broker is going to
11 be you're going to want to raise your limits.
12 SENATOR SKOUFIS: Okay, thank you.
13 SENATOR BAILEY: I'm all set.
14 Dr. Hartwig, safe travels.
15 SENATOR SKOUFIS: Go catch your flight.
16 Thanks for your time.
17 PROFESSOR HARTWIG: My pleasure, thank you.
18 SENATOR SKOUFIS: Next up we'll have Panel 6,
19 affordable housing providers. We have the Honorable
20 Carlina Rivera who is now president and CEO of
21 NYSAFAH; Wilson Kimball, Executive Director of the
22 state's Public Housing Authority Directors
23 Association; Perry Perlmutter, President and CEO of
24 Services for the UnderServed; and Rebecca Zangen,
25 Chief Policy Officer for Supportive Housing Network
267
1 of New York.
2 If you could all raise your right hand for
3 me, please. Do you solemnly swear to tell the
4 truth, the whole truth and nothing but the truth?
5 (All were sworn.)
6 You are excused and someone else can provide
7 testimony.
8 CARLINA RIVERA: Thank you, Chairs for your
9 graciousness and members of the committee for the
10 opportunity to testify. I'm Carlina Rivera,
11 recovering councilwoman, but now president and CEO,
12 proudly of the New York State Association for
13 Affordable Housing, representing the owners,
14 developers and managers of affordable rental housing
15 as well as insurance brokers across New York State.
16 Affordable housing providers in every region
17 are raising the same alarm. Insurance costs have
18 escalated to crisis levels, threatening both new
19 development and the long-term stability of existing
20 affordable housing. Premiums are rising rapidly.
21 Coverage is harder to secure. And operating budgets
22 are being stretched past the breaking point. I'll
23 give you one example.
24 Kennedy Plaza Apartments in Utica, recently
25 their insurance policy was not renewed. The
268
1 292-unit family housing complex was able to secure
2 coverage from only one carrier, which offered
3 reduced protection at a premium that was 44 percent
4 higher, rising from approximately $168,000 from 2022
5 to 2023, to $298,000 for 2025 to 2026. The per unit
6 cost jumped from $575 to $1019. To cover the
7 increased premiums, the owner has been forced to
8 draw down reserve funds that will likely be
9 exhausted by next year and Kennedy Plaza is working
10 with HCR to find a resolution and clearly there are
11 more stories like this statewide.
12 Kennedy Plaza is, of course, just one of the
13 many affordable housing properties struggling to
14 secure coverage in an unregulated market.
15 Additional data percent attached to my written
16 testimony that illustrates the scale of this
17 challenge and gives more background to this example.
18 Unfortunately, this pattern is consistent
19 statewide. A 2022 HCR DFS report documented a
20 43 percent average increase in insurance costs
21 between 2019 and 2021. And a 2024 New York housing
22 conference report -- you will hear from them
23 later -- report shows that per unit premiums are
24 doubling from $869 to $1,770. Today insurance can
25 account for as much as 22 percent of monthly rent in
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1 a typical LIHTC apartment, a low income housing tax
2 credit.
3 Combined with declining rent collection rates
4 and rising repair costs, many properties are now
5 facing shrinking net operating income, depleted
6 reserves, deferred maintenance and, in some cases,
7 negative cash flow. Key drivers include high
8 litigation costs, inflated settlements and
9 construction inflation, all factors you have heard
10 about at length today.
11 And to address these challenges, NYSOFA has
12 met with various stakeholders including the New York
13 Insurance Association and we recommend six
14 initiatives, six proposals.
15 1: Create a safe housing incentive program.
16 Offer insurance premium discounts to developments
17 that provide brief tenant-focused safety courses
18 covering fire safety, water damage prevention, slip
19 and fall risk and renters insurance education.
20 2: Create a New York State insurance
21 investment program, incentivize insurers to serve
22 affordable housing in underserved communities
23 through a public rating system. Rewarding high
24 performing companies with regulatory and contracting
25 benefits.
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1 3: Establish an affordable housing
2 reinsurance trust. Establish a state administered
3 program to share catastrophic or high layer losses,
4 stabilize the market, attract more insurers and
5 lower premiums.
6 4: Expand and codify the risk reduction and
7 insurance affordability pilot program. Increase
8 funding to $25 million, broaden eligibility to
9 include for-profit developers, and in addition to
10 supporting participation in captives, fund risk
11 mitigation measures such as water sensors, cameras
12 and slip and fall prevention to reduce claims
13 exposure and insurance costs.
14 Finally, I'll say 5. Here is the fifth one.
15 Affordable housing relief fund. Expand a
16 housing program created as part of the City of Yes
17 to provide targeted financial support for preserving
18 and maintaining existing affordable housing
19 statewide.
20 This fund would offer grants or low interest
21 loans for emergency repairs, compliance upgrades and
22 critical operating shortfalls that threaten property
23 viability. While it would not address the insurance
24 cost drivers discussed above, it would help
25 stabilize existing projects as we work toward
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1 long-term solutions. And the details for this
2 program have been introduced in a bill by Senator
3 Kavanagh, and Assembly member Rosenthal.
4 And lastly NYSOFA supports Senator Kavanagh's
5 newly introduced bill 8583A, which would require
6 insurers to provide critical data to DFS and offer
7 premium discounts for property owners who undertake
8 meaningful mitigation measures.
9 Together, these actions would reduce risks,
10 stabilize the insurance market, protect existing
11 affordable housing and support New York's long-term
12 housing goals.
13 With that I take any questions that you might
14 have.
15 WILSON KIMBALL: Good afternoon. I come
16 before you today to raise the alarm on the
17 escalating cost of insurance for public housing
18 authorities across New York State. This is a major
19 issue crippling --
20 SENATOR KAVANAGH: Can you just for the
21 record identify yourself?
22 WILSON KIMBALL: Sure. Wilson Kimball from
23 NYSPHADA. I'm also Executive Director of the
24 Yonkers Housing Authority.
25 SENATOR KAVANAGH: Thank you.
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1 WILSON KIMBALL: Thank you, Senator Kavanagh.
2 This is a major issue crippling our public
3 housing authorities. NYSPHADA along with many of
4 our valued partners in the affordable housing
5 movement, including NYSAFAH, Enterprise and the New
6 York Housing Conference meet regularly to discuss
7 possible solutions to mitigate the highs cost of
8 property, casualty and liability insurance.
9 There are many factors contributing to the
10 high cost of insurance, and we applaud the
11 legislature for taking a hard look at this issue.
12 Over the last couple of years, NYSPHADA has surveyed
13 our members and openly engaged them in the
14 challenges of finding, procuring and paying for
15 insurance. Many of our authorities have seen nearly
16 40 percent increase in insurance costs. (Please the
17 graph attached.)
18 In Yonkers, for instance, our insurance on
19 our biggest development went from $800,000 to $1.2M
20 in one year. We were very encouraged that the state
21 budget included funding for technical assistance for
22 affordable housing developers who are interested in
23 undertaking risk mitigation to lower their insurance
24 premiums. To that end, we will be collaborating
25 with partners to secure funding through New York
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1 State’s Risk Reduction and Insurance Affordability
2 Pilot, which will assist non-profit affordable
3 housing providers who want to join captives.
4 In addition, we are partnering with NYSAFAH
5 and other industry partners to seek capital funding
6 to purchase equipment and other resources, which
7 will mitigate the risks of natural disasters and
8 safety issues like FireAvert and security cameras.
9 NYSPHADA is very grateful to the legislature
10 and the Executive for the incredible financial
11 support in the past several budget cycles to help
12 modernize and rehabilitate our aging facilities,
13 including last year’s $75 million for upstate
14 capital improvements.
15 Over the last several years, 30 to 40 of our
16 members have utilized this funding to pursue
17 modernization projects. We are expecting more
18 housing authorities to pursue major upgrades through
19 Rental Assistance Demonstration (RAD) projects in
20 the coming years.
21 However, the high cost of insurance has
22 drained the coffers of New York State Housing
23 Authorities. That is why we are asking New York
24 State to implement new policies and laws which will
25 help housing authorities continue to build safe and
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1 quality housing for New York’s low-income families.
2 PERRY PERLMUTTER: Good afternoon, thank you,
3 Senators, for having me here today. I'm Perry
4 Perlmutter, president and CEO of Services for the
5 UnderServed or S:US.
6 S:US is a leading not-for-profit working to
7 end homelessness in New York City. Housing is our
8 core mission. We operate thousands of units of
9 permanent supportive and affordable housing across
10 Brooklyn, Queens, Manhattan and the Bronx, for
11 New Yorkers with serious mental illness,
12 intellectual and developmental disabilities,
13 substance use challenges, veterans, and formerly
14 homeless families. On any given night, S:US
15 provides housing and shelter for more than 5200
16 New Yorkers.
17 For the people we serve, housing is
18 healthcare and prevention. When housing fails,
19 costs don't disappear. They shift into emergency
20 rooms, shelters, policing and hospitalizations.
21 The cost of insurance has grown dramatically
22 for us. 3 years ago S:US paid under $6 million a
23 year for property and casualty insurance. Today we
24 are paying over $16 million, with lower liability
25 limits. We have had to turn to non-admitted
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1 carriers and patched together coverage from multiple
2 insurers just to meet lender requirements.
3 Independent analysis have shown insurance is
4 now the fastest growing operating cost in affordable
5 housing, growing faster than utilities and
6 maintenance and more than doubling in just the last
7 few years. S:US already has about $4 million in
8 unrecoverable costs due to the high cost of property
9 and casualty insurance. Dollars we cannot put into
10 staff, services or repairs.
11 We can't pass these costs along in rent to
12 extremely low income tenants. So the only leavers
13 are cuts, deferring maintenance, delaying
14 renovations, reducing programming or, in worst
15 cases, contemplating selling buildings just to get
16 out from under insurance costs. These are huge
17 risks.
18 If insurance is unaffordable or unavailable,
19 buildings become financially inviolable and
20 sometimes uninsurable. That means fewer safe stable
21 units for people with complex needs.
22 Nationwide, similar pressures have already
23 contributed to losses in supportive housing units,
24 even as homelessness rises. We are deeply concerned
25 that New York could see the same pattern.
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1 As I mentioned, our tenants are people with
2 serious mental illness, developmental disabilities,
3 trauma histories and chronic health conditions. If
4 a building closes or a project never gets built,
5 they cannot easily relocate. They fall back into
6 shelters, hospitals or the street. So this is not
7 just about line items in a budget. It's about
8 whether thousands of vulnerable New Yorkers can keep
9 their homes.
10 Insurers have pulled back sharply from
11 multifamily and supportive housing. We have seen
12 that directly where insurers have pulled out of the
13 city. Cutting liability limits, for example,
14 dropping excess coverage from $100 million to
15 $50 million. Our limits are lower but they have
16 been cut dramatically also. Providers are being
17 treated as higher risk, simply because they serve
18 low income or voucher tenants, even though state law
19 now explicitly bans this kind of discrimination.
20 The result is fragmented. High cost market that
21 resembles modern red lining, affordable and
22 supportive housing.
23 I have a few suggestions for the legislature,
24 potential policy solutions.
25 First: We need transparencies. Bills like
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1 a-0196 would require Annual Reporting on
2 availability, pricing and terms of insurance for
3 multifamily and social service providers. Data will
4 help identify where insurers are pulling back, where
5 pricing is discriminatory, and what targeted
6 solutions are needed.
7 Secondly: We urge to establish a state-run
8 excess liability insurance fund for affordable
9 supportive housing and social service providers,
10 attaching above the $1 million/$3 million aggregate
11 primary limit. Premiums would be based on actuarial
12 losses, not inflated by profit margins of 150 to
13 300 percent that insurers take. This fund would
14 provide the high limit umbrella coverage lenders
15 require as private markets retreat.
16 Third: Support the creation and scaling of
17 non-profit insurance pools, captives and reciprocals
18 that let providers ban together. The state can help
19 you about ceding a statewide non-profit captive. I
20 know there was some money in the budget last year,
21 connecting us with existing municipal or public
22 pools and providing technical assistance so smaller
23 non-profits can participate.
24 Fourth: Fully enforce New York's updated
25 insurance law 3462 which prohibits charging higher
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1 rates or denying coverage.
2 I'll just finish. If we don't act now, we
3 will see more deferred maintenance, stalled projects
4 and potentially the loss of supportive housing units
5 just when New Yorkers need them most.
6 Thank you so much for the opportunity to
7 testify today.
8 REBECCA ZANGEN: Good afternoon. Thank you,
9 Chairs for this urgently needed hearing. My name is
10 Rebecca Zangen. I'm the Chief Policy Officer of the
11 Supportive Housing Network of New York. We are a
12 membership organization representing 200 non-profits
13 that develop, own and operate supportive housing
14 statewide, including S:US.
15 You are going to hear in my testimony a lot
16 of what my colleagues have already testified to so
17 I'll try to keep it high level. I just want to note
18 that, as you all know very well, supportive housing
19 is deeply affordable housing with embedded social
20 services for formerly homeless households. As of
21 May 2025, there were 64,000 units of supportive
22 housing across every county in the state with nearly
23 5,000 additional under construction and 53 percent
24 of these are located in subsidized affordable
25 multi-family residences.
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1 Supportive housing is one of our state's
2 strongest tools to address homelessness, reduce
3 costly reliance on shelters, emergency rooms,
4 hospitals and jails and ensure long-term housing
5 stability for some of our neighbors with the most
6 complex challenges.
7 New York City and state are each
8 approximately 10 years into their own 15-year
9 initiatives to develop a collective total of 35,000
10 new units. New York State has a separate goal to
11 preserve 3,000 units of supportive housing over
12 5 years.
13 But today, the ability of non-profits to
14 develop, to operate and preserve this housing is in
15 jeopardy due to rapid destabilizing increases in
16 insurance. You've heard a lot about the rising
17 costs, the limits, in terms of coverage and higher
18 deductibles. That's also something our members are
19 experiencing. I just want to say that is happening
20 to our members, large and small, those that are in
21 urban and rural communities, and also to brand new
22 buildings and buildings that are decades old. You
23 have heard about some of the increases to premiums.
24 And I would say that the supportive housing
25 community's experience really tracks that of the
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1 larger affordable housing community and you have
2 heard the statistics.
3 The last network survey that we did of our
4 members was in 2021. But we found an average
5 44 percent premium increase in just one year.
6 I would say in supportive housing, unexpected
7 increases in operating costs, pull resources away
8 from vital services that make the model so
9 effective. Staff salaries and retention, case
10 manage many ratios and robust on-site services are
11 all put at risk which can impact tenant stability.
12 Across New York, non-profit and affordable housing
13 owners are facing operating deficits, deferred
14 maintenance and capital deterioration, cuts to
15 essential services, borrowing at high interest rates
16 to coverage insurance gaps and the risk of selling
17 buildings to stay solvent.
18 I also want to mention that since the early
19 1980s, the state has invested billions of dollars
20 into creating supportive housing residences,
21 transforming lives and communities and creating
22 jobs. Risking that now and paying more annually to
23 provide temporary shelter or emergency services
24 would be a tragic outcome.
25 We appreciate the legislature and the
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1 Governor's early work to address this crisis.
2 The DFS HCR affordable housing and insurance
3 report confirmed that carriers were asking
4 discriminatory underwriting questions about
5 subsidized housing leading to the 2024 statutory ban
6 on discriminatory practices. And last year's budget
7 set aside $5 million to help non-profit owners join
8 group insurance captives, which is an important
9 first step, but it's just that. A first step.
10 The scale and urgency of this crisis require
11 a more comprehensive multipronged strategy. The
12 network's recommendations again are in line with a
13 lot of our colleagues and rather than go into
14 detail, I'll just name kind of the five categories
15 that we would recommend action in.
16 The first is improving transparency and data
17 access. The second is funding and incentivizing
18 risk mitigation upgrades. The third is addressing
19 New York's liability environment. And just to
20 mention a little bit more about this... a five-year
21 pilot creating an affordable housing carve-out from
22 the strict liability provisions of the Scaffold Law
23 that would allow DFS and policymakers to evaluate
24 the impact on pricing and carrier participation as
25 well as mandate disclosure of third-party litigation
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1 funding to increase transparency.
2 The fourth area is provide short-term relief
3 and long-term risk sharing. And the fifth is to
4 rigorously enforce the antidiscrimination
5 protections that are already in place.
6 With that, I will wrap up and we welcome your
7 questions.
8 SENATOR BAILEY: I just want to say thank you
9 for all of your service. And I want to say to my
10 friend, the former -- always honorable but the
11 former Council Member, we miss your service in the
12 city but NYSAFAH has certainly gained an incredible
13 ally. And I want to thank you for all the work that
14 you do and I want to address something from the top.
15 I think Mr. Perlmutter mentioned it mostly. What
16 you are doing in housing has a domino effect on
17 society. When constituents come to all of our
18 offices, if they have a housing issue, it's never
19 just a housing issue. It is always a totality of
20 circumstances that stems from a lack of safe and
21 secure housing.
22 So I just want to thank you for recognizing
23 that and we are censoring people first in what we
24 do. I know we talk about a lot of money and a lot
25 of lawsuits, and a lot of this and a lot of that but
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1 we are censoring people in the conversation and I'm
2 glad that we have been able to bring that back to a
3 point of gravity.
4 Before I get to the question that you know
5 I'm going to ask. I already tee'd it up for you,
6 you now I'm going to ask it, I want to ask you a
7 couple more questions.
8 You mentioned that there is less growth. Do
9 you have -- I don't know -- you have a lot of data.
10 I don't know if this is parsed through yet, but if
11 you don't have it, could you get data that can show
12 what the percentage loss growth in developing
13 affordable housing is that specifically related to
14 insurance? Is there a way to put that in a bucket?
15 PERRY PERLMUTTER: We could get some data
16 from S:US, just us, I mean, maybe we could work to
17 put it through network?
18 REBECCA ZANGEN: It's a bit hard to quantify,
19 but there could be a way to look at the increased
20 insurance costs and what that does to the per unit
21 cost of developing affordable and supportive
22 housing. And of course since we have a limited pool
23 of subsidy to develop those increased cost of
24 developing minimize how many units we can do.
25 SENATOR BAILEY: I know there is no specific
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1 factor that triggers this that triggers that. I
2 understand that. But I'm trying to get a handle on
3 it because I want to be able to be able to prove
4 things by data. And I think as Mr. Finkelstein
5 earlier mentioned, I don't want to talk about the
6 monsters in the closet. I want us to be able to use
7 things that are quantifiable. And as such, I want
8 to figure out if there is clearly a defined loss of
9 growth in affordable housing that people need to
10 survive that is specifically related to insurance,
11 then we have to figure out a way to do that. I know
12 causation isn't exact but we should be thinking
13 about that data set if we can. Go right ahead,
14 Ms. Zangen. I'm sorry.
15 REBECCA ZANGEN: Not at all. I think another
16 thing to be aware of, and this may be where you are
17 going with it, but in addition to that, it's on your
18 existing portfolio, if you are in a situation with
19 negative cash flow, on a building that you already
20 operate, you are much less likely to want to develop
21 more.
22 PERRY PERLMUTTER: That's what we are facing.
23 Like I said, we have $4 million excess insurance
24 that we have no place to recover it from. So that's
25 really impacting the agency's ability to operate.
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1 So what we are really looking closely at, all other
2 costs and how we can operate these types of
3 buildings.
4 WILSON KIMBALL: And in Yonkers, that project
5 that I mentioned where our insurance went from 800
6 to $1.2 million is also the development that lost
7 its gas. So our tenants have been without stoves
8 for over a year because we didn't have the money to
9 bring in and go to electrification because we're
10 tasked with the choice of a $30 million
11 electrification or $100 million gas, return to gas.
12 And we are having to make tough choices, including
13 staffing choices, which are 456 Teamsters.
14 So it does exactly as you say. Have a
15 trickle down effect.
16 SENATOR BAILEY: Certainly.
17 CARLINA RIVERA: And also I want to tell you
18 with the example I gave Kennedy Plaza in Utica,
19 there is actually a chart attached to my written
20 testimony, where they really tried to break down how
21 the insurance costs added overall to their
22 operational cost and what that means for them. To
23 really illustrate the scale of the problem.
24 SENATOR BAILEY: I've asked this of other
25 folks and maybe you might have a different
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1 perspective. Not the tort reform question yet. You
2 are dealing with supportive housing, deeply
3 affordable housing, unhoused individuals, homeless
4 housing. Have you seen where insurers are walking
5 away from these areas specifically as opposed to
6 others? Are you seeing that happening? Other folks
7 are saying they're not seeing it. I just want to
8 see is it happening from in your world view?
9 PERRY PERLMUTTER: In my world, yes.
10 We have seen it. We had an insurer, I
11 believe 2 years ago walk away. My understanding was
12 from all New York City risks like this. And we had
13 to switch insurers, which we were already in a bad
14 place. So, yes, we did see that happen. And they
15 left New York City and they wouldn't insure us. So
16 we are seeing that.
17 WILSON KIMBALL: And we've had one insurer --
18 well, our main insurer, which is HAI Group, tell us
19 they won't ensure our new property, which is eight
20 stories, because it's a high rise.
21 SENATOR BAILEY: You mentioned the state
22 covering certain loss mitigation methods. Is that
23 something that you think the state should be doing
24 at large? Should it be on projects that there is a
25 portion of state funding? I think each of you
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1 mentioned that in your testimony and I think it's a
2 fair concept. But how do we get the state to
3 assume -- I guess you are asking the state to assume
4 some sort of risk, not exactly but you are asking
5 the state to provide something that is a loss
6 mitigation tool. Was would the metric be for that?
7 WILSON KIMBALL: Well, the two that I think
8 of the most would be like a FireAvert type system
9 because what we find is that most of the problems in
10 our housing come from seniors who forget to turn off
11 the stove or the oven. And so fire tends to be a
12 very big driver in the damages area. But an even
13 bigger driver is the water that then comes down
14 through from the ceiling, the fire or sprinkler
15 system to turn off those things. So FireAvert
16 system would be fine. A pilot program is always
17 better than trying to do a blanket program. Maybe
18 that would be the best way to do it.
19 And then cameras, we have found, have been
20 incredibly helpful for the slip and fall that really
21 isn't a slip and fall where the person sees a hole
22 and actually walks to the hole and falls into it.
23 And we have had that camera, you know, footage, help
24 us get out of that situation.
25 SENATOR BAILEY: So more of a direct infusion
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1 of capital or capital-like discretionary funds to
2 your buildings to arm them with the necessary bells
3 and whistles. Would that be a fair assessment?
4 WILSON KIMBALL: Yes.
5 PERRY PERLMUTTER: That would be helpful.
6 SENATOR BAILEY: And you mentioned the pilot
7 program. So now we are getting to the tort reform
8 question, your thoughts about tort reform. And you
9 mentioned something -- and I will give you credit --
10 I have not yet heard, which is why you saw my --
11 which is why I was like I've always heard tort
12 reform but I've never heard it piloted. Can you
13 talk to me more about that pilot program that you
14 are thinking about? And if I could hear from
15 everybody if you so choose, about what your feelings
16 are about what tort reform would possibly mean for
17 rates and lowering things, so to speak.
18 CARLINA RIVERA: I think it's a bit of a
19 rabbit hole, but we are trying to address some of
20 the issues associated with the costs of affordable
21 housing. I would say it sometimes detracts from the
22 issue a bit but I know my colleagues have a lot to
23 say about it.
24 PERRY PERLMUTTER: I think there should be
25 some sort of tort reform. There are some runaway
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1 verdicts, you know, payouts that really that go into
2 the excess layers, which is where I know someone
3 just before us testified about that's where the big
4 increases are.
5 So some sort of tort reform -- I'm not an
6 expert in it -- would be helpful. I mean, people
7 need to be paid for their losses when there are true
8 losses. But it seems like insurance companies are
9 willing to settle because they're worried about
10 large jury verdicts in the city.
11 REBECCA ZANGEN: The notion of affordable
12 housing carve-out that's a pilot that would be
13 temporary would be one way to test what the impact
14 actually would be. We hear from many experts in the
15 field that this Scaffold Law is unique to
16 New York State and certainly I am not an expert in
17 this at all. And before 2 or 3 years ago, I had
18 never heard of Scaffold Law or tort reform. These
19 are things that I'm just scratching the surface and
20 beginning to understand. But, given how much we
21 hear from experts and from the insurance industry
22 that this is the driver of costs, it seems that a
23 modest pilot program, specifically carving out our
24 industry that I think the state has invested the
25 most in, that provides such a public good, that we
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1 need to make sure remains stable, could be a way to
2 test what really is the impact and how can we, you
3 know, move forward.
4 WILSON KIMBALL: And I think having a sunset
5 would help bring on board other members of the
6 legislature who might have doubts about whether
7 there is an impact. I think one of the things I did
8 not hear discussed today is the replacement cost of
9 affordable housing, and that tends to be from our
10 insurance providers, carriers since one of the
11 driving forces of insurance and maybe the dirty
12 little secret in New York State is that our
13 affordable housing in Westchester cost about
14 $950,000 a unit for a one bedroom to build. That's
15 an incredible cost. And therefore the replacement
16 cost and the insurance cost on that is very high.
17 SENATOR BAILEY: As the proud representative
18 of Mount Vernon, I understand the dual jurisdictions
19 issues that we often have and how it's not uniform
20 across the board.
21 Crystal ball. Same question I asked before.
22 Based upon these possible pullouts and possible
23 areas that you are doing, if something isn't done,
24 whatever that something is -- are there areas in
25 New York City where people are living right now that
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1 need the most help that could be theoretically
2 uninhabitable because of insurance costs?
3 PERRY PERLMUTTER: We are in difficult
4 neighborhoods and if we were forced -- if it got to
5 the point where we were forced not to be able to
6 offer affordable housing, or supportive housing,
7 yes, that could be an issue.
8 I mean, we are not there. Luckily we are
9 financially strong, but this is really stressing
10 S:US. I can speak for us.
11 SENATOR BAILEY: I appreciate that. Anything
12 else before we go to Senator Skoufis? Thank you for
13 your time.
14 SENATOR SKOUFIS: Yes, thank you all for your
15 time. I don't have too many questions beyond what
16 Senator Bailey asked.
17 But I want to probe one thing, Ms. Kimball
18 you touched on it a little bit ago.
19 Now doubt all of you deploy and utilize, I
20 would imagine, robust security systems, cctv
21 systems. There has been a lot made about fraud
22 today by other panels. And I'm curious, how often
23 do you see it happening within your portfolios?
24 PERRY PERLMUTTER: In terms of fraudulent
25 claims?
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1 SENATOR SKOUFIS: Yes.
2 PERRY PERLMUTTER: What I see more are like
3 claims without real merit and that they actually
4 drive up costs. I'm not sure -- there is probably
5 some fraud but I think more like without merit that
6 force us to defend them and it actually adds a lot
7 of costs. And a lot of times it's a business
8 decision, just like it is for the insurance
9 companies, it's a business decision for us. Do we
10 want to litigate or do we want to settle earlier?
11 So I think there are a lot of cases --
12 SENATOR SKOUFIS: And are you making that
13 call or is your carrier making that call?
14 PERRY PERLMUTTER: Generally it's the carrier
15 unless it is within the deductible. Generally it's
16 the carrier.
17 SENATOR SKOUFIS: And you cited I think you
18 were paying $6 million several years ago and now
19 it's up to $16 million, you mentioned.
20 PERRY PERLMUTTER: 16, yeah.
21 SENATOR SKOUFIS: Did your previous carrier
22 cite any of this fraud as one of the reasons they
23 either pulled out or the new carrier why the policy
24 is so expensive?
25 PERRY PERLMUTTER: No, they didn't cite
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1 fraud, no.
2 SENATOR SKOUFIS: What did they cite?
3 PERRY PERLMUTTER: Our claims. The claims
4 that we paid and they do -- they do their actuarial
5 analysis. To me, it seems like we are paying a lot
6 in their profits as opposed to our losses.
7 SENATOR SKOUFIS: What I'm getting at with
8 these questions is I'm curious -- and you touched on
9 it a little bit ago, Mr. Perlmutter -- I wonder if
10 you have seen your carrier settle claims that you
11 feel they should not have settled.
12 PERRY PERLMUTTER: 100 percent.
13 CARLINA RIVERA: The membership brings that
14 up consistently, yes.
15 WILSON KIMBALL: Yes, but it's not like the
16 million dollar claims, at least in my experience.
17 It will be a $200,000 claim, which then our attorney
18 says is worth $6,000, but the insurance company
19 wants us to settle for whatever because they
20 understand that the time in court with the lawyer
21 and my time and taking depositions and blah blah
22 blah is going to be so much more expensive than
23 whatever the settlement is. So I mean, in that
24 case, that's the most appalling and galling, as a
25 CEO, when you are told that this case is worth x and
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1 they want x times 200,000, right?
2 PERRY PERLMUTTER: We've seen the same thing
3 and it's very difficult. It's frustrating at times
4 where we see cases without merit and they're
5 settling for two, 3, $400,000 and it really, it ends
6 up in our loss experience and that causes the
7 premiums to go up dramatically because it's not just
8 one time. We are not just paying for the loss. We
9 are paying two to three times the amount...
10 SENATOR SKOUFIS: I want to get back to your
11 point before or the question and answer before,
12 which is do you ultimately have final say as the
13 policyholder as to whether they settle or whether
14 they go to trial?
15 PERRY PERLMUTTER: No, we don't.
16 SENATOR SKOUFIS: You don't.
17 PERRY PERLMUTTER: The only time we do but
18 not in the property and casualty is our employment
19 law where the first 100,000 is ours. Otherwise we
20 really don't.
21 SENATOR SKOUFIS: But it sounds like for all
22 of you, there are numerous instances where, if you
23 did have sort of that final arbitration, you had
24 veto power, you would have compelled your carrier to
25 take something to trial.
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1 PERRY PERLMUTTER: Yes.
2 WILSON KIMBALL: Yes, because as you I think
3 raised earlier, you don't want to send a message to
4 the public that suing a housing authority is a good
5 idea or a lucrative idea. So we want to fight these
6 tenaciously, especially when we know we are right.
7 But that's where the confidentiality clause comes
8 in. It does help housing authorities to not have
9 all the settlements bandied about, especially
10 settlements that we didn't want ourselves, that we
11 took.
12 SENATOR SKOUFIS: And do you imagine that the
13 reason why carriers do this is just it's easier?
14 WILSON KIMBALL: I think it's the bean
15 counting, right? It's a cost benefit analysis of
16 the cost of a deposition, the cost of a time away
17 for staff, the staff of whatever goes into a
18 lawsuit. I'm a recovering attorney, also, so, yes,
19 it's all that.
20 SENATOR SKOUFIS: Is that short-term
21 thinking? Because as you mentioned, as I mention
22 the earlier, I would imagine that if a carrier was
23 taking these types of cases to trial, and were
24 winning verdicts or dismissing these cases, I would
25 imagine there would probably be fewer fraudulent
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1 cases brought forward, no?
2 WILSON KIMBALL: You know, I don't know.
3 SENATOR SKOUFIS: Which would save the
4 carrier money.
5 WILSON KIMBALL: You know, they have a
6 broader portfolio experience, like our carrier is
7 national, so they would know what goes on. I mean,
8 I do think our insurance in New York is on the rise
9 also because we are covering states like California
10 and Florida, that have had epic, epic
11 weather-related losses. I mean, if you look at the
12 statistics from the HAI Group, New York has had none
13 of the major catastrophic weather events the last
14 couple of years that drive costs in insurance.
15 I mean, it's kind of shocking because we had
16 "Sandy." But subsequent to that, we haven't been
17 the ones driving the weather-related costs.
18 SENATOR SKOUFIS: They're adamant, for the
19 record, because I share your suspicion. They're
20 adamant that that cross subsidization is not
21 happening but I share your suspicion. Go ahead.
22 You were going to say something, sir?
23 PERRY PERLMUTTER: Sometimes when you leave a
24 carrier, they want to close out the claims so
25 they'll settle them really easily and we have had to
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1 jump around because we were, you know, one of the
2 carriers left New York City. So we have seen that
3 even worse where they just want to settle whatever
4 is sitting on their books and they close them out,
5 which is really frustrating for us because it still
6 does sit in our loss history.
7 SENATOR SKOUFIS: I imagine you all work with
8 peers in other states. Are there any other states
9 where the policyholder does have final say as to
10 whether a case is brought to trial?
11 PERRY PERLMUTTER: I don't know.
12 SENATOR SKOUFIS: Does that mechanism exist
13 anywhere?
14 CARLINA RIVERA: I try to speak to colleagues
15 and allies in like New Jersey, Connecticut, mostly
16 tristate area, Pennsylvania. I haven't really found
17 that.
18 SENATOR SKOUFIS: Because it is strange. You
19 are paying the premium.
20 PERRY PERLMUTTER: Well, there are policies
21 where you can have the ability, but if you lose,
22 then you have to pay up. You have to pay some of
23 the loss. So we don't have that type of policy.
24 But there is like a hammer clause I think in some
25 policies. We don't have that ability.
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1 SENATOR SKOUFIS: You mentioned,
2 Ms. Kimball, that you support these
3 confidentiality agreements and sort of the concept?
4 WILSON KIMBALL: Yes, because we have seen
5 different individuals who have sued the housing
6 authority try to compare notes, well, she got or he
7 got or I should get. And so the less information
8 that is in the public domain, the better for us, I
9 would say.
10 SENATOR SKOUFIS: What if they were
11 non-identifiable, they were disclosed but you
12 couldn't identify, they were redacted or through
13 some other means, you couldn't identify the names,
14 address, et cetera, but we at least had the data in
15 the public how many claims, how many payouts.
16 WILSON KIMBALL: Okay.
17 SENATOR SKOUFIS: That's something you think
18 would address your concern?
19 WILSON KIMBALL: I think there is always a
20 way to meet in the middle, right? It should never
21 be too far left or too far right. There is always
22 an idea in the middle that is probably the right
23 answer, like a pilot with a sunset.
24 CARLINA RIVERA: Transparency.
25 WILSON KIMBALL: Transparency to the extent
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1 possible.
2 SENATOR SKOUFIS: Thank you all.
3 SENATOR KAVANAGH: Thank you. And let me
4 just begin by saying however much Senator Bailey
5 misses Carlina Rivera and her service, we miss her
6 more on the lower east side, as my neighbor and
7 friend. But it's great to see you here. We have
8 bequeathed you to the statewide role now.
9 CARLINA RIVERA: Thank you for having me.
10 SENATOR KAVANAGH: I'm going to ask a
11 smattering of questions on sort of components of
12 each of your testimony.
13 So I just want to start with this idea of a
14 public excess liability fund. Are any of you aware
15 of a model that currently exists where a government
16 is sort of stepping in and creating that kind of
17 structure in other states or other jurisdictions?
18 PERRY PERLMUTTER: I know there was in
19 New York, a medical indemnity fund for babies born
20 with disabilities. That originally it was supposed
21 to be funded by hospitals in the state. I know that
22 the fund didn't do so well many, many years later.
23 But if it was funded correctly, I know
24 New York State did have that fund. And so what we
25 are proposing is an excess liability. And everybody
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1 who joins would pay an actuarial amount but just for
2 the losses and not for a profit. So I know that
3 that worked for a number of years, many years in
4 New York and now I think it's, for whatever reason,
5 I don't know the details.
6 SENATOR KAVANAGH: If I'm not mistaken, you
7 have some experience in the insurance industry.
8 PERRY PERLMUTTER: I worked in insurance,
9 yeah, yeah, yeah.
10 SENATOR KAVANAGH: Any examples in the
11 property space that you are aware of?
12 PERRY PERLMUTTER: What's that?
13 SENATOR KAVANAGH: The medical indemnity fund
14 is helpful as an analogous situation, but are you
15 aware of any instances of somebody trying that in
16 excess in the property --
17 PERRY PERLMUTTER: I don't know. I'm not
18 sure.
19 SENATOR KAVANAGH: Okay.
20 A couple of you testified about the incentive
21 program we created or the subsidy program we created
22 for people to join captives. It's a $5 million fund
23 in last year's budget. There is a notice of funding
24 availability that is out, I think due the first week
25 of December. I think at least one of your
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1 testimonies suggested $25 million would be a number
2 that would be appropriate for that. Just -- I mean,
3 can you talk a little bit about the interest among
4 affordable housing providers in joining that kind of
5 mechanism.
6 PERRY PERLMUTTER: I could talk to it a
7 little bit. I would be interested. I'm doing a
8 little research on captives, reciprocals in the
9 state. And there is definitely interest among many
10 non-profit and affordable housing providers. I
11 could tell you for sure because as I've done a
12 little research and trying to put something
13 together, a lot of providers say they're interested.
14 SENATOR KAVANAGH: So you think there would
15 be demand.
16 CARLINA RIVERA: I was going to agree with
17 that. We brought up $25 million in terms of our
18 discussion with our membership. We want
19 organizations to create their own captives or
20 self-insurance mechanisms. I mentioned some of the
21 things that they would be able to do. Fund risk
22 mitigation measures like water sensors, cameras,
23 slip and fall prevention. That's all to reduce
24 operating costs and insurance claims. This has come
25 up multiple times. It was certainly something that
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1 was featured in recent campaigns, Millford Street
2 specifically, but other organizations are doing it,
3 too. One of our members, L & M has created their
4 own captive. They're a bit different. They have
5 18,000 units that they can start with. But putting
6 it to scale and having state support, I think, would
7 make a difference. It really trickles down to the
8 reinsurance sort of level, but it's a start in the
9 right direction.
10 SENATOR KAVANAGH: And we have had
11 conversations throughout the day about the kinds of
12 actions that property owners can take to reduce risk
13 and how that relates to insurance premium rates.
14 And I want to get to a specific proposal in
15 Carlina's testimony. But just more generally, to
16 the extent you are in discussions with insurers, how
17 clear is it to you what, sort of, what aspects of
18 your property might result in discounts in premiums?
19 WILSON KIMBALL: Cameras seem to be a
20 favorite for sure. There was a bill in Florida at
21 one point where housing authorities would be
22 exempted from sort of torts that were the result of
23 mass shootings, if they did x, y and z, part of
24 which included, you know, cameras, lighting, fencing
25 et cetera, et cetera. So cameras are always very
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1 vital and important. We try to stay away from
2 fencing.
3 SENATOR KAVANAGH: And I will refrain from
4 commenting on other steps Florida could take to
5 reduce the likeliness of mass shootings.
6 WILSON KIMBALL: Agreed.
7 SENATOR KAVANAGH: But in terms of your --
8 you mentioned a bunch of actors. Leak sensors that
9 prevent -- our understanding is that a lot of
10 catastrophic losses are about much more routine
11 things than hurricanes and storms.
12 WILSON KIMBALL: Yes, fire and the resulting
13 sprinkler system, which drenches multiple units and
14 causes more damage, which I believe the insurance
15 industry asked us to put in. So maybe they should
16 rethink that.
17 SENATOR KAVANAGH: Right. To your knowledge,
18 are there changes in the way properties are built or
19 kind of features that seem sensible to be added that
20 would reduce the risk of loss that are not currently
21 resulting in premium discounts?
22 WILSON KIMBALL: We are building all passive
23 house so that we can have everybody shelter in place
24 should there be another catastrophic, you know,
25 weather situation. There is even things as small as
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1 fire blankets and other things because fire
2 extinguishers cause a lot of damage. It's small
3 things like that, which might be the biggest
4 improvement. So we are trying all that stuff.
5 CARLINA RIVERA: But that's a good question
6 because -- and over the past few weeks, I have been
7 obviously downstate is a place I have spent most of
8 my time. But Albany, Schenectady, Troy, Rochester,
9 Buffalo, Newburgh, Poughkeepsie, Syracuse, Utica, it
10 all comes down to the same issue, this insurance
11 idea. But they are trying things to add
12 preventative measures inside homes. Whether or not
13 any of that is being rewarded so to speak, that's a
14 really good question and I'll try to get some
15 details for you on particular things they're doing
16 around stoves and fire suppression to see if it is
17 as rewarding for the investment.
18 WILSON KIMBALL: The other thing that is lost
19 that we are a medium sized housing authority, like
20 2800 units and 5,000 vouchers so we can afford
21 cameras and we can afford these items and we can try
22 to afford these. If you are looking at Herkimer,
23 they have 248 units. They're not really in a
24 position, although they need the cameras, to do that
25 investment.
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1 SENATOR KAVANAGH: I won't share with them
2 that their local elected officials might consider
3 doing that with discretionary funding as we
4 frequently do on the lower east side. But no, it is
5 an important point. And that, I mean that question,
6 that's something we have been asking a lot of
7 contacts is to what extent should we be subsidizing
8 changes people can be making in property, especially
9 to the extent it's publicly subsidized property
10 anyway.
11 WILSON KIMBALL: The smaller the housing
12 authority, the more they need your help.
13 SENATOR KAVANAGH: Right. But having said
14 that, if we could close the loop and ensure that
15 those short-term investments are then leading to
16 longer term savings in insurance, it would probably
17 be easier to justify.
18 PERRY PERLMUTTER: So just in general, I feel
19 our insurance is based on our losses, no matter what
20 we do. I mean, what we do will hopefully reduce
21 losses and claims. But I don't see if I have, you
22 know, whatever it is, that is to prevent fires or
23 whatever it is, I don't see getting credit for that
24 in my insurance premiums. Today, hopefully it will
25 prevent losses.
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1 REBECCA ZANGEN: I just want to raise perhaps
2 there is a role for DFS in creating some standards
3 around certain practices and, you know, actuarial
4 data around which practices can create, you know,
5 minimize risk and loss. And because I think a lot
6 of our members do put a lot of these best practices
7 into place and don't necessarily see a reduction in
8 premium. I think there is a role for DFS to come in
9 with some data and provide some standards around
10 credits that insurers can give.
11 SENATOR KAVANAGH: I think that there have
12 been a couple of features that DFS has gone out and
13 encouraged insurers through regulations to do but it
14 is pretty limited so far. We heard from the
15 superintendent earlier that they are -- the agency
16 is attempting to kind of catalog the various things
17 that, you know, might be appropriate for discounts
18 and what different insurers are doing, but I think
19 that this is an area we want to have a continuing
20 conversation.
21 Carlina, in your testimony you mentioned the
22 possibility of discounts for kind of more behavioral
23 changes. Like training people, tenants on fire
24 safety and avoiding the risk. Can you talk a little
25 about that.
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1 CARLINA RIVERA: What we are calling safe
2 housing courses. So it would be the Safe Housing
3 Incentive Program. And that's to receive insurance
4 premium discounts for offering these courses. So
5 the idea would be that tenants -- or we're looking
6 at property owners, because I realize that tenant
7 compliance can always be an issue. But it is to
8 include fire safety and extinguisher basics. I know
9 we are trying to get away from that. But preventing
10 water damage and reporting leaks, reducing trip and
11 fall hazards. Understanding basic lease terms.
12 Responsible use of appliances and utility, renter
13 insurance education. These are all ideas where, you
14 know, as we are discussing insurance, I mean things
15 like defensive driving for car insurance, not the
16 perfect example. I realize that. But it's how do
17 we try to share some of the responsibility and be
18 collective on this effort. And in exchange, an
19 insurer would reduce liability and/or property
20 premiums for participating development. So it's an
21 idea we have that we are working on in coalition and
22 we obviously would really love to hear constructive
23 criticism.
24 SENATOR BAILEY: Just want to refollow that.
25 That's an incredible idea. Would that potential
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1 idea be predicated upon the tenant, the management
2 company, the association? Because you know, like
3 there are different levels of liability and
4 responsibility. And so like if you get a tenant to
5 go, you get 5 percent. If you get the tenant and
6 the management company to you, you get 10 percent.
7 You get everybody to go, you get 15 percent, just
8 throwing it out there. Like I'm curious because now
9 my interest is peaked about some sort of like
10 program like that. I'm just wondering like how
11 would a program like that look in your eyes.
12 CARLINA RIVERA: I appreciate your interest
13 because I knew once I said defensive driving, that
14 people start paying attention and it's only because
15 I have been on that side, that I think, how can I
16 explain this in a way to get people's attention.
17 When gas goes up, you see it at the pump, right?
18 When eggs go up, you see it at the checkout. When
19 insurance goes up, it doesn't exactly show up on
20 your itemized receipt. So how are we creating some
21 sort of action or idea or innovation. And so when
22 we brought this to the Insurance Association, among
23 many, many other stakeholders, maybe the tenant is
24 not the person. Maybe it's the property owner. But
25 we are trying to figure out how you take an idea
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1 that has existed for a long time that has seemingly
2 worked and apply that to residential properties.
3 So, you know, we are working it out and we are
4 conferring with our partners.
5 WILSON KIMBALL: Other members from across
6 the country incentivize tenants with gift cards or
7 whatever for reporting leaks because really an
8 unreported leak is so much worse on the third day
9 than it was on the first day. So calling into the
10 emergency call center and reporting leaks or, you
11 know, fires or whatever they might be seeing, and
12 some of our tenants are doing it for free because
13 they enjoy calling us and reporting on things that
14 are happening in our yard.
15 But that is an excellent program. And our
16 staff currently takes a Know Before program which is
17 all online. And it's everything from fire
18 prevention, to sexual harassment prevention, to a
19 number of other classes. It can all be done online
20 through our insurance carrier.
21 SENATOR BAILEY: Everybody operates based on
22 incentive, right? Like there is no person in this
23 world that is not incentivized by something. If you
24 are hungry, you are incentivized to go find some
25 food, right, it can be as basic as that. So I think
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1 incentivizing people to be better actors. We know
2 we can't legislate kindness but if we can figure out
3 how to get people to be better actors, that may be
4 able to keep things in a better state of repair. I
5 like that. I would love to flesh it out a little
6 bit further. Sorry to interrupt.
7 SENATOR KAVANAGH: If you are done, just a
8 couple of quick followup.
9 First, just for NYSPHADA particularly, there
10 is this HAI Group insurance mechanism. Can you talk
11 a little bit about that?
12 WILSON KIMBALL: HAI is a Housing Authority
13 Insurance Group.
14 It's out of Connecticut. It started off as a
15 captive and is now probably the largest insurer of
16 affordable housing across the country.
17 SENATOR KAVANAGH: To what extent are members
18 in New York participating in that?
19 WILSON KIMBALL: I don't know what percentage
20 of our members are in HAI. I believe it is a large
21 portion of our members.
22 And they do incentivize us by having us take
23 these Know Before classes online. My entire staff
24 has to take it, from the maintenance workers to the
25 white collar Teamsters. And also they do
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1 incentivize us for having like no slips and falls.
2 We get incentives for having a good quarter. That
3 kind of thing.
4 SENATOR KAVANAGH: And that covers, in sort
5 of the insurance that is required by HUD for public
6 housing to have; is that right?
7 WILSON KIMBALL: It came up and was created
8 by a number of people who had formerly been at HUD.
9 SENATOR KAVANAGH: If you have that product,
10 are you also seeking insurance in addition to that?
11 WILSON KIMBALL: Depending on how your RAD
12 deal works, it could be. One of our partners in our
13 RAD deal is L & M. They're in their own captive and
14 one of our other partners is the Community Builders
15 because these are RAD deals and I believe they might
16 be in their own captive as well. So it kind of
17 depends on the mix and match.
18 With the community partners, we are relying
19 on their insurance for this eight-story building.
20 Since when we did talk HAI, they said they don't
21 insure high rises, having been in Manhattan for many
22 years before I went to Yonkers, I don't consider an
23 eight stories a high rise but in any event, that's
24 where we are.
25 SENATOR KAVANAGH: That is very helpful. I
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1 am going to wrap just because I have various
2 opportunities to talk with all of you in various
3 context. But to appreciate your testimony, all the
4 work you do to make sure we have affordable housing
5 available throughout the state. And just to note, a
6 couple of you cited a-9016 which is a transparency
7 in reporting bill. Just to note, there will be a
8 revised and more comprehensive version of that that
9 will be kind of same as that bill soon. So we would
10 like feedback on that as we go forward. But thank
11 you.
12 CARLINA RIVERA: I just want to say to you
13 all thank you because this is not an easy topic and
14 we all have been working on this for many, many
15 years.
16 And just the last anecdote is that while I
17 was in Utica, one of the property owners said that
18 liability insurance is going up for snow plowing.
19 And when they asked their vendor why, they said
20 because your block has affordable housing, for snow
21 plowing. So it's unfortunately, it feels like a
22 modern day red lining and I know neighborhoods are
23 disproportionately affected so thank you for taking
24 on this topic and for the time and thoughtfulness
25 you brought to it.
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1 SENATOR BAILEY: Thank you all.
2 SENATOR SKOUFIS: Moving right along,
3 Panel 7, Property Owners Associations;
4 Kathleen Irwin Policy Director of the New York
5 Apartment Association; Tim Foley, CEO and Executive
6 Vice President of the Building & Realty Institute of
7 the Hudson Valley, BRI; and Ann Korchak, president
8 of the Small Property Owners of New York.
9 While folks are shuffling a little bit. If I
10 could swear you all in if you are ready for that.
11 Please raise your right hand. Do you
12 solemnly swear that you will tell the truth, the
13 whole truth and nothing but the truth?
14 (Witnesses sworn.)
15 SENATOR SKOUFIS: Thanks very much. Who will
16 be going first? Whoever it is, take it away.
17 KATHLEEN IRWIN: Thank you, Chairs and
18 members of the Housing Insurance and Investigations
19 Committees for the opportunity to testify. My name
20 is Kathleen Irwin and I'm a policy director with the
21 New York Apartment Association.
22 Our members own and operate more than 400,000
23 units of pre-1974 rent stabilized housing, a
24 critical and endangered segment of the city's
25 housing stock.
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1 Today we face an insurance crisis that
2 threatens the viability of rent stabilized housing
3 both privately owned and non-profit. To capture the
4 impact of this crisis, we conducted a member survey
5 in October of 2025 of over 60,000 units of housing.
6 Our survey data shows that total insurance
7 costs including property, liability and umbrella
8 coverage rose 113 percent citywide in just 5-years
9 from annual average of $703 per unit in 2020 to
10 $1501 in 2024. Premiums in the Bronx and northern
11 Manhattan specifically rose 134 percent during that
12 same period with some buildings paying more than
13 $3300 per unit per year.
14 Rent guidelines per data show a 52 percent
15 increase in the share of costs consumed by insurance
16 from 5.4 percent of total operating costs in 2019 to
17 8.2 percent in 2023. Our survey also found that
18 87 percent of owners have been forced to take on
19 more risk through higher deductibles or cutting back
20 on coverage.
21 In one case, a portfolio of 100 to 500 units
22 had to increase their per property deductible from
23 5,000 up to $25,000. At the same time, their per
24 unit annual premiums climbed from $901 in 2019 to
25 $1602 in 2025.
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1 Another member with fewer than 100 units
2 increased their deductible from $10,000 to $50,000
3 and cut umbrella coverage back from $5 million to
4 $1 million. Still their annual per unit premiums
5 grew from $1140 in 2022 to $2334 in 2025. It's
6 important to note that this acceptance of risk is
7 not reflected in the costs submitted to the Rent
8 Guidelines Board even though higher risk creates the
9 possibility of major unexpected expenses.
10 Considering premium costs alone obscures the depth
11 of the insurance crisis.
12 Equally troubling, the majority of survey
13 respondents reported being denied insurance
14 coverage. 74 percent of owners with fewer than 100
15 units and all survey respondents with portfolios
16 over 5,000 units had experienced denial of coverage.
17 Common insurer explanations reported in the
18 survey included refused to insure rent stabilized
19 housing, refused to cover Bronx buildings, or
20 carriers stopped writing multifamily coverage in
21 New York City. Liability costs and fraud further
22 compound this problem.
23 According to the national insurance crime
24 bureau, New York City ranks number 1 in the U.S. for
25 questionable slip and fall claims. Fraudulent
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1 claims have become routine, often involving staged
2 accidents, exaggerated injuries or false claims of
3 building negligence when people behave
4 irresponsibly. In one example claim, security video
5 captured a person descending the stairs, distracted
6 by their phone and not holding the railing who then
7 fell and brought a claim alleging the stairs were
8 defective.
9 According to our survey, 70 percent of owners
10 with video evidence disproving a slip and fall claim
11 still saw insurers settle rather than fight. Faced
12 with the prospect of drawn out investigations,
13 litigation and the risk of jury awards more than
14 eight times higher than the national average,
15 insurers choose to save themselves money by settling
16 despite the evidence.
17 This practice drives up premiums while
18 rewarding bad actors. This dynamic especially harms
19 tenants in buildings with rent stabilized units.
20 Fraudulent claimants and their attorneys profit,
21 insurers protect themselves through higher rates or
22 leaving the marketplace and owners are left
23 observing massive cost increases.
24 This is reflected in higher rents and
25 building with market units but in fully stabilized
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1 buildings, premium costs increases cannot be offset.
2 Every dollar diverted to inflated insurance costs is
3 a dollar that cannot be spent on maintenance, safety
4 upgrades or energy efficiency.
5 We urge the committees gathered to act.
6 First: Create a state-backed reinsurance
7 program to stabilize premiums for affordable and
8 rent regulated housing. This intervention would
9 bring in more competition by protecting insurers,
10 moderating their risk exposure and lowering rates.
11 Secondly: We encourage the state to pursue
12 targeted tort reform that would rebalance the
13 current liability landscape while maintaining the
14 core intent of those protections. Regardless of how
15 robustly the state works to support the insurance
16 market, the current liability environment leaves
17 insurers and building owners extremely exposed to
18 fraud and abuse. So as long as it is a lucrative
19 practice to bring suspect fact patterns and inflated
20 claims, bad actors will enrich themselves at the
21 expense of New York City's rent stabilized housing
22 and tenants.
23 The New York Apartment Association also
24 remains committed to collaborating with any elected
25 official working towards real solutions on this
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1 issue. Without insurance reform, we risk losing the
2 very buildings that keep New York affordable for
3 working families.
4 Thank you for your attention and for your
5 commitment to protecting New York's housing.
6 TIM FOLEY: Good afternoon, Chairs. Thank
7 you so much for convening this very important
8 hearing and a special note of appreciation to your
9 respective staffs for such thorough and organized
10 preparation.
11 My name is Tim Foley. I'm the CEO and of the
12 Building & Realty Institute of the Hudson Valley.
13 We represent home builders, developers, property
14 owners and managing agents across Westchester,
15 Rockland and Putnam Counties covering everything
16 from affordable housing to co-ops and condos.
17 And no matter where we look in the insurance
18 market for residential housing, the story is the
19 same: Sticker shock. We have seen double digit
20 renewal increases across the board for the last
21 2-years. In extreme cases, particularly for high
22 limit umbrella liability policies, increases have
23 reached as high as 100 to 200 percent. Although it
24 is true across the board, there is no doubt that
25 older housing stock has been hit the hardest,
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1 including co-ops, rent stabilized buildings and
2 subsidized affordable housing.
3 And the data tells a devastating story.
4 Westchester rent stabilized property owners reported
5 a 22.5 percent insurance increase over the last
6 2-years. Nassau saw 25.1 percent and Rockland
7 experienced a staggering 67.2 percent. The New York
8 Housing Conference found that insuring an affordable
9 apartment now costs $1770. According to their
10 numbers, 103 percent increase from just 4-years ago.
11 ANHD stated in their most recent report
12 insurance has been the fastest growing expense
13 category with double digit annual increases in
14 multiple years, while Enterprise Community Partners
15 reported insurance has risen 110 percent since 2017,
16 more than double any other expense.
17 The national causes of this surge in costs
18 are clear. Climate change has driven an increase in
19 damage related to extreme weather events.
20 Nationally, catastrophic claims rose 32 percent
21 between 2019 and 2022. Replacement and repair costs
22 have soared over this timeframe; first due to the
23 pandemic supply chain disruptions, then due to
24 inflation and now tariffs on building materials.
25 The reinsurance market is, as you have heard,
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1 is fundamentally broken. Many carriers have
2 withdrawn entirely from high risk markets including
3 New York, leaving property owners with higher costs
4 and worse coverage.
5 While the state has taken important steps to
6 crackdown on insurance discrimination, we need more
7 comprehensive action to protect our oldest most
8 affordable and most likely to be financially
9 distressed properties. We respectfully urge you to
10 consider four policy solutions.
11 First: As many have said, we need a state
12 excess liability fund, a public or state-backed
13 reinsurance program. The reinsurance market is
14 broken for older housing stock and affordable
15 housing and a state-backed safety net could
16 immediately reduce risk, lower costs and improve
17 terms for both subsidized and naturally occurring
18 affordable housing. This could be limited to
19 financially distressed properties or it could be a
20 broader pool. Though of course the broader the
21 better to stabilize costs for both the insurers and
22 taxpayers.
23 Second: We strongly recommend regulations or
24 incentives for longer term insurance contracts
25 specifically for affordable and financially
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1 distressed properties to make them viable.
2 These properties face predictable restrained
3 income year over year, but unpredictable expenses.
4 Insurance used to be one of the more modest and
5 stable cost increases but that world is gone.
6 The next best thing is longer term contracts
7 that provide some predictability and some planning
8 with more years between major rate shocks.
9 And third: New York should reduce insurance
10 premiums for climate resilient construction through
11 discounts and other incentives. Since climate
12 change and extreme weather are the primary drivers
13 of the rise in premiums we see today, we should
14 offer relief to property owners who build or
15 renovate to modern energy efficient codes and higher
16 resilient standards.
17 There is a model in existing law Chapter 28
18 Article 23 Section 2346, already allows premium
19 reductions for hurricane resistant windows and
20 doors. We can expand this to reward properties
21 meeting standards like HUD Green and Resilient
22 Retrofit Program, the National Green Building
23 Standard or Fortified Standard. This would provide
24 cost relief while at least minorly addressing some
25 of these root causes.
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1 Fourth: We need increased transparency
2 through increased reporting requirements. While the
3 trends are clear, the exact mechanisms insurers use
4 to balance risk and cost remain opaque. A public
5 reinsurance actor would provide valuable
6 transparency but additional reporting or
7 requirements similar to what NYSIF workers'
8 compensation safety groups provide would improve our
9 ability to manage future changes and crises.
10 We appreciate the opportunity to share our
11 perspective and commend your willingness to tackle a
12 problem that is worsening the financial outlook for
13 our most affordable housing options in the midst of
14 a severe affordable housing shortage. Thank you.
15 ANN KORCHAK: My name is Ann Korchak and I
16 serve as the board president for SPONY, the Small
17 Property Owners of New York. We are an all
18 volunteer organization of small rental building
19 owners, which means we have firsthand experience
20 with the rising costs and shrinking coverage.
21 Insurance is one of the largest expenses we
22 face, second only to property taxes. It's an
23 expense that we cannot delay and one where we can
24 easily find a more affordable option.
25 Earlier this year we did a survey of our
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1 members and that showed that insurance costs were
2 increasing about 37 percent for small buildings
3 under 11 units. The increase was slightly lower for
4 the larger buildings. My own family's experience
5 reflects this. Our combined total insurance cost
6 for commercial and liability coverage for a 10-unit
7 building on the upper west side has increased
8 43 percent in recent years.
9 This steepest increase was for the liability,
10 which we saw a 95 percent increase. In the past, we
11 paid as little as $56 a unit for liability coverage.
12 And today it's more than a thousand dollars. Our
13 liability coverage was once a fraction of our total
14 insurance bill. It now exceeds our commercial
15 package.
16 And while we once carried $100 million in
17 umbrella liability, we can now only be given
18 $15 million in coverage and our deductible has also
19 doubled.
20 The drop in coverage isn't a choice. In the
21 past we always had multiple offers when our
22 insurance policy came up for renewal. Last year,
23 the day before our policy expired, we had just one.
24 Our long time insurer had dropped us. Getting that
25 close to the expiration date was extremely nerve
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1 racking and the only offer was a three-year
2 commercial package.
3 We hadn't seen that in many, many years. But
4 it came with a twist. We had to pay all 3 years up
5 front. It was this time last year because I was
6 facing a huge tax bill coming in December, so we
7 didn't have the cash on hand. And the only reason
8 we were able to pay both our taxes on time and this
9 insurance bill is because a long time contractor
10 waited, like another 60 days for us to pay him the
11 $20,000 bill for a job he had just done.
12 Just want to add a few other things.
13 Yesterday I saw some comments, insurance related
14 comments in a SPONY WhatsApp chat. One owner was
15 attempting to negotiate a payment plan because the
16 cost was so high, they couldn't afford it. Another
17 was at housing court with a tenant who had not paid
18 rent since June of 2023. It was $63,000 in
19 rental arrears and this person has to pay a big
20 insurance premium later this month. So cash is a
21 problem when have you a $63,000 in rental arrears.
22 Another owner was denied a renewal for filing
23 a claim that was covered by a sewer backup rider
24 that the carrier had encouraged her to purchase six
25 years prior. So when she used the rider, then she
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1 got her insurance canceled.
2 Several years ago I asked my broker why our
3 costs were rising so quickly. And her answer was,
4 you own a building in New York City. So you are in
5 the construction business. And she is right.
6 Buildings all over the city doing facade repairs,
7 boiler replacements, electrification upgrades and
8 just ordinary maintenance repairs. And every
9 contractor who works in our buildings is also paying
10 more for their insurance. And those costs come
11 right back to us with higher construction costs.
12 We pay for this reality on both sides. Our
13 own insurance coverage and then that extra charge
14 from the contractors. I have learned one of the
15 drivers of this is the large amount of personal
16 injury litigation, including fraudulent claims and
17 lawsuits. Insurance fraud is an area where perhaps
18 the government could take action by prioritizing
19 fraud prevention and enforcement, legislators can
20 help reduce unnecessary claim costs, stabilize the
21 insurance market and provide real relief for small
22 property owners who supply much of New York's
23 affordable housing. The city itself could also
24 reduce risks especially around flooding by properly
25 maintaining and regularly cleaning the sewers and
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1 catch basins. Of the 2024 DEP storm analysis
2 outlines several concrete steps to improve drainage.
3 We are paying very large water and sewer fees. We
4 would like to make sure that that money is being
5 used properly to help mitigate some of those
6 problems.
7 High crime rates are another reason for
8 rising costs or denied coverage. Another owner I
9 know shared with me that she was told her policy
10 would not be renewed because the crime score exceeds
11 our threshold for acceptable risks established
12 through our underwriting guidance. So lowering
13 crime rates could also help property owners.
14 And I just thank you, you know, for including
15 us here today. And appreciate, you know, anything
16 you could do. We are on the front lines here and
17 it's getting more and more difficult for us to cover
18 our operating expenses.
19 SENATOR SKOUFIS: Thanks to each of you for
20 your testimony. And you know, I think we all work
21 with all of your organizations over the course of
22 session and know that you are in the trenches and
23 know that it is difficult and your insight today,
24 and generally, is really appreciated. I want to ask
25 a question that I asked the previous panel. Your
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1 members, I imagine the large majority of your
2 members, use video surveillance, have cctv systems.
3 And I'm curious to what extent are your members
4 seeing claims without merit or even fraudulent
5 claims caught on video but nevertheless -- and I
6 think one of you mentioned it before -- how often
7 are nevertheless your carriers, your members'
8 carriers still settling those claims?
9 KATHLEEN IRWIN: We asked that specific
10 question -- I don't know if I'm on. We asked that
11 specific question in our survey. And for those who
12 reported that they had had fraudulent claims,
13 70 percent of those with video, their insurers still
14 chose to settle.
15 SENATOR SKOUFIS: And the other two of you?
16 TIM FOLEY: We don't have data on that. We
17 certainly do have anecdotes because we cover a broad
18 spectrum of housing; for example, some areas that
19 are particularly crime ridden may be more inclined
20 to have cameras than others.
21 We do certainly have anecdotes, particularly
22 on new construction, where some of the surveillance
23 cameras have caught fraudulent slip and falls.
24 There was one video that I actually got to watch
25 myself of a worker walking down an alley way who was
328
1 unaware that there was a camera there and quite
2 literally lying down as if to simulate a fall that
3 had just transpired. There was pressure to settle
4 that claim. I believe they did not, in that
5 particular instance. But that is just one anecdote
6 in that systematic data.
7 SENATOR SKOUFIS: How was that resolved, do
8 you know?
9 TIM FOLEY: I believe ultimately, when they
10 brought that specific video in, that particular
11 plaintiff backed away. But I do know that there are
12 many occasions where the insurers, again, as was
13 previously testified through whatever bean counting
14 they're doing, determined that the risk of going to
15 trial, the risk of additional costs of going to
16 trial, the legal costs of going to trial are greater
17 than whatever is being asked for by the individual
18 plaintiff.
19 ANN KORCHAK: I would just add that I know of
20 no owner who has ever gone to trial.
21 SENATOR SKOUFIS: Not a single one?
22 ANN KORCHAK: Not a single one.
23 SENATOR SKOUFIS: How much of that do you
24 think has to do with whatever actuary they're
25 conducting or risk that you are referencing versus
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1 it just being easy to settle? And you don't have to
2 use up personnel and bandwidth -- and yes, there is
3 certainly a cost to seeing a case to trial. But at
4 the end of the day, just settling, you just tuck
5 that into your next rate application, no?
6 TIM FOLEY: Well, there are two factors that
7 our members feel, which is that this is not an
8 isolation. So any incident that is involving their
9 insurance, whether it's directors and officers
10 insurance within the co-op, whether it's something
11 that is an alleged fair housing violation, so on and
12 so forth. The pressure to settle is omnipresent no
13 matter what channel of insurance you are
14 particularly talking about. Particularly, you know,
15 within certain ranges within costs. So it is no
16 more remarkable in the context of the type of
17 liability and construction insurance that we are
18 talking about than it is in any other context. If
19 there is a claim, they're looking at it.
20 But the second factor is that the number one
21 determining factor between whether you will have a
22 reasonable increase in your premiums or not is your
23 claims history.
24 SENATOR SKOUFIS: Of course.
25 TIM FOLEY: So if there is any claim of any
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1 sort, the insured is so desperate to mitigate their
2 losses, that even if they feel that there is some
3 injustice, and often they do feel that quite
4 strongly. They have done nothing wrong. They ought
5 to go to trial, they also are very concerned about
6 what is going to happen the next time they're up for
7 renewal.
8 KATHLEEN IRWIN: I think, as far as our best
9 understanding, it's more of a cost question than
10 like a laziness question. I think it's more the
11 risk-reward. Like if you spend all this money
12 investigating, defending a claim, litigating a claim
13 and even imagine that it still does get an award
14 given against it, there is always the risk of that
15 regardless of what the fact pattern is. All of that
16 comes together to say at the end of the day, this is
17 a nuisance. At the end of the day, we are going to
18 settle. It costs less money to settle and that's
19 what we are going to do.
20 SENATOR SKOUFIS: Do you think they're
21 evaluating that risk properly? Obviously none of
22 you are actuaries. I understand that. But as a lay
23 person, my sense is that there is really no downside
24 for the insurer to settle.
25 It sort of gets this situation off their
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1 plate, right? Whereas you absorb, your members
2 absorb that downside because yes, it's not a payout.
3 It's not a verdict. It's not, you know, a jury
4 award, but that settlement still appears on your
5 claims history and drives up your premiums, which
6 again, then is to the benefit of the carrier we are
7 talking about.
8 And so I don't want to make it seem as though
9 I'm suggesting they're doing this because they're
10 lazy, but in my mind, the risk equation is very
11 different for the insured versus the insurer. There
12 is very little downside for them. You absorb all
13 that downside. You absorb that risk.
14 ANN KORCHAK: Right. And it's so frustrating
15 because you are paying such high premiums and you
16 know, so many people have video cameras now, right?
17 So you know if somebody has made a fraudulent claim.
18 Like this story you just told about the guy
19 laying down. You are paying for this coverage that
20 never materializes because when they go and settle,
21 you never have a chance to say, hey, my camera
22 footage here is showing that what they're claiming
23 is not what actually happened. And you just have to
24 accept it. It's just because, right, the insurers
25 have decided that that is the preferred way for them
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1 to go.
2 SENATOR SKOUFIS: I'm not nearly as familiar
3 as likely Senator Bailey is with how the penal code
4 speaks to insurance fraud, but I imagine there is
5 some criminal conduct that is in our penal code
6 having to do with insurance fraud like we are
7 talking about. In your experience, have you ever
8 seen anyone prosecuted for what you believed to be
9 insurance fraud?
10 KATHLEEN IRWIN: I know we had a member who
11 had enough cases that they were able to start
12 looking at it as an organized kind of effort. I
13 don't know that they were ultimately prosecuted and
14 I think that was a capacity issue. But I think,
15 too, what the point that you are bringing up is sort
16 of leads me to two of the specific asks that we are
17 sort of shopping around in the world of tort reform.
18 And one of those being to make it easier to recover
19 attorneys fees when building owners and insurers
20 successfully, you know, beat back a fraudulent
21 claim. Because right now they do not.
22 And also to broaden the set of circumstances
23 that would entitle an insured to bring their own
24 independent counsel, to basically override and say
25 no, we are going to fight this because right now...
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1 SENATOR SKOUFIS: Are there circumstances now
2 that exist where you can do that?
3 KATHLEEN IRWIN: My understanding is you
4 would have to sue your insurer.
5 That doesn't seem like a great option. Those
6 are ideas we have. Because as you are bringing it
7 up, the benefit --
8 SENATOR SKOUFIS: Do any other states do
9 that, what you just suggested?
10 KATHLEEN IRWIN: I looked it up in the back
11 when you asked before.
12 It doesn't seem that there is any state that
13 gives that as a blanket entitlement but it is more
14 case by case.
15 SENATOR SKOUFIS: And you think that both of
16 those reforms would have a positive impact on
17 premiums?
18 KATHLEEN IRWIN: Those are a couple of the
19 ideas that we have.
20 SENATOR SKOUFIS: Okay. All right. Thank
21 you.
22 SENATOR KAVANAGH: First of all, thank you
23 all for your testimony and thank you for the hard
24 work of managing real estate in this environment.
25 We know it's not easy. I want to start by just
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1 talking about a little clarity by what we mean by
2 fraud. Because we have two different examples from
3 this panel. One is about somebody walking down the
4 stairs and using their phone and maybe be being
5 distracted and then falling and then asserting that
6 the stairs are defective. And the other is
7 somebody, you know, lying down and pretending to
8 have fallen on the ground.
9 I do think that just conceptually those are
10 pretty different things. Like when somebody is
11 walking down the stairs -- if somebody is walking
12 down defective stairs and falls and they're using
13 their phone, the insurance company is entitled or
14 the property owner is entitled to say well, it
15 wasn't the defect in the stairs. It was the phone
16 call and the distraction and vice versa.
17 I just -- I'm not sure that's what we usually
18 think about when we think -- sort of a dispute about
19 what was the actual cause, I think, is different
20 than what the kind of fraud we have been talking
21 about today where people are fabricating incidents
22 or causes of things that happened.
23 So I just want to -- to the extent that I'm
24 asking about fraud, I'm asking about the case where,
25 you know -- and Ms. Irwin, we had some
335
1 conversations with some of your members that were
2 talking about people, you know, walking by a few
3 times, checking the place out and then, you know,
4 dropping on the sidewalk.
5 So, you know, as I think as I've said, I
6 don't think there is anybody here or anywhere that I
7 know of that wants to sort of support that kind of
8 activity continuing.
9 In terms of reforms, we have had a lot of
10 talk today about tort reform and with limited time,
11 I want to ask you a couple of questions on it but I
12 want to focus on some of the other ideas here.
13 First of all, the idea that somebody is -- an
14 insurer is stating that they're refusing coverage
15 because housing is rent stabilized. Do you have
16 sort of specific documentation of that?
17 KATHLEEN IRWIN: The examples that I cited in
18 my testimony were the ones that people were able to
19 provide to us. Granted this is their reporting of
20 what their insurer told them. I don't know if they
21 kept or would be willing to provide, if it happened
22 in writing or happened over the phone. But it
23 wasn't, you know, three people who answered those
24 three things. Those were common answers that we
25 were hearing from our membership.
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1 SENATOR KAVANAGH: Again, we are trying to,
2 as much as possible, pin down, you know, evidence of
3 behavior. So I mean, obviously anecdotes and verbal
4 assertions are useful evidence. But if you had a
5 notice from an insurance company that said we are
6 declining because it's rent stabilized status. I
7 think we would be very much interested in seeing
8 that.
9 TIM FOLEY: If I can just answer. We have
10 not had any particular documentation either for
11 being rent stabilized or being a co-op or being
12 otherwise subsidized affordable housing. The only
13 thing that we are looking at ultimately is the
14 impact. And when we look at those classes and where
15 their increases are, there is a pattern of whether
16 it is specifically targeted for them based on that
17 factor or because they tend to be over buildings 50,
18 75 years old or because they're in Mount Vernon as
19 opposed to Scarsdale.
20 At a certain point, you don't need a lot of
21 brilliant deduction to figure out where the higher
22 risk buildings are and they are certainly being
23 priced accordingly.
24 SENATOR KAVANAGH: Again, we took pains a
25 couple years ago to require an investigation of
337
1 whether affordable housing per se was being
2 discriminated against. There was a lot of anecdotal
3 evidence that it was. We passed a law banning that.
4 I am wondering why the New York Apartment
5 Association today, which represents pretty much
6 entirely rent stabilized landlords, why, among your
7 recommendations, is that we restrict the ability of
8 insurers to discriminate against rent stabilized
9 housing? Is that something that -- do you think
10 insurers ought to be allowed to discriminate against
11 rent stabilized housing in making insurance
12 decisions?
13 KATHLEEN IRWIN: I don't. No.
14 SENATOR KAVANAGH: Okay, I think we might
15 want to consider whether, you know, rent stabilized
16 housing is a prevalent form of housing, that's a lot
17 more affordable than other housing. I think we'd
18 probably consider whether there might be some
19 categorical discrimination that's going on that we
20 might want to consider. So we would like to follow
21 up again. And again, specific evidence of it
22 occurring.
23 To my challenge, the insurance industry did
24 not significantly oppose our efforts to ban
25 discrimination against affordable housing. So I
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1 think it would be an interesting question, what the
2 position would be on something like that.
3 ANN KORCHAK: Oftentimes the non-renewal
4 notification -- just a few short words. The one I
5 read about the crime score was the lengthiest
6 non-renewal message I've ever seen.
7 SENATOR KAVANAGH: Right. We have been
8 talking to the regulator this morning. I mean, to
9 the extent that they are providing model -- that
10 insurers are providing models and saying this is how
11 we are pricing things and this is how we are making
12 decisions in the marketplace, specifying what
13 factors they can and cannot consider, would seem to
14 be, at least one thing we can try to get right. So
15 I would like to follow up with you about that.
16 In terms of, again, I'll ask you all the
17 question I asked before. Are you aware of any
18 state-backed reinsurance mechanism -- or
19 government-backed reinsurance mechanism in the
20 property space that exists in other jurisdictions?
21 ANN KORCHAK: I'm not.
22 TIM FOLEY: I have not specifically seen it.
23 It does come up in all the literature, which is why
24 we made it part of our recommendations as well.
25 From the Urban Institute on down, it seems to be the
339
1 go-to methodology.
2 SENATOR KAVANAGH: And it's come up a lot
3 today in a lot of the literature we have been
4 reviewing during the course of this hearing.
5 Another question I asked previous panel of
6 people managing property, but to the extent your
7 insurers are offering discounts -- and I may
8 mention, too, that are statutory or regulatory now,
9 you know, the windows and the storm shutters -- but
10 do you think that insurers of properties are
11 transparent and sort of proactively informing
12 property owners of what -- what aspects of their
13 property or what behaviors might get them discounts
14 on their premiums?
15 TIM FOLEY: We are seeing a lot of the
16 reverse. The advice that we give to all of our
17 members is, if upon renewal, they come up with a
18 list of suggestions, those are not suggestions.
19 Those are you absolutely have to do this or you will
20 be non-renewed the next time it comes around. And
21 that can vary from, as the previous panel was
22 talking about, things that have to do with fire
23 mitigation and other measures. That can be
24 something as simple as we walked around your
25 building and we saw three barbecues on three
340
1 balconies in your 100-unit building. If those are
2 here next year, you are getting non-renewed.
3 So there is a tremendous amount of negative
4 feedback about the qualities and factors that you
5 cannot have. What we do not at all have and this is
6 part of the reason why we think this would be a
7 productive step forward, is a sense of the types of
8 discounts that could be applied in such a way that
9 would actually get you benefit within -- that would
10 move you in the right direction.
11 So we think in many ways, that's an untapped
12 field. And to be perfectly honest, it solves a
13 couple of different problems at the same time.
14 It creates a mechanism to make insurance a
15 little bit more affordable. We are certainly
16 nowhere near the level of incentives that we need to
17 invest in retrofitting, particularly for energy
18 efficiency or improved building codes or a whole
19 host of other mitigating factors. It gives another
20 tool within that tool box.
21 And oftentimes, again, if we are trying to
22 move in the direction of making these more
23 sustainable long-term, if something is more energy
24 efficient, it will be more cost efficient over term.
25 It's often hard to balance that long-term investment
341
1 with the short-term expenses that are in front of
2 people. This helps move us in that direction.
3 So because it does all three, it seems like a
4 natural place to go.
5 SENATOR KAVANAGH: And just to be clear.
6 Your proposal is that we expand the range of
7 discounts that are available if people take certain
8 actions that DFS or somebody else determines to be
9 actuarially appropriate.
10 TIM FOLEY: Correct. My review of the law is
11 that only for the hurricane glass. That is the only
12 resiliency feature that is statutorily required to
13 have DFS come up with an actuarially appropriate
14 discount. We would trust DFS on this, obviously
15 rather than, you know, to come up with a fair number
16 for a lot of these other features as well.
17 ANN KORCHAK: One of the toughest things that
18 a lot of small owners face is when you do get the
19 renewal, the list of things you need to address at
20 the building. Like you said, you gave the example
21 of the barbecues, the most common one we see is
22 sidewalk repair. And you know, that never comes on
23 the cheap.
24 It's expensive to get a Mason to come in and,
25 you know, you have to get the permit also from DOT
342
1 and get all that. So in my case, I had that large
2 three-year premium I had to pay up front and also a
3 demand to replace some portions of the sidewalk.
4 SENATOR KAVANAGH: I just have a little bit
5 of time left. But, Tim, you mentioned regulations
6 to require longer term insurance contracts. Can you
7 just talk about how that would work?
8 TIM FOLEY: Actually, that dovetails very
9 well with Ann's anecdote. Where she was able to get
10 the longer term rate lock but only with a pretty
11 severe threshold that she had to meet in terms of
12 payment up front. We know there are some insurance
13 programs that might offer you, say, a two-year
14 contract as opposed to a one-year contract.
15 Part of the reason why we saw such a huge
16 increase in Rockland is their largest rent
17 stabilized landlord did have one of those multiyear
18 things and it came due and there was a huge increase
19 as a direct result. But if it was spread out over a
20 larger number of years, or if there was some way of
21 accomplishing that without the negatives, we think
22 that would help rate lock people.
23 They're doing the same thing with regard to
24 utilities and a whole host of other things. So it's
25 a common tactic to help mitigate some of the more
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1 unpredictable cost swings.
2 ANN KORCHAK: My three-year plan policy was
3 actually a little bit lower than what I had paid
4 last year. So I actually saw a bit of a decrease in
5 2024 from 2023. It was nominal, maybe $150, but it
6 was -- but, you know, now I have a three-year rate
7 lock.
8 SENATOR KAVANAGH: But in order to get that,
9 you needed to pay up front for the three-year.
10 ANN KORCHAK: Correct.
11 SENATOR KAVANAGH: So you would be suggesting
12 that through regulation or statute we effectively
13 require insurers to all offer multiyear policies
14 where the payments are spread out throughout the
15 term.
16 TIM FOLEY: It is a little bit more sketchy
17 but I think regulation is needed to figure out what
18 is an appropriate tradeoff between the security of
19 the rate lock, short of paying for the whole thing
20 up front.
21 I'm sure there are some policies that could
22 be developed that would make that a little bit more
23 sustainable, particularly for smaller property
24 owners.
25 SENATOR KAVANAGH: I'm past my time. So
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1 thank you all.
2 SENATOR BAILEY: Thank you very much. So,
3 when you are batting third after these two guys
4 there is not really too much else to say. So I'm
5 not going to ask questions just to ask questions.
6 Senator Kavanagh did ask the tort reform
7 question that you knew was coming.
8 I just want to point to something in your
9 testimony as New York Apartment Association about
10 specifically highlighting the Bronx and other
11 Manhattan's premiums rose 134 percent with some
12 buildings paying more than 3300 per apartment per
13 year. I've asked this question I think to the last
14 couple of panelists.
15 Do you see -- do you or anybody -- see that
16 insurers are walking from certain types of
17 neighborhoods at higher clips than other
18 neighborhoods?
19 SUPERINTENDENT ASROW: Anecdotally, yes, we
20 are seeing that.
21 TIM FOLEY: It is more complicated in
22 Westchester because it would tend to be the entire
23 region rather than a specific neighborhood. We are
24 certainly seeing flight from affordability for sure,
25 even if it is not named as such. We are not seeing
345
1 quite as much migration from specific
2 municipalities.
3 SENATOR BAILEY: Is there a way to parse that
4 data out in Westchester? Is there a way we can
5 collect data? Is that working with the county
6 executive? Is it working with county legislators?
7 Because as you know, I represent the City of Mount
8 Vernon, and you mentioned that some of the higher
9 loss risk buildings in the City of Mount Vernon as
10 opposed to Scarsdale. This is the common AMI
11 reference, the same AMI as in Scarsdale than it is
12 in Mount Vernon, despite the incomes being vastly
13 different.
14 Do you have an idea about data collection?
15 Is that something that we can do at the state or
16 should we be talking with our friends at the county
17 level and how we can parse that data out better?
18 TIM FOLEY: We don't have specific statistics
19 on it because you are right, we don't, generally
20 speaking, have a large reservoir that would percent
21 across different housing types. Part of the reason
22 that we know is just from immediate similar to their
23 owner surveys, from the immediate feedback from our
24 members. And when it is multiple different types of
25 housing -- so when we're talking to co-ops, as well
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1 as affordable housing, as well as rent stabilized in
2 Mount Vernon and all three of them are seeing the
3 same thing, that's how we know it's geographically
4 inclined.
5 I don't believe that the county has any data
6 collection that is going on within that regard. I
7 would actually see if this was something that
8 perhaps, through DFS or at the state level, we could
9 start to look at particular types of communities
10 versus others.
11 SENATOR BAILEY: Certainly. I'm not trying
12 to make Ken do anymore work. Ken has a lot of work
13 already.
14 TIM FOLEY: I don't think he has the data at
15 his beck and call. I could be mistaken.
16 SENATOR BAILEY: I'm a big fan of our county
17 executive doing great work there. I really don't
18 have much else. Your testimony has been
19 self-explanatory. I don't like to ask perfunctory
20 questions. Thank you for your time and for your
21 testimony.
22 TIM FOLEY: Thank you.
23 SENATOR SKOUFIS: All right. We are going to
24 do some shuffling here of our panels. So due to
25 some time constraints from folks on Panel 10, we are
347
1 going to move them next. And then subsequent to
2 Panel 10, we are going to merge Panels 8 and 9
3 together. So Panel 10 is next.
4 It is made up of Iyla Shornstein, Political
5 Director, Center for Climate Integrity;
6 Elizabeth Derbes, Director Financial Regulation &
7 Climate Risk, Natural Resources Defense Council.
8 And then we will be joined remotely by Dave Jones,
9 Director Climate Risk Initiative, Center for Law,
10 Energy & Environment at the University of
11 California, Berkeley School of Law. And he is also
12 the former insurance Commissioner of California.
13 And last but not least, also joining remotely is
14 Jordan Haedtler, Climate Financial Strategist at the
15 Climate Cabinet Action.
16 Do we have our folks remotely?
17 We are going to swear everybody in, including
18 the couple of folks remotely. So if everyone could
19 please raise their right hand.
20 Do you solemnly swear that you will tell the
21 truth, the whole truth and nothing but the truth?
22 (Witnesses are sworn.)
23 SENATOR SKOUFIS: Thank you very much. Who
24 would like to go first?
25 SENATOR KAVANAGH: I think we will have these
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1 people go first and then the online and then
2 questions for online and back pending any further
3 questions for these folks. Technical reasons.
4 SENATOR SKOUFIS: Take it away.
5 IYLA SHORNSTEIN: Can you hear me okay? Hi,
6 I'm Iyla Shornstein. Thank you so much for the
7 opportunity to testify in front of your joint
8 committees today. I'm the political director at the
9 Center for Climate Integrity and we are a national
10 non-profit that empowers communities and officials
11 with the knowledge and the tools that they need to
12 hold fossil fuel companies accountable for their
13 deception and for the damage they've caused.
14 So I will be speaking from a slightly
15 different perspective today.
16 And you know, has already been discussed here
17 and from, I know, I think the first testimony today,
18 the DFS acting director said the number one
19 challenge right now is climate risk. So I'm going
20 to speak a lot to the who-is-responsible part of
21 that problem.
22 You know, there is a growing crisis. We
23 don't have to mention it in detail again. But
24 including here in New York, home insurance premiums
25 are going up every year. Twice as fast as the rate
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1 of inflation. Another disturbing trend is that
2 insurers are canceling people's policies and
3 refusing to issue new ones, citing the risk of
4 worsening extreme weather disasters, like, of course
5 "Hurricane Ida," "Sandy," "Irene."
6 It's not just homeowners being impacted like
7 we've heard. Landlords are paying more to insure
8 their buildings and passing those costs on to
9 renters in the form of higher rents. Rates are also
10 rising for commercial properties, making it even
11 more expensive to operate a small business. And all
12 of this feeds into the growing affordability crisis
13 facing so many New Yorkers today.
14 There is no mystery what is driving this.
15 Insurance companies are having to pay out more and
16 more money to policyholders due to damage from
17 extreme weather disasters that are getting worse
18 with each passing year.
19 There is also no mystery as who is at fault
20 for these harms. Decades of scientific research has
21 shown that fossil fuel pollution is warming the
22 atmosphere and super charging deadly wildfires,
23 floods and storms that are causing billions of
24 dollars in economic damage.
25 The companies responsible for that pollution
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1 knew decades ago that their products could cause
2 potentially catastrophic events. Those are their
3 own words. But rather than change their business
4 model, they engage in a decades-long campaign to
5 deceive the public about the danger of fossil fuels
6 in order to keep us hooked on them.
7 How is it fair that everyday New Yorkers are
8 shouldering the cost of extreme weather disasters
9 through higher insurance rates, while the companies
10 that cause the problem pay nothing? While there has
11 been a lot of good suggestions here today about how
12 to treat the symptoms of the climate change driven
13 insurance crisis, we are never going to bend the
14 curve of -- we are never going to bend the curve of
15 rising insurance costs without addressing the core
16 driver of higher prices. Worsening climate
17 disasters and extreme weather that big oil knew
18 would be costly and destructive.
19 Senate Bill 8585, sponsored by Senator
20 Kavanagh, would help keep home insurance affordable
21 and available for New York residents by allowing the
22 Attorney General to take the largest oil and gas
23 companies to court to recover the costs stemming
24 from an extreme weather disaster made worse by
25 climate change. Money recovered through litigation
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1 could be used to bolster the New York Property
2 Insurance Underwriting Association, which is the
3 insurer of last resort for New Yorkers who can't get
4 coverage on the private market.
5 The association currently covers over 22,000
6 homeowners, and represents almost $8 billion in
7 property. Numbers that could quickly balloon
8 following the next climate disaster. We have
9 already seen this in states like Florida and
10 California.
11 Following devastating hurricanes and
12 wildfires, there have been massive spikes in the
13 number of people who can't secure home insurance on
14 the private market and must move to the insurer of
15 last resort plans, AKA, the FAIR Plans. When FAIR
16 Plans are threatened with insolvency, private
17 insurers raise rates or impose surcharges on the
18 rest of their policyholders in the state, raising
19 the cost of insurance for everybody.
20 California's FAIR Plan is right now in the
21 midst of raising its rates on the average
22 policyholder by more than 35 percent. While the
23 rest of the state's homeowners are covering the cost
24 of a billion-dollar emergency bailout needed to keep
25 the plan solvent following LA's wildfires.
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1 While New York has not yet reached a
2 California or Florida level of crisis, it is one
3 "Hurricane Ida"-level storm away from having the
4 same problem. Huge rate hikes across the state and
5 insurers refusing to cover high-risk properties.
6 According to insurance industry data, the New York
7 metro area is the riskiest location in the country
8 for financial damages from storm surges and
9 hurricane winds.
10 Senate Bill 8585 is a commonsense step to
11 address the growing polycrisis of climate change and
12 affordability by ensuring that the state has every
13 tool in the tool box available to protect New York
14 families from massive insurance rate hikes in the
15 coming years.
16 Instead of allowing the insurance crisis to
17 be born on the backs of everyday people, it would
18 empower the Attorney General to recover the costs of
19 climate disasters from the at-fault companies that
20 knowingly made them worse. There is clear precedent
21 for third parties that cause insurance losses to be
22 held financially accountable for them.
23 When you get rear ended in a traffic
24 collision, your insurance company goes after the
25 other driver in court. When utilities fail to
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1 maintain their power lines and ignite a wildfire
2 that destroys communities, insurance companies take
3 them to court.
4 This bill would empower the Attorney General
5 to similarly hold the companies fueling climate
6 disasters accountable and defend the interests of
7 everyday New Yorkers following the next disasters.
8 This bill is an important step to ensure that these
9 companies share the financial burden of the climate
10 disasters they know they are fueling. Thank you for
11 the opportunity to testify today.
12 ELIZABETH DERBES: Thank you as well for the
13 opportunity to provide information to the
14 committees. My name is Elizabeth Derbes, I'm
15 Director of Financial Regulation & Climate Risk at
16 the Natural Resources Defense Council, an
17 international non-profit environmental organization.
18 Since 1970 our lawyers, scientists and
19 environmental specialists have worked to protect the
20 world's natural resources, public health and
21 environment.
22 To ensure that insurance remains available
23 and affordable, policymakers and insurers must play
24 a larger role in supporting and incentivizing risk
25 reduction before damage from increasingly frequent
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1 and severe weather events can lead to insurance
2 claims.
3 By promoting disaster resistant construction,
4 land use standards and infrastructure improvements,
5 insurers and state and local governments can reduce
6 risks of property damage, displacement and long-term
7 housing instability for policyholders.
8 As the committee members know, this issue has
9 broader importance for New Yorkers. What happens
10 when property insurance becomes unavailable or
11 unaffordable? Mortgages, in turn, also can become
12 unavailable as they depend on mortgage property
13 being insured as Federal Reserve Chairman Jerome
14 Powell told Congress earlier this year, if you fast
15 forward 10 or 15 years, there are going to be
16 regions of the country where you can't get a
17 mortgage. If insurance is no longer available,
18 other financial services will also become
19 unavailable. Economic consequences can include
20 increased mortgage defaults and foreclosures,
21 declining property values and declining property tax
22 revenues.
23 As you know, the crisis has already begun in
24 states like California, Louisiana and Florida, where
25 insurance companies have deemed many high risk
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1 properties to be uninsurable. This can lead to a
2 downward spiral for state insurers of last resort or
3 FAIR Plans as my colleague here mentioned.
4 Mounting losses from extreme weather events
5 leave private insurers to retreat from high risk
6 areas and raise premiums for everyone else. When
7 private insurers decline to renew higher risk
8 policyholders, many of those consumers are forced to
9 move to the state created insurer of last resort or
10 FAIR Plan. These are backed by the private insurers
11 admitted in the state. The states mentioned have
12 seen dramatic increases in FAIR Plan enrollment.
13 Newly enrolled high-risk properties tend to incur
14 more damage than the average property leading to
15 increased claims against the FAIR Plan. These costs
16 are often passed through to the private insurers
17 that back the plan.
18 Where underwriting becomes less profitable,
19 this can prompt private insurers to exit the state.
20 When fewer private insurers remain to back the FAIR
21 Plan, this further concentrates the costs of
22 weather-related property damage in the plan.
23 The cycle continues. Growing enrollment at
24 the FAIR Plan, rising costs passed through to
25 private insurers, and further retreats from the
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1 state insurance market.
2 We thus feel that risk reduction and hazard
3 mitigation are essential for FAIR Plans and
4 insurance markets more broadly to operate
5 sustainably. Our more detailed written submission
6 references a report on studies showing how
7 properties can be retrofitted for increased
8 resilience to floods, hurricanes and high winds,
9 earthquake and wildfire with analysis showing that
10 the financial benefits of risk reduction efforts far
11 outweigh the costs.
12 States are on the front lines of
13 climate-related catastrophe preparedness and
14 response and many states are introducing innovative
15 programs to reduce physical exposure of housing
16 through regulatory and financial incentives.
17 Some of these have been mentioned in other
18 testimony today. These programs may be funded
19 through general revenue or by contribution from
20 insurers. They can offer cost sharing for physical
21 upgrades to properties, and require insurers to
22 account for these risk reductions in their
23 underwriting models with premium discounts for
24 upgraded properties. Several state insurance
25 regulators have begun collaborating with private
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1 insurers to harden homes using certified
2 consensus-based standards.
3 Among these, some of these have been
4 mentioned, are the Strengthen Alabama Homes Program
5 which uses the IBHS wind mitigation fortified roof
6 standard that has retrofitted 17,000 homes in
7 Alabama. There are additional fortified state grant
8 programs in Louisiana and North Carolina for
9 upgrading existing roofs to the fortified standard.
10 Florida's My Safe Home Program, to protect homes
11 against wind and hurricanes, which also requires
12 that policyholders be offered discounted insurance
13 rates if they have upgraded their homes. And
14 California's Safe from Wildfires Initiative.
15 New York's Clean Water, Clean Air and Green
16 Jobs Environmental Bond Act of 2022 authorized up to
17 $4.2 billion in state-backed bonds to fund
18 environmental and climate resilience projects
19 statewide. It earmarks funds across four broad
20 categories: Climate change mitigation, restoration
21 and flood risk reduction, water quality
22 infrastructure and land conservation and recreation,
23 with at least 35 percent of its benefits directed to
24 disadvantaged communities. New York must continue
25 to accelerate these programs with an eye to avoiding
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1 the kind of insurability crisis that has arisen in
2 other states. Insurance will not solve the climate
3 crisis but it can provide a leaver to incentivize
4 the protection of New York communities through more
5 resilient building. This can reduce the
6 vulnerability of homes and neighborhoods leading to
7 safer communities, reduced financial strain on
8 insurers and more affordable access to insurance.
9 Thank you for the opportunity to testify.
10 SENATOR KAVANAGH: We will go to our online
11 testimony now. Jordan, it seems like you just
12 volunteered.
13 JORDAN HAEDTLER: Good afternoon, Chairs
14 Bailey, Kavanagh and Skoufis. My name is Jordan
15 Haedtler and I work on insurance policy at Climate
16 Cabinet Action.
17 Climate change is making insurance less
18 affordable and available throughout the country.
19 Last week, my colleagues and I released a report
20 with nine recommendations for state policymakers to
21 better integrate climate risk into insurance
22 regulation. I would like to highlight several areas
23 where legislation introduced this week, s-8583, is
24 responsive to those recommendations:
25 Number 1: We recommended that states should
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1 integrate climate resilience into insurance pricing
2 and underwriting. Numerous studies have shown
3 insurance becomes more cost effective with adoption
4 of climate-resilient practices such as ecological
5 forest management and ecological flood plain
6 management. Those can bring down insurance losses
7 substantially. Many expert organizations have
8 recommended that climate adaptation measures be
9 accounted for through insurers' pricing and
10 underwriting practices.
11 Earlier this year, Colorado became the first
12 state in the U.S. to act on this recommendation when
13 it passed legislation requiring insurers to factor
14 community and household mitigation measures into
15 insurance modeling.
16 Passing similar legislation in New York can
17 help foster healthier insurance markets. Homeowners
18 want a clear picture of what mitigation steps will
19 result in more affordable insurance. Compelling
20 greater transparency and risk modeling and
21 clarifying that hazard mitigation is a factor in
22 that modeling will likely yield more responsible
23 actions from governments, insurance companies, and
24 policyholders alike.
25 Secondly: We recommended states should
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1 collect data to improve our understanding of how
2 climate risk is affecting insurance markets. In
3 January, the Federal Insurance Office published
4 findings from a nationwide climate-related data
5 collection on insurance markets. It is vital that
6 data like this is collected on an ongoing basis and
7 that that data is collected and made more granular
8 and widely available. States can help with this and
9 S-8583 would do exactly that.
10 This legislation specifically addresses one
11 of the most critical gaps in this policy area: How
12 the insurance crisis is impacting renters and
13 hampering the development of more affordable
14 housing.
15 A survey released in March by the Federal
16 Reserve Bank of Minneapolis confirmed that insurance
17 costs are causing stress for multifamily housing.
18 We know this has been a challenge in New York, and
19 in a 2022 report from New York DFS, confirmed that
20 affordable housing owners were asked by insurance
21 companies whether buildings contained subsidized or
22 Section 8 units. The data compelled by s-8583
23 should shed light on what more can be done to
24 support more affordable housing in the midst of our
25 nationwide insurance crisis.
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1 Finally, our report made a number of
2 recommendations for states to reform their insurer
3 of last resort programs. When the protection gap --
4 the difference between insured and uninsured
5 losses -- grows, disaster recovery costs borne by
6 governments, businesses and households go up and the
7 economy as a whole can suffer. In order to fulfill
8 the task of stabilizing insurance marks, we need to
9 close the protection gap.
10 There are three major pieces to this puzzle:
11 First: There's the admitted market, where
12 insurers licensed to do business in the state are
13 subject to rate review and solvency regulations.
14 Then there is the residual market, provided by the
15 New York Property Insurance Association, and finally
16 there is the non-admitted market, where surplus
17 lines are not subject to the same regulatory and
18 consumer protections as admitted market policies.
19 Climate change is placing pressure on all
20 three pieces of this puzzle. The data collection
21 that I mentioned before showed a 50 percent increase
22 in the number of residual policies nationally from
23 2018-2022; however, the same data set showed that
24 residual line coverage in the New York PIUA had
25 declined over the same time period.
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1 Although residual line growth can be a sign
2 of an unhealthy insurance market, shrinking
3 enrollment, like we have seen in the New York PIUA,
4 can also be a bad development. When that happens,
5 policyholders get pushed on to surplus lines or go
6 without insurance entirely which can cause the
7 protection gap to grow.
8 We have data confirming that New Yorkers are
9 becoming more reliant on surplus lines. A recent
10 paper from a Georgetown law professor found that
11 surplus line growth nearly doubled between 2018 and
12 2022 and that New York has consistently ranked in
13 the top four states for surplus line growth. To
14 guard against this trend, better management of the
15 New York PIUA is needed.
16 State insurers of last resort are often
17 characterized as "State run" but they're typically
18 operated with minimal governmental oversight.
19 Because questions of how to close the protection gap
20 and stabilize insurance markets in New York are
21 fundamentally public policy questions, public
22 officials should have a say in how they're decided.
23 S-8583 helps fulfill that objective by increasing
24 the number of public appointees serving on the board
25 of the NYPIUA. I urge the New York Senate to
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1 support s-8583. Thank you.
2 SENATOR KAVANAGH: Thank you. Dave Jones.
3 DAVE JONES: First, let me see if you can
4 hear me. Are you able to hear me? Terrific.
5 Well, Chairpersons, and members of the Senate
6 Committee, thanks for the opportunity to testify.
7 My name is Dave Jones. I'm the director of the
8 Climate Risk Initiative of the Center for Law,
9 Energy and the Environment. I served as
10 California's Insurance Commissioner from 2011-2018.
11 Insurance is the canary in the coal mine for
12 the climate crisis. And the canary is dying.
13 Climate change is increasing the frequency and
14 severity of natural catastrophes which, in turn,
15 damage and destroy homes and businesses at an
16 unprecedented level.
17 Globally and in the United States, insurance
18 losses from climate driven natural catastrophes
19 continue to climb astronomically. While climate
20 driven catastrophes vary in severity and frequency
21 across the United States, there is virtually no
22 place in the United States that is not experiencing
23 worsening weather-related events.
24 Insurers respond to increased losses in two
25 ways:
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1 First: They increase the price of insurance.
2 And second and contemporaneously: They
3 reduce their exposure to losses by not renewing
4 insurance policies and not writing new insurance
5 policies.
6 U.S. insurers are doing both. In the last
7 3 years alone home insurance premiums on average
8 rose 24 percent across the country and across the
9 country insurers are not renewing home and small
10 business owners property insurance and they're
11 reducing the issuance of new insurance policies.
12 Now, there is no magic wand that we can wave
13 or regulatory dial that we can turn to keep private
14 insurance available in the long run in the face of
15 rising global temperatures. We need to combat
16 climate change itself, which requires a major
17 transition away from burning fossil fuels and from
18 other greenhouse gas emitting sectors of the
19 economy. At the same time, states like New York can
20 and should take a number of additional steps to help
21 keep insurance available and affordable in the short
22 and mid term.
23 First: One important policy solution to help
24 keep insurance available is to hold the major oil
25 and gas companies accountable for their emissions
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1 which contribute to the increased frequency and
2 severity of weather-related disasters which are
3 contributing to the increase in insurance company
4 losses and causing insurers to raise rates and
5 decline to write and renew insurance.
6 The writ of subrogation, as was testified to
7 earlier, exists in all insurance contracts and under
8 state law. Insurers have the right to bring suits
9 against third parties whose actions or inactions
10 cause damage or injury to the insured policyholders,
11 which, in turn, causes the insurance company to pay
12 the policyholder.
13 Incentivizing or requiring private insurers
14 in FAIR Plans in residual markets, like the New York
15 Property Insurance Underwriting Association, to
16 pursue subrogation claims against fossil fuel
17 companies, who are creating a new cause of action
18 and enabling them to recover insurance losses from
19 fossil fuel companies who help stabilize insurance
20 markets. And states should also enact legislation
21 authorizing their Attorneys General to bring these
22 claims against fossil fuel companies to recover
23 insurers losses when private insurers decline to
24 bring suit after some reasonable period of time.
25 New York Senate Bill s-8585, sponsored by
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1 Senator Kavanagh, does exactly that. It establishes
2 a right for insurers through the New York
3 Property Insurance Underwriters Association and the
4 Attorney General to recover from major oil and gas
5 companies for insurance losses resulting from major
6 climatic disasters.
7 In addition, and currently, insurers in the
8 United States are investing over half a trillion
9 dollars in the fossil fuel industry whose emissions
10 are creating an existential challenges for the home
11 and business property insurance market. Globally,
12 28 major property and casualty insurers collect
13 $11.3 billion annually in premiums from insuring the
14 fossil fuel industry.
15 Insurers should end their support through
16 investments in insurance for the very industry that
17 poses a critical threat to their ability to write
18 insurance. Such a move would be far from symbolic.
19 A recent study found that insurers restricting
20 coverage for coal enterprises contributed to a
21 reduction in coal production and burning with
22 essentially no financial impact on the insurers.
23 States should enact legislation to require
24 insurers to transition from insuring and investing
25 in the fossil fuel industry.
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1 The Insurer Communities Act, New York Senate
2 Bill S-186A, sponsored by Senator Brad
3 Hoylman-Sigal, would do exactly that, by requiring
4 insurers in New York to transition from investments
5 in and writing insurance for the fossil fuel
6 industry.
7 The third policy recommendation I make is
8 that New York should enact laws to require insurers
9 to account for the risk reduction benefits of
10 mitigation in their pricing and underwriting. As
11 Jordan testified to, there is substantial empirical
12 and scientific evidence and a broad-based consensus
13 that adaptation and resilience measures taken at the
14 property, community and landscape scale can reduce
15 the risk and magnitude of lost from climate-driven
16 perils.
17 The Insurance Business Institute for Business
18 and Home Safety, the empirical research arm of the
19 property and casualty insurers, has developed
20 standards for home which reduced the risk of loss
21 due to wildfire, hail, wind and rain. Community and
22 landscape scale resilience measures, including
23 forest management used to prescribe fire and
24 thinning to reduce wildfire risk and nature-based
25 solutions to river and coastal flooding, also reduce
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1 the risk of loss.
2 However, insurers across the United States
3 are not taking these property, community and
4 landscape scale risk mitigation measures into
5 account and the computer models they use for pricing
6 and deciding whether to write or renew home and
7 small business property insurance, which is
8 extremely frustrating for homeowners, small business
9 property owners, communities and states like
10 New York, which are making investments in adaptation
11 resilience.
12 As Jordan just testified to, just this past
13 year, the State of Colorado grew tired of waiting
14 for insurers to account for risk reduction measures
15 in their pricing and underwriting models and took
16 action. With the support of Colorado Insurance
17 Commissioner Mike Conway, the state enacted
18 HB-25-1182, which requires insurers in Colorado to
19 account for property, community and landscape scale
20 mitigation and the computer models they use to set
21 prices and to decide whether to write or renew
22 insurance. This is the most important property
23 insurance law to be enacted this year and should
24 serve as a model for other states.
25 New York's Senate Bill 8585 -- 8583A
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1 sponsored by Senator Kavanagh, does exactly this by
2 requiring the models used by insurers in New York to
3 take into account property and community level
4 mitigation measures and requires those models to be
5 provided to the New York Department of Financial
6 Services for review. This bill makes sure that
7 investments made by homeowners, business owners and
8 state are taken into account in insurance pricing
9 and underwriting.
10 Thanks for the opportunity to testify and I
11 submitted more comprehensive remarks in writing.
12 SENATOR KAVANAGH: Thank you both. Thank you
13 all four of you, including our in-person testimony.
14 We are going to, for technical reasons, we're
15 going to address any questions that people on the
16 panel have to the online. And if you have further
17 answers in response to the questions we've asked
18 these folks, you will have an opportunity to answer
19 and also make direct additional questions to the
20 in-person witnesses.
21 So just first, can you -- there are a lot of
22 different mechanisms that states, including
23 New York, have been using to kind of assign the risk
24 and the damage that results from climate change to
25 the fossil fuel industry that caused it, including,
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1 you know, we passed the Climate Super Fund Act last
2 year.
3 Can you talk about why the insurance system
4 is, among various options, there is also just
5 straight out litigation saying, you know, companies
6 have cost to states and they should pay for it. Can
7 you talk about why embedding these kinds of
8 provisions in the insurance system makes
9 particularly good sense?
10 DAVE JONES: Yes. So the important steps
11 that New York has taken, either through legislation
12 or through litigation to hold the oil and gas
13 industry accountable, are important and are
14 extremely helpful. But they don't go to the losses
15 that insurance companies are incurring as a result
16 of these climate-driven natural catastrophes. And
17 as a result, while laudable, those efforts are not
18 going to contribute to stabilizing the insurance
19 market and helping to reduce the acceleration of
20 rates and reduce the acceleration of non-renewals.
21 So insurance companies do have a right to
22 bring lawsuits against third parties whose actions
23 or inactions cause them damages, as Iyla testified
24 to, but they're not doing so.
25 And so I think the policy challenge then for
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1 policymakers such as yourselves, is to enact
2 legislation that encourages them to do so, but in
3 the event they don't do so, confers on the Attorney
4 General, the ability to bring those lawsuits, if the
5 insurers are disinclined to do so.
6 And that's the most direct way of making sure
7 that there is some ability to recover from the very
8 industries whose emissions are a major driver of
9 these losses. Some portion of the losses, which can
10 then go towards reducing the acceleration of rates
11 and reducing the tendency to non-renew or not write
12 new insurance.
13 SENATOR KAVANAGH: And for either of you. As
14 we've noted, subrogation is a concept that is not
15 new in insurance law or contract law, but is
16 there -- has there been a reluctance in the past by
17 insurance companies to use subrogation in other
18 context, like one of the witnesses in the room
19 mentioned, or is the reluctance particularly around,
20 kind of, weather and climate events?
21 DAVE JONES: There has been no reluctance to
22 bring subrogation claims in other context. So if
23 you recall, health insurers brought subrogation
24 claims against big opioid for health insurance
25 payments associated with opioid addiction treatment.
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1 Health insurers brought subrogation claims against
2 big tobacco for health insurance payments associated
3 with respiratory illness treatment. And property
4 and casualty insurers have brought subrogation
5 claims against utilities whose equipment started
6 wildfires or caused other damages. In 2018, the
7 campfire was started by the California utility
8 Pacific Gas & Electric and subrogation claims were
9 brought to recover 11 billion of the $12.6 billion
10 paid out by insurers for the campfire which
11 destroyed about 18,000 structures. So there has
12 been no lack of appetite to bring subrogation claims
13 in other context. It's just not happening in this
14 context.
15 And so, I think that's why there is a need
16 for state law to further encourage, incentivize or
17 create a clear pathway for insurers to bring these
18 claims, to create duties on the insurers of last
19 resort, the FAIR Plans and residual markets, which
20 are state created entities to bring these claims.
21 And also to empower your Attorneys General to
22 bring the claims in the event that the insurers are
23 not bringing the claims.
24 SENATOR KAVANAGH: And just shifting gears a
25 little bit. On the issue of activities that or
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1 aspects of property that can be retrofitted or
2 installed, that reduce risk, you know, as you note,
3 there are some states that have begun to mandate
4 that. We have a couple of mandates in New York
5 around shatterproof glass and storm shutters and we
6 have been talking, including through proposed
7 legislation, about expanding that. We had our
8 superintendent earlier today talking about an effort
9 that is currently underway with DFS to kind of
10 catalog the different incentives that are offered
11 and the discounts that are offered by various
12 companies and kind of play a greater role in
13 ensuring that property owners and policyholders are
14 aware of those.
15 Are you aware of, from your work, you know,
16 reviewing insurance systems in other states -- aware
17 of any state that does that particularly well that
18 makes sure that policyholders or property owners
19 have clear information about what discounts are
20 being offered?
21 DAVE JONES: Well, I think the best example
22 of this is the law that was recently passed in
23 Colorado that will both require more transparency,
24 as well as requiring the computer models themselves
25 to account for property level, community level and
374
1 landscape scale mitigation both in pricing and in
2 underwriting.
3 Now there are some states that have also
4 implemented discounts. California has a discount
5 for home hardening and defensible space and for
6 being in a firewise community related to the
7 wildfire peril. Alabama has a mandated discount for
8 the fortified home standard associated with wind and
9 a couple of other states have also, you know, moved
10 down the road of discounts.
11 Discounts are terrific, but what you also
12 want, is you want to make sure that the models that
13 are used to decide whether to write and renew
14 insurance also account for the mitigation measures.
15 Because getting a discount is great, but if the
16 insurer won't write or renew the insurance for you
17 because the risk score model they're using doesn't
18 account for mitigation, then the discount is
19 meaningless.
20 And even within the context of discounts,
21 because in most states -- and I think this is true
22 in New York as well -- when insurers file their
23 rates, they basically come forward with a base rate.
24 But they're also entitled to provide for what is
25 called rate segmentation or rate relativities across
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1 different classes of exposure based on risk. And
2 they do that based on models. So while the discount
3 might be offered, it's not necessarily the case that
4 the discount is fully capturing the risk reduction
5 benefit that would be afforded if the models
6 accounted for it and if the rate relativities were
7 required to account for it, too.
8 So even in the context of pricing, getting it
9 into the models is, you know, a supplement to and an
10 additional benefit in addition to the discount. But
11 really you want it in both and that's what Colorado
12 has done and that's what you are proposing in your
13 legislation, in both the models for underwriting and
14 for pricing. The models used to decide whether to
15 write and renew and to price have to take into
16 account property, community and landscape scale
17 mitigation.
18 SENATOR KAVANAGH: I think I will end there
19 asking questions of all of you because we are very
20 tight on time. Let me just ask Jordan if you have
21 anything else to add to any of the questions we have
22 discussed so far.
23 JORDAN HAEDTLER: I will answer two quick
24 additions to everything Dave went over. First on
25 the second question that you asked.
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1 Colorado was investing hundreds of millions
2 of dollars in mitigation. And Boulder County alone
3 was spending $9 million annually to make communities
4 safer from wildfires. But Coloradans were not
5 really seeing the benefits of that in a more
6 affordable or accessible insurance market and
7 Coloradans were paying nearly $2,000 above the
8 national average.
9 That's why county governments and even some
10 rural counties were some of the strongest advocates
11 for making this change.
12 We also heard, to your point, there aren't
13 really states that catalog those discounts well,
14 although I would also add that community-level
15 investments go a lot further than individual
16 fortification measures. And we need to be
17 incentivizing those by governments more than ever,
18 especially in the wake of this federal retreat that
19 we are seeing.
20 But what we heard throughout the process of
21 passing the bill in Colorado was that homeowners
22 really weren't getting the information that they
23 needed to take the mitigation steps that they wanted
24 to take. And that in some cases, they were seeing
25 that their neighbors wildfire risk score was vastly
377
1 different from theirs, even though they obviously
2 lived in the same neighborhood and in some cases had
3 made very similar steps to harden their home. So
4 that's why more transparency in these models is
5 crucial.
6 And then to go back to the very first
7 question that you asked, I would say that the
8 biggest reason why we're seeing climate risk serve
9 as the key channel -- or insurance, rather, serving
10 as the key channel spreading climate risk throughout
11 the financial system, is that insurance companies
12 are massive institutional investors. They're some
13 of the biggest players in corporate muni bond
14 markets, et cetera, which make them hugely
15 interconnected to the rest of the financial systems.
16 So that's why it's really crucial to incorporate
17 climate risk management into their role as players
18 in the economy.
19 And so a plug also to the Insure Our
20 Communities Act which Dave mentioned which has also
21 been introduced in New York because insurance -- the
22 insurance industry has known about the risks that
23 climate change poses for decades. About as long as
24 the fossil fuel industry has. And really has not
25 pared back their investments and underwriting in
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1 fossil fuels. And the Insure Our Communities Act
2 would require insurance companies to adopt
3 science-based targets for how they're -- how they're
4 involved in both the underwriting and investment
5 side.
6 SENATOR KAVANAGH: I don't know if you guys
7 can see the clock. My time is up. So I think
8 Senator Skoufis is good. So I think we have no
9 further questions for our online participants. But
10 thank you for appearing remotely and thank you for
11 all the work you are doing around the country on
12 these issues. We appreciate it.
13 So I guess this technically counts as
14 Kavanagh overtime now. But just let me just start
15 with the few questions on the table if you just want
16 to...
17 ELIZABETH DERBES: I wanted to add that, to
18 your question about states that are doing it
19 particularly well -- and I don't have the details to
20 hand -- but your excellent staff may already have
21 them or we are happy to look into it for you. But I
22 think North Carolina's FAIR Plan has been kind of a
23 leader in a number of these things. And I thought I
24 would just offer a gloss, too, that with respect to
25 the fortified roofs, I think they found that it was
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1 challenging to get uptake on discounts for new roofs
2 because a new roof is still a big expense. And one
3 program that they found successful is to offer, in
4 their policies, an endorsement for a new roof once
5 you lose your roof. So at the point that you need
6 to replace your roof, and you have an insurance
7 payout, at that point, you get the financial support
8 to put in a fortified roof and they have found that
9 quite successful.
10 SENATOR KAVANAGH: Great.
11 IYLA SHORNSTEIN: To the question about, sort
12 of, inferring if there is some precedent for
13 insurers to bring claims against other responsible
14 parties, why have they not yet brought claims
15 against fossil fuel producers. And I would never,
16 you know, pretend to speak for the insurers
17 themselves but I think this is probably a little bit
18 of a simple case of follow the money. It has been
19 reported that the insurance industry has over half a
20 trillion dollars invested in fossil fuels. So I
21 think if we follow the money trail, we might get
22 some answers there, too.
23 SENATOR KAVANAGH: They might be suing
24 themselves. Interesting. Just -- you mentioned
25 Elizabeth you mentioned the Florida -- I forget
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1 happy homes or something.
2 ELIZABETH DERBES: Florida, yes, My Safe
3 Home.
4 SENATOR KAVANAGH: That's why they don't let
5 me name things. That was something that was enacted
6 by the Florida State legislature?
7 ELIZABETH DERBES: Yes. My understanding is
8 it requires insurance companies who operate in
9 Florida to offer policyholders a discount on their
10 wind insurance rates if they have upgraded their
11 homes to the standard.
12 SENATOR KAVANAGH: So just to note, this
13 isn't happening just in places where we have, you
14 know, otherwise a strong commitment and climate and
15 other...
16 ELIZABETH DERBES: Yes.
17 SENATOR KAVANAGH: Again, I appreciate all of
18 your testimony and expertise and we have lots of
19 written material including your testimony today.
20 But I think we'll end here since I'm, you know, into
21 my overtime. But, again, thank you very much for
22 your input and for all your testimony and thank you
23 to our online folks as well.
24 SENATOR SKOUFIS: So next up we have our
25 consolidated super panel, 8 and 9. Housing policy
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1 organizations, made up of Patrick Boyle, Senior
2 Director Policies and Communications at Enterprise
3 Community Partners; Rachel Fee, Executive Director
4 of the New York Housing Conference; Emily Klein,
5 Assistant Vice President, Deputy Director for Policy
6 and Public Affairs at the Community Preservation
7 Corporation.
8 And from Panel 9, John Crotty, President of
9 Milford Street Association Insurance Company.
10 Thank you all for joining us. Once you get
11 settled, I will swear you all in. All the placards
12 are set. Nice to see all of you. If you could
13 please raise your right hands for me.
14 Do you solemnly swear that you'll tell the
15 truth, the whole truth, and nothing but the truth?
16 (Witnesses sworn.)
17 SENATOR SKOUFIS: Thank you very much. Who
18 wants to bat leadoff here? Take it away.
19 PATRICK BOYLE: Thank you so much. My name
20 is Patrick Boyle and I'm the Senior Director Policy
21 Communications for the New York Office of Enterprise
22 Community Partners. Since our New York office
23 opened in 1987, we have committed more than
24 $5.7 billion in equity loans and grants to
25 affordable housing and community organizations to
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1 create or preserve nearly 84,000 affordable homes
2 across New York State. On behalf of Enterprise, we
3 would like to thank the Chairs for holding this
4 important hearing and for the opportunity to testify
5 today.
6 Over the past 2-years, Enterprise has been
7 leading a diverse working group focused on insurance
8 challenges and affordable housing. The group is
9 made up of affordable housing developers and owners
10 operators, brokers, policy and advocacy
11 organizations and risk management experts. We
12 organized this group because we have seen firsthand
13 the crisis in multifamily insurance in the realm of
14 affordable housing.
15 What was once considered a predictable and
16 steady project expense has seen rapid escalations in
17 price. Brokers working to get bids on insurance
18 policies for projects are getting fewer and fewer
19 responses. Projects are being dropped at renewal
20 and carriers willing to write policies for
21 affordable housing are insisting on higher
22 deductibles and more exclusions than what they're
23 willing to cover.
24 What we have learned over the 2 years of
25 convening this working group is that for an issue as
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1 complex as multifamily insurance, there is no single
2 solution.
3 The state must advance a package of
4 solutions percent achieve better data and
5 transparency, reduce runaway cost drivers on the
6 liability front, bolster insurance participation in
7 low income communities and fund risk mitigation
8 measures while ensuring that these measures are
9 credited by insurance carriers.
10 A little bit about the data and the impact.
11 Last month, Enterprise released an important report
12 on expense challenges in affordable housing. We
13 combined our asset management portfolios with our
14 counterparts at the National Equity Fund, LISC,
15 leading to a data set of 428, 100 percent affordable
16 housing projects and over 37,000 affordable units
17 statewide. We assessed these projects' expenses and
18 financial performance from 2017 to 2024.
19 The results were pretty striking. A lot of
20 what we have heard from other panelists today.
21 Insurance costs have risen 110 percent overall on
22 the 100 percent affordable portfolio since 2017.
23 And along with other rising expenses, reduced income
24 on the rent collection side, the major takeaway from
25 this report was that 57 percent of the affordable
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1 housing projects that we study and that are under
2 our asset management are running operating deficits
3 or cash flowing negatively. So this is a major
4 uptick over the years prior to the pandemic, driven
5 kind of most centrally by that rapid increase in
6 insurance alongside other challenges.
7 So this is what has led us to really be
8 focus percent around insurance, as a number of the
9 other panelists have said today from kind of coming
10 from the affordable housing space, we are not
11 insurance experts. We are newer to this issue.
12 We're driven to the issue based on the fact that it
13 has become so prominent and such a cost driver for
14 us. But over these past few years of conversation,
15 talking to people who are experts, talking to those
16 in the affordable housing space and what they see,
17 we wanted to propose some solutions, a lot of which
18 have been highlighted by other groups in different
19 ways.
20 We really need to improve data and
21 transparency. That has been really clear throughout
22 today. Regardless of the report that was released
23 by DFS in 2022, and a number of other attempts to
24 study this issue, we still have really fundamental
25 questions that I think we have kind of heard
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1 threaded throughout today's testimony.
2 How much of the rise in insurance rates for
3 multifamily housing is due to global factors like
4 climate-related losses, versus tangible and sort of
5 local factors to the project bases, like claims and
6 losses. How do insurance rates for subsidized
7 affordable housing compare with market rate
8 multifamily housing in similar geographies and
9 building profiles and what has been the impact of
10 the 2024 change in the law banning insurance
11 carriers from discriminating against affordable
12 housing? How many complaints have been brought?
13 How many enforcement actions have been taken? Has
14 there been an expansion of the insurance carrier
15 marketplace as a result?
16 So, you know, a lot more data is needed for
17 us to be making the most sound policy decisions and
18 in our testimony we call out some existing
19 legislation on the Assembly side, which would do
20 some of that.
21 We have heard a lot today about risk
22 mitigation strategies. And we agree it's important
23 to fund those and then to ensure that those risk
24 mitigation strategies are credited by insurance
25 companies.
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1 So, you know, we've heard a lot from owners
2 that are doing creative things around fire
3 suppressants, water detection. The biggest drivers
4 of losses on the property side, as well as things on
5 the liability side. Investing in cameras, coverage,
6 lighting, camera storage. So cameras that are
7 storing data for longer periods of time that allow
8 you to challenge claims.
9 Owners that do this, you know, report to us
10 that they don't really see in a direct way that
11 being credited by companies.
12 The rest of our testimony points to some of
13 the other solutions that we highlight.
14 SENATOR SKOUFIS: Thank you very much.
15 We will definitely take a look at them. Next
16 up, Ms. Fee. We'll go down the line.
17 RACHEL FEE: Hi, everybody. My name is
18 Rachel Fee. I'm the Executive Director of the
19 New York Housing Conference, an affordable housing
20 policy and advocacy organization. Thank you for
21 this opportunity to testify on this really important
22 topic.
23 Much of my testimony aligns with Patrick.
24 I'm a member of his working group. Also have been
25 working with CPC and John Crotty for the past couple
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1 of years. So maybe I'll emphasize more on why this
2 issue is so important and some of the, you know,
3 solutions I think we have agreement on.
4 Data shows that about half of affordable
5 housing nearly is -- buildings in New York City are
6 experiencing operating deficits where rents are not
7 covering expenses, including insurance costs.
8 Policy interventions are required to prevent these
9 buildings from defaulting on their loans. So there
10 is a lot at risk if we are not solving this problem.
11 In 2024, we released a policy brief. The
12 alarming risk of rising insurance costs for
13 affordable housing, it was referenced many times by
14 other witnesses today. And we showed that that
15 brief examined property and liability insurance data
16 from 18 partners covering 130,000 units of
17 affordable housing and mixed income housing. We
18 found that costs have skyrocketed while coverage has
19 decreased. This was particularly true for
20 affordable housing units where premiums increased
21 103 percent between 2019 and 2023.
22 Rising insurance rates impact a building's
23 cash flow. Our data shows that costs have increased
24 on average by 900 per unit over the last 4-years,
25 decreasing cash flow by about 60 percent in a
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1 100-unit building that we modeled. If left
2 unchecked, skyrocketing premiums will make rental
3 housing even more unaffordable for New Yorkers and
4 put the existing affordable housing at financial
5 risk. I would argue it is already at risk when half
6 of the buildings are running operating deficits.
7 For new affordable housing development, and
8 this came up from a question from Senator Bailey
9 earlier, we found that rising insurance costs are
10 being absorbed by higher subsidy rates at initial
11 underwriting. So this 900 increase per unit that we
12 had calculated over a four-year period, translates
13 into $10,700 of additional subsidy for each new
14 construction of affordable housing unit. So the
15 City of New York or the state housing program, they
16 are subsidizing these rising costs. And then once
17 the buildings are operating, building operators
18 cannot keep up with the rising costs that they were
19 underwritten to, which are, you know, these
20 increases are far beyond the 3 percent in expenses
21 anticipated of total cost growth each year. So that
22 poses a significant policy problem.
23 I also want to point out it's impacting how
24 we are addressing the preservation of affordable
25 housing. One of our non-profit partners in the
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1 Bronx, leading on preservation for 40 years -- this
2 is like the work that they do -- they said that they
3 are reluctant to take on another preservation
4 project with code violations, an existing occupied
5 building in need of rehab work because it will
6 impact their insurance rates. And they just can't
7 afford it. So what does that mean for housing
8 quality in our city and the preservation of housing
9 in distress?
10 So we support policy interventions, a package
11 like Patrick said. We don't think it's one thing
12 that is going to fix this. We are supportive of
13 immediate relief through an affordable housing
14 relief fund. Thank you to Senator Bailey and
15 Assembly Member Torres for that. We also support
16 more transparency and accountability around data
17 collection. Two bills in the Assembly that were
18 already mentioned. We also support an exemption of
19 affordable housing from Scaffold Law and we are also
20 interested in how tort reform can fit into this
21 picture.
22 You know, some of these short-term measures
23 of relief, if they don't come fix the structural
24 problems we have, we still have the same problem.
25 We also are supportive of disclosing Third Party
390
1 Litigation Funding. Getting to some of the
2 advertising that was discussed earlier, as well.
3 And we think generally this market needs to be more
4 competitive and more attractive to insurance
5 companies, so that we have more competition and
6 pricing can come down. We are supportive of risk
7 share models, excess liability fund. We are also
8 supportive of public investment in Milford Street
9 insurance captive for affordable housing and...
10 we'll hear more solutions but I think a package of
11 solutions is what we are interested in.
12 SENATOR SKOUFIS: Thank you, Ms. Klein.
13 EMILY KLEIN: Thank you, Senators Bailey,
14 Kavanagh and Skoufis for convening this hearing and
15 providing the opportunity to speak today. My name
16 is Emily Klein. I'm the assistant Vice President
17 and Deputy Director for Policy and Public Affairs at
18 the Community Preservation Corporation, a
19 51-year-old non-profit community development finance
20 institution that has invested over $16 billion to
21 finance the creation and preservation of 275,000
22 units of housing through our lending and investing
23 platforms.
24 As has been mentioned many times today,
25 according to a 2022 study by the New York State
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1 Department of Financial Services, the U.S. insurance
2 market has experienced a significant hardening in
3 recent years, characterized by an increased demand
4 for insurance, fewer coverage options and steady and
5 significant rate increases. Through CPC's annual
6 survey of borrowers expenses, we clearly see the
7 dynamic playing out across the properties that we
8 finance in New York State.
9 Our most recent survey collected 2024
10 expenses from 12,650 rent stabilized units in
11 New York City. Since 2020, insurance has risen
12 61 percent cumulatively, reaching an average cost of
13 $1636 per unit in 2024 with a 23 percent jump from
14 2022 to 2023 alone. This escalation has been
15 particularly acute in the Bronx, where premium
16 amounts per unit average $200 greater than the other
17 boroughs. Similarly, buildings in our servicing
18 portfolio in New York State, excluding
19 New York City, have seen a 76 percent increase in
20 insurance costs from 2020 to 2024, reaching an
21 average of $1005 per unit in 2024. Both upstate and
22 downstate, insurance costs now account for
23 16 percent of the total per unit expenses.
24 There are numerous factors that contribute to
25 the cost and availability of insurance in a given
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1 geography which make it hard to holistically
2 diagnose the causes of this problem.
3 Influencing factors can include both
4 legitimate challenges, like climate change and price
5 inflation, and other more intangible and potentially
6 nefarious factors like Third Party Litigation
7 Funding, insurance provider withdrawal, burdensome
8 regulatory environments and intractable
9 discrimination. These factors combined have led to
10 the unchecked escalation of insurance costs
11 throughout New York State and specifically in parts
12 of New York City.
13 Without regulatory frameworks, like the
14 Community Reinvestment Act which requires financial
15 institutions to invest across geographies regardless
16 of a community's financial strength, insurance
17 providers have no mandate to provide coverage
18 equitably across communities. If they determine a
19 state, city, neighborhood, block or building too
20 risky for any reason, they can charge exorbitant
21 rates or refuse to provide coverage all together.
22 And since multifamily buildings are required to have
23 insurance nonetheless, remaining providers can
24 charge high rates because there is no competition.
25 These compounding inequities leave the most
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1 vulnerable with the least comprehensive and most
2 costly protection.
3 In light of the challenges of continuous cost
4 escalation and the growing consensus around the need
5 for tactical policy responses, we recommend
6 exploring the following solutions:
7 First: Reward risk mitigation with premium
8 relief. Similar to how car insurance rewards good
9 driving behavior by lowering premiums as mentioned
10 earlier by NYSAFAH, the state should encourage
11 insurance providers to factor risk mitigation
12 efforts into pricing and offer lower premiums
13 contingent upon certain risk mitigation efforts.
14 Second: Require disclosure of Third Party
15 Litigation Funding, or TPLF. TPLF allows third
16 parties such as hedge funds and other financiers to
17 provide funding for a plaintiff's case in exchange
18 for a percentage of the settlement or judgment.
19 While this practice is relatively new in the U.S.,
20 TPLF is already impacting the insurance industry,
21 enabling prolonged legal battles and increasing the
22 frequency and size of very large or "Nuclear
23 verdicts" which then drive up premiums.
24 Disclosure of and data on TPLF should be
25 required in New York so that relevant oversight
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1 bodies can dimension, monitor, and if needed,
2 interrupt the impact of this practice.
3 Third: Create a Scaffold Law carve-out for
4 affordable housing. New York State's regulatory
5 environment around risk and liability is incredibly
6 complex with entrenched parties on all sides that
7 make comprehensive reform difficult. In the absence
8 of such state tort reform, the state should explore
9 avenues for a Scaffold Law carve-out for affordable
10 housing projects.
11 And lastly: Explore public insurance program
12 for affordable housing. Similar to how the National
13 Flood Insurance Program has stepped in to provide
14 insurance to properties that would otherwise
15 struggle to find sufficient and affordable coverage,
16 so, too, can New York State step in to create a
17 publicly funded property insurance program. We
18 recommend the state undertake a feasibility study to
19 assess the role, cost and potential impacts of a
20 public insurance program for affordable multifamily
21 housing.
22 These recommendations and others shared today
23 provide pathways to better understanding the drivers
24 and impacts of the insurance cost escalation and
25 will be essential to inform the solutions. Thank
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1 you for the opportunity to testify and I'm happy to
2 answer any questions.
3 SENATOR SKOUFIS: Perfect timing.
4 Last but not least, Mr. Crotty.
5 JOHN CROTTY: Thank you all for having me
6 here. And I can say it is a great honor to testify
7 with these people on this panel. They have all been
8 very helpful in what has been a long and arduous
9 thing. Their support has meant a lot to me and to
10 the effort in general. So it's fitting that we are
11 all here together. Thank you all very much for
12 having us here.
13 The issue here will determine whether
14 affordable housing in New York remains economically
15 viable and will shape our shared priorities for the
16 years ahead.
17 We started the Milford Street Association to
18 confront what is the single biggest operational
19 threat to affordable housing. Insurance costs
20 driven by unimaginable and increasingly aggressive
21 liability environment.
22 If affordable housing is a priority, then we
23 must confront this issue directly and with full
24 clarity. Affordable housing relies on slow rents
25 and relatively stable expenses. Yet across the
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1 board, expenses have increased. Insurance has grown
2 far beyond the pace of rental increases.
3 They have absorbed the entire operating
4 margins. A few years ago, as you have heard before,
5 insurance for an affordable building cost about $500
6 a unit. You are now at 1500 plus a unit, and you've
7 heard stories significantly higher than that. It's
8 about 21 percent per year. If you look at the Rent
9 Guidelines Board, which is a largely unpolitical
10 document, and put those increases in, you will see
11 the number is closer to 540 percent.
12 That's not me telling you. It's the preocc
13 (sic). Right?
14 Milford came about as a creation of a number
15 of operators sitting around and complaining. We are
16 very good at it. So just ask me any issue and we'll
17 tell you what is wrong with it. But at this point,
18 it was really kind of a traumatic experience for all
19 of us and we were looking forward and not
20 understanding what the future was going to look
21 like.
22 So we took this all and we went to Dick
23 Ravitch, who is one of the great New Yorkers of all
24 time and said Dick, we have this problem. And in
25 typical Dick fashion, he said, boy, you know, that
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1 sounds tough. Prove it.
2 So what we did was we got our losses
3 together. We went out to an actuary and gave them
4 our losses. A world-renowned actuary in New Jersey.
5 And they came back and said you are paying more than
6 you should.
7 We took that information as proof of the
8 hypothesis. And went out to create this captive.
9 It was created in a certain way to address a certain
10 need, namely affordable housing. So we built
11 partnerships with regulators, brokers, actuaries,
12 accountants, politicians, thought leaders, whoever
13 would listen and put this group together. And
14 something government probably should have done and
15 frankly that was my first instinct because I didn't
16 really want to do this but was to go to HFA and say
17 this is something you should do. And some old
18 colleagues there said you should go do it. I said,
19 okay, well, you know, I'm going to. And when I do,
20 you better help. And they have come through on that
21 somewhat.
22 But the city and state, as you already know,
23 have invested more than $3 billion a year every year
24 for the last 20 plus years in this. I don't know
25 what the total size of the investment is. Someone
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1 at OMB could tell you. It exceeds $100 billion.
2 But if we don't get this under control, we
3 will have wasted all that money. And we are seeing
4 it happen now. You have heard from a variety of
5 other operators. The spikes in premium, the need
6 for capital repairs that are going unfunded and a
7 variety of other issues associated with spending an
8 ever increasing amount of your budget on insurance.
9 I also shared with you, Senators, today, we
10 teamed up with an AI company, and that AI company
11 took every claim and case in the New York State
12 system and produced some really meaningful data. In
13 there you will see the aggregation of the data by
14 category and by court. And what you will notice in
15 there, is that on the third or fourth page -- I
16 forget which -- using an estimate of about $50,000 a
17 case, we have at least $4 billion worth of liability
18 to manage. That's just a fact. You want to say
19 50,000 is wrong. The trial lawyers were here. They
20 can come up with a number. You can go ask them.
21 But you know, it's a number. I don't think it's a
22 bad number.
23 As part of running Milford, we have now
24 gotten to see a lot of loss runs from different
25 carriers. We only do affordable. So we've gotten
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1 some trends and understood some stuff.
2 So the combination of the data you have in
3 front of you, some of the other data we put
4 together, clearly highlight the problem and what is
5 needed to sort of do it. You have heard a lot of
6 good suggestions here today. Most of them I agree
7 with. I think they make a lot sense. But the key
8 driver of this cost is really what we end up paying
9 for what we do.
10 And you have to think about what that means.
11 Tort reform is a big word. But the practical
12 execution of it is really significant. I talk a
13 little bit as well in here about third party
14 financing, which is also big. You will notice in
15 your packet that I gave you, there is some data
16 around that and some impacts of what happened, two
17 different court cases, two moments I would like to
18 share with you. I can tell my time is getting short
19 here.
20 Government has been somewhat supportive.
21 Governor Hochul has given the captive $2 million
22 which I was hoping to say was executed by here. It
23 wasn't. But it will be shortly. And Mayor-Elect
24 Mamdani has also talked quite a bit about working
25 with groups like Milford and we are very excited
400
1 about that because we are right. People have
2 mistaken over time that somehow this is my thing or
3 our thing. We created it as an open-ended
4 association captive so call could participate. This
5 is not a John Crotty problem. I have many, this is
6 not only one of them; however, the industry really
7 has to deal with this. And we are going to need
8 your help to come up with a comprehensive solution
9 that will not only work today but work going forward
10 that we are in a major pickle. And there is not a
11 very easy way out of it. So with that, I'll thank
12 you.
13 SENATOR SKOUFIS: Thank you very much,
14 Mr. Crotty. I will kick things off and I want to
15 kick things off by not speaking about a John Crotty
16 problem but a John Crotty solution. How much is
17 your captive saving you and your colleagues?
18 JOHN CROTTY: That's a hard question to
19 answer. Up front -- the best way to answer it is
20 this and I'll explain why.
21 Figure the P&L, the profit motivation on
22 insurers is north of probably 35 percent. The
23 reason I say that, is the structure of insurance is
24 finance.
25 The broker is good for about 10 percent. The
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1 regional broker, the sort of the larger wholesaler
2 is good for 7. That's 17. And then the insurance
3 company, the people writing the paper, you know,
4 they want 10 to 15 to 20 percent.
5 So off the bat, you are sort of at a number
6 of about 20 percent. But that would be only half of
7 the story because in a captive, you pay money in for
8 year one. There is a three-year liability period
9 that extends after that initial period, where a
10 claim can be brought. At the end of that period,
11 you can assess, within the captive, what has been
12 spent based on that first year's worth of premium.
13 If there is an example of no claims, and they
14 paid $100 in, you could probably apply a large
15 majority of that $100 to the fourth year renewal and
16 then I could answer more accurately what are you
17 saving.
18 Up front 15 to 20 percent. Overall, could be
19 as high as 50 and 60. We just don't know.
20 SENATOR SKOUFIS: Those are big numbers.
21 JOHN CROTTY: They're meaningful. It is
22 stability to the operator and it is why I have put
23 in all this time and others have put in all this
24 time to get to this point. We're not going to
25 survive without a significantly better solution.
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1 SENATOR SKOUFIS: I know we put a couple
2 of -- and you mentioned it -- a couple of dollars
3 with HCR to sort of, and I think it's out for bid
4 right now.
5 SENATOR KAVANAGH: Two different things.
6 JOHN CROTTY: There are two numbers. ESDC
7 voted upon and gave us $2 million for the captive.
8 SENATOR SKOUFIS: That's separate from what
9 I'm talking about.
10 JOHN CROTTY: Separate, yes.
11 SENATOR SKOUFIS: So why haven't we seen more
12 captives? These are big numbers. Is it just that
13 it's really hard to do? And if that is the case,
14 what can we do as legislators to make it less hard
15 to do?
16 JOHN CROTTY: So, you know, I read
17 sometimes, mostly I listen to books on tape. And
18 one of the great stories I've read is, you know,
19 Martin Luther King wrote this speech called The But
20 If. And it's about the young boys when they got
21 killed down there and he was talking about their
22 faith. And towards the end of it, he gives a speech
23 about how you have to stand up for what's right.
24 And what is going on. We run an affordable housing
25 company. We have done some very difficult projects.
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1 As someone was saying earlier -- I think it was
2 Rachel -- but forgive me if it wasn't. Operators
3 that go in to take broken properties will not look
4 at new stuff because they can't afford the
5 liability. We weren't that smart. We had no idea
6 and it might not have been that big an issue at that
7 time.
8 But I will tell you, because we were willing
9 to do that, amongst the things we've saved, up in
10 the Bronx quite a bit, one of which is the
11 birthplace of hip-hop, which have been lost to
12 history if not for us going in and doing something
13 about it. And it has been a very meaningful
14 development.
15 So the long-winded answer is, if you see a
16 problem and you think you have the capacity to fix
17 it, you should do it. And you should do it no
18 matter what the cost.
19 SENATOR SKOUFIS: Were there statutory
20 barriers, were there regulatory barriers that we
21 should be looking at?
22 JOHN CROTTY: Yes. Statutory, regulatory,
23 systematic, people wise, overall mentality.
24 SENATOR SKOUFIS: In the interest of time,
25 can you follow up with us and identify what those
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1 barriers are that we can try and address?
2 JOHN CROTTY: 100 percent. That would be
3 great.
4 SENATOR SKOUFIS: For all of you, I suppose,
5 a lot has been talked about regarding discounts
6 today and whether we should require them, whether
7 carriers are offering them. I remain very concerned
8 that there are many, many discounts that are
9 available that people have no idea know exist. And
10 I'm curious, your members, your peers, can you give
11 me a sense of what your sense is regarding their
12 awareness of discounts that do exist with some of
13 the common carriers that your members are
14 policyholders of?
15 PATRICK BOYLE: Yes. I think one thing that
16 has been clear to us in our conversation with
17 affordable housing owners, is a lot depends on the
18 strength of your relationship with your broker, the
19 capacity you have to really dedicate time and effort
20 into kind of studying your own insurance and what
21 benefits might be available to you. And a lot of
22 affordable housing owners are so strapped in their
23 time and in their resources that I think they lack
24 the capacity to kind of be able to do that research.
25 We had not understood that there were a lot
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1 of existing -- or really any significant existing
2 discounts out there. We have known -- I've seen the
3 checklist on the single-family homeowner side.
4 For multifamily, I understood it to be a much
5 sort of shorter list of kind of DFS mandated actions
6 on discounts. And to the extent that there are
7 others out there that might depend on the carrier,
8 it probably would depend a lot on the relationship
9 owners have with their brokers and their ability to
10 chase that down. But anything to bring those more
11 out into the open would be great.
12 RACHEL FEE: We interviewed 18 different
13 affordable housing owner and operators, and many of
14 them reported that they were required to increase in
15 investment in risk mitigation efforts, just to get a
16 renewal policy. So we have not heard of, you know,
17 do x, y and z and you get a 20 percent discount.
18 It's there are no other market options and this is
19 what you need to do just to renew.
20 JOHN CROTTY: It's worth noting the process.
21 When you drive down the street and you go by a gas
22 station, if they don't produce the pricing at the
23 front of it, there are laws against that. They say
24 hey, you want this level of fuel, this much a
25 gallon. Insurance thinks that is a joke because
406
1 what they do is, quite often, the broker -- you only
2 are allowed one broker. A broker of record. It's a
3 signed document. Without that signed document, you
4 can't get bidding, you can't get pricing. So when
5 the singular broker goes out to shop for you, you
6 are then beholden to that broker with what they come
7 back with.
8 As they come back, which they often do,
9 usually not with the best news over the last five or
10 six years, they will come back to you with a number.
11 You generally have between 48 to 72 hours to bind
12 it. And that is where you are at. You are not
13 allowed to shop that offer. The broker will or will
14 not have done that for you.
15 So the existence of discounts that may or may
16 not be available, has, in our experience, not really
17 been part of the process. And that's not a lack of
18 understanding. That is a process that will not
19 allow that to occur.
20 SENATOR SKOUFIS: Got it. Last question that
21 I've got. If any of you have maybe 30 or 40-second
22 opinions on bad faith laws. I'm curious, do you all
23 feel that it would help unclog the court system, it
24 would move things more quickly? It would have, even
25 if on the margins, positive impact on premiums or do
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1 you think it induces more folks to bring weak cases
2 and claims and would make the situation worse?
3 JOHN CROTTY: I'm not exactly sure what the
4 law means. But I did share with you and I don't
5 know if my colleagues have seen this. You know,
6 New York City on premises of slip and fall cases has
7 something north of 50,000 cases plus. If you put an
8 aggregate in there of 50 -- and you can argue that
9 that is a good or bad number. I'm not saying it's
10 either. I think it's probably about right. If you
11 want to say it's more or less, okay, fine. It's
12 about $3.8 billion worth of stuff to offset.
13 SENATOR SKOUFIS: Let me ask you on that,
14 though, do you feel it has the length of time to
15 resolve these cases, which it sounds like a large
16 majority of them are settlements, does that have a
17 deleterious impact on premiums?
18 JOHN CROTTY: The length of time to settle a
19 case?
20 SENATOR SKOUFIS: Yes.
21 JOHN CROTTY: Yes, it's not a debate.
22 SENATOR SKOUFIS: So does bad faith help with
23 that?
24 JOHN CROTTY: I'm not 100 percent sure what
25 you mean by bad faith. I just don't know. What do
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1 you mean?
2 SENATOR SKOUFIS: It was discussed on a
3 couple of panels. But in effect, as I understand it
4 as it has been explained, if you can demonstrate
5 that an insurer is effectively delaying the
6 resolution of a case and is dragging their feet, and
7 whereas they wind up settling 18 months down the
8 road. They could have settled a month down the
9 road. Then there is a financial penalty levied
10 against the insurer.
11 JOHN CROTTY: I mean, there is no penalty
12 against the insurer ever. It is always against the
13 affordable housing operator. The insurer is nothing
14 but a...
15 SENATOR SKOUFIS: The argument is that this
16 kind of law would compel the insurer to not be in
17 court litigating for 18 months, 24 months and it
18 would be resolved much, much quicker.
19 JOHN CROTTY: I think that would be helpful
20 but I'm not entirely sure who would be to blame for
21 that. You know, the third party litigation guys,
22 they're more than happy with collecting what is an
23 88 percent guaranteed return by lending you money
24 well below what the settlement is going to be and
25 waiting it out because the longer time goes on, the
409
1 more money they make.
2 So, you know, I don't have a solid answer for
3 you. But there is a lot of people making money on
4 that delay. And all of it is being paid by the
5 affordable housing provider.
6 SENATOR SKOUFIS: The insurers, too. They
7 invest the money during those 18 months that they're
8 not paying it out.
9 JOHN CROTTY: No, they're not. I don't know
10 how much they're making -- yes, the cash that they
11 would otherwise pay out is getting a 6 percent
12 return. But when they get hit, it's not 6 percent
13 they're worried about, right?
14 SENATOR SKOUFIS: Okay, thank you.
15 SENATOR BAILEY: I just want to say a couple
16 of things. I want to do it while Senator Skoufis is
17 still here, I'm going to do something out of the
18 Senator Skoufis book and I'm going to illustrate how
19 important this graphic is and I'm a Bronxite through
20 and through. And each of the 62 counties in this
21 great state are special. But I am from one. And
22 when I see that, the amount of premium in the Bronx,
23 in a borough where -- that contains the poorest
24 congressional district. They always talk about how
25 bad it is, that lowest wages, that the premiums are
410
1 higher. And so I am asking -- I'm going to ask the
2 same question, a two-part question. Despite what
3 has been said about, you know, hey, it's people
4 aren't walking away. In your estimation, in the
5 units that you operate and the things that you have
6 seen, especially you, John, are conditions different
7 based upon communities? And as far as what kind of
8 insurance is tendered and are insurers pulling out
9 of the market, away from property owners?
10 EMILY KLEIN: I think that the data we
11 provided helps to paint that picture. As much as
12 possible, we like to rely on the facts that we see.
13 CPC has very strong underwriting standards for the
14 projects that we lend to, and that does not vary,
15 depending on the borough.
16 Those are standard across our portfolio. And
17 when we then disaggregate our expense data and see
18 that in actuality, these expenses across properties
19 that generally speaking should all be of a similar
20 quality are -- insurance is on average $200 higher
21 in one borough than the others and increasing
22 rapidly in a way that departs from the other
23 boroughs, that leaves us with some questions about
24 is there something different happening based on
25 geography. I think we have heard a lot of anecdotal
411
1 expresses of that. I think it is really hard to
2 quantify because this is a really complicated world
3 of insurance and place-based decision making. But I
4 think the data that we provided suggests that there
5 is a real problem and it is worse in certain areas
6 of the city than others.
7 SENATOR BAILEY: I know it's not exactly
8 apples to apples but is it fair to say that in this
9 chart that you have provided, that I could make the
10 logical assumption -- and it is an assumption, I
11 will admit -- that you are speaking about the same
12 property types, like let's say a three-bedroom,
13 single-family owner occupied home, just for, in each
14 borough. And that same exact residence, square
15 footage, to a degree, location, building type, all
16 of these different things, it's more expensive to
17 insure that building in the Bronx than it is these
18 other counties?
19 EMILY KLEIN: I think that's correct. I
20 think it's important to look as well at, you know,
21 these are all multifamily affordable buildings so
22 that's sort of our baseline. We have also broken
23 that data down by building size and building age,
24 which are two other factors that I think we do see
25 impacting certain expense lines. But those didn't
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1 actually draw as much of a conclusion as the borough
2 data did.
3 SENATOR BAILEY: Look, I'm not pointing
4 fingers without data. Making accusations that are
5 threadbare do no one good. But I will say that
6 things like this illuminate what my constituents are
7 feeling.
8 I want to ask a question about tort reform.
9 And I know that it was touched on briefly by each of
10 you. What measures -- like we have heard pilot
11 programs. We've heard get rid of the Scaffold Law.
12 What would help each of you in your estimation, in
13 what a tort reform change would look like?
14 PATRICK BOYLE: What's attractive about
15 piloting some changes to things like the Scaffold
16 Law or other kind of liability laws, is it allows
17 you to kind of study the impact in a controlled way
18 between this set of housing versus another set of
19 housing and kind of see what the impacts are of
20 changes you make and, you know, Scaffold Law,
21 liability law, it goes beyond, you know, affordable
22 housing. And these are major issues of
23 consideration of businesses are very impacted.
24 There was just an article on bars and restaurants
25 and they can't afford insurance. So this is way
413
1 beyond housing.
2 But, you know, we are here speaking for
3 affordable housing. So any changes we can make that
4 would, you know, have a sunset provision, we are not
5 committing to it forever but it would allow us to
6 study the impacts of it is -- I think is an
7 attractive approach.
8 And then on the Third Party Litigation
9 Funding, this is something new. Everything we have
10 heard about it is kind of very anecdotal. There are
11 groups calling attention to this kind of new player
12 in the, sort of, litigation realm. So, again, just
13 more transparency, more data to kind of understand
14 what is going on. Seems like a reasonable first
15 step in terms of, you know, how is this impacting
16 court cases? How is this impacting affordable
17 housing? Are these funding mechanisms in affordable
18 or multifamily housing at a disproportionate rate to
19 other types of things that they look to fund. So
20 just kind of understanding the issue better seems
21 like kind of a reasonable first step.
22 SENATOR BAILEY: Anyone else?
23 JOHN CROTTY: I have a document put together
24 on suggestions to do it. My only fear with sharing
25 it is, I would like it to be a little more
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1 collaborative. When we pass tort reform in
2 New York City back when Brian or Senator Kavanagh
3 was a top aide to hopefully the borough president
4 for life or almost borough president for life, Gail.
5 We did tort reform in '03. Remember this?
6 It was a long, long time ago. And we had great
7 lawyers there who were able to carve the city out of
8 that piece and knock down a pretty significant cost
9 element for the city. There are suggestions, they
10 are good. I would rather if we had a little bit
11 more of a group focusing in to make sure that they
12 work for everyone. In my mind, you would want to do
13 affordable right now.
14 You know, the labor unions have a lot to say
15 about this. At JFK, they have a PLA for work. The
16 unions do, to guarantee the rate. As part of that
17 rate, what they were able to get -- and you should
18 ask them about this -- is a very deliberate specific
19 set of accident claims, doctors that are not
20 allowed, procedures to be followed for all
21 accidents. The amount of savings from that, I'm
22 told from them, anecdotally and again ask them, is
23 about 7 percent on $6 billion. So you could do the
24 math of what that is worth to them, right?
25 And so, you know, there is a lot of ways to
415
1 sort of look at this problem. I have a couple
2 suggestions. But I do think it would be better,
3 from a broader group, sort of opining on it. You
4 know, just try to create these answers and they're
5 not quite perfect until a couple people beat them
6 up, right?
7 SENATOR BAILEY: Last question I have as the
8 shot clock expires is, I see the information about
9 the claims. And this is something maybe to think
10 about. Should there be a special part in the
11 courts -- should we have a conversation with the OCA
12 about these specific types of cases so that the
13 docket can be possibly streamlined? Is that
14 something that has been -- just spit balling as I
15 looked at your data, John.
16 JOHN CROTTY: I'm not a lawyer. You can
17 talk to the lawyers to figure out what does and
18 doesn't make sense. Those boys got their own
19 ecosystem up there that they sort of exist in. I
20 know -- I could tell you what the problem is and I
21 think I've tried to do that. The solution could
22 look a couple different ways. But if we don't
23 change it, I could also, with some level of
24 accuracy, predict the future.
25 SENATOR BAILEY: Thank you. Senator
416
1 Kavanagh.
2 SENATOR KAVANAGH: Thank you. This panel has
3 been substantially the John Crotty show. We
4 appreciate...
5 JOHN CROTTY: It shouldn't be. I have to
6 tell you, Patrick and Rachel have been so critical,
7 and CPC generally in doing this. I wasn't kidding
8 when I said that before. It really has been a group
9 effort. We would be almost nowhere without Rachel.
10 And she has to put up with me so --
11 SENATOR KAVANAGH: Which I personally know
12 from experience is challenging. I just would remind
13 you not to tell Brad Hoylman-Sigal who is the
14 borough president for life.
15 Just a question and I'm aware that there is a
16 lot of collaborative efforts that has gone into your
17 work and this is a panel of people who have really a
18 singular role in, you know, our housing system,
19 studying it, maintaining it, building it. So each
20 of your organizations really plays a fantastic role.
21 Can you just, back to, like, stepping back
22 from this, we have had a long day here. We have a
23 few more panels.
24 But just talk about the significance of
25 insurance, escalating insurance costs as a threat to
417
1 our ability to do what we need to do in housing.
2 RACHEL FEE: Our analysis shows that $148 of
3 rent for an affordable housing tenant is going
4 towards insurance. $148. Think about the average
5 income --
6 SENATOR KAVANAGH: Per month.
7 RACHEL FEE: Per month, all of the families
8 trying to leave shelter with a city voucher because
9 they cannot afford rent and $148 is going towards
10 insurance in that building.
11 And that rate keeps going up and keeps going
12 up. And is threatening the viability of our
13 affordable housing stock right now. So action is
14 imperative. It's urgent. It's also impacting our
15 city and state housing plans. So we know we have a
16 supply shortage. And our estimates show that almost
17 $11,000 dollars per unit in capital subsidy has been
18 added just being over the four-year period where
19 insurance costs spiked.
20 So if the city for their new construction
21 program is investing $150,000, right? 10 has been
22 added just because of insurance costs, subsidizing
23 those higher costs of carrying that building.
24 So that means that every year, as costs go
25 up, we are building fewer affordable housing units.
418
1 It's a larger share of rent. And it is not
2 sustainable for our existing stock. So thank you
3 for the opportunity to testify today and your
4 attention to the issue. We really do think it is an
5 urgent one that is impacting renters across the
6 state.
7 EMILY KLEIN: And just to speak a little bit
8 to the quality of existing housing. CPC put out a
9 data brief that opened up our books to explore the
10 expense data coming out of our rent stabilized stock
11 here in New York City last May. And in that
12 document, we talk about how expenses across the --
13 so cumulative, the full expense budget -- we show an
14 increase of 22 percent from 2020 to 2024.
15 But within that 22 percent, the budget line
16 for insurance is up, as I said before, that increase
17 is in the 60 percent. So that is by far the largest
18 driver by expense line in that stack of expenses.
19 And the only expense line that we see that has gone
20 down is repair and maintenance. So when we see year
21 over year over year expenses being driven higher and
22 higher, in large part due to insurance costs, where
23 building owners are making their -- their ends meet
24 is by skimping on what they can, what they don't
25 have to pay. And a lot of times that comes down to
419
1 building maintenance and repairs. And so
2 ultimately, as that continues year over year, you
3 see quality of housing fall and much needed repairs
4 go undone.
5 And that ultimately trickles down to the
6 quality of housing that tenants in these units have
7 to then experience.
8 We see this as part of a holistic issue that
9 really trickles down to affect housing quality.
10 PATRICK BOYLE: I agree with all of that and
11 they really summarized well.
12 I think the longer that this becomes a
13 problem and we see these distress indicators in
14 affordable housing continue to grow, that's just
15 going to be a ballooning problem and groups are
16 going to be coming in with bigger and bigger asks
17 that are more along the lines of bailouts and
18 capital needs to preserve and sort of maintain the
19 stock we have when we need to be preserving but also
20 keeping the momentum on building.
21 SENATOR KAVANAGH: This was set at 5 and it
22 should have been 10. I have been denied 5 minutes
23 by my own people.
24 JOHN CROTTY: One thing I would add, I
25 agree, the city and state do not have the money to
420
1 pay for what's coming if they don't fix it. There
2 is just not enough subsidy to correct the issue. So
3 the question really just becomes who is going to do
4 with less? And I think we are here to tell you that
5 affordable housing on its current trajectory is
6 over. Not hyperbole. Reality. And the trial
7 lawyers can tell you a lot of stuff. And other
8 people could tell you a lot of things. But you now
9 have some facts in front of you as to what exists.
10 SENATOR KAVANAGH: Obviously this effort --
11 is an attempt...
12 JOHN CROTTY: I thanked you at the
13 beginning. I meant it.
14 SENATOR KAVANAGH: And we haven't even
15 discussed your hot sauce, your side career in hot
16 sauce.
17 JOHN CROTTY: One hearing at a time.
18 SENATOR KAVANAGH: Can you just, in response
19 to Senator Skoufis, you alluded to this, but we
20 heard from the superintendent, that some, you know,
21 in some cases, captives are set up under the laws of
22 other states and then working here, which isn't
23 necessarily, you know, a problem from our
24 perspective. But are there -- I mean, are there
25 sort of obstacles you can highlight for beyond more
421
1 people joining and paying and, again, we're trying
2 to subsidize that. But are there obstacles you can
3 highlight about how to expand your particular model?
4 JOHN CROTTY: Do you remember going to the
5 butcher back in the day? It doesn't exist anymore.
6 But the proverbial thumb on the scale.
7 The City and State of New York finance this
8 stuff. And they take certain opinions about what
9 they can and can't insist on. And others seemingly,
10 they say they can't do. It is nonsensical. They
11 can insist on who is working on the project, color,
12 creed and race. They can insist on materials and
13 not lack of materials. And then when it comes to
14 insurance, they're complete free market operators.
15 It's nonsense. They could encourage participation
16 in a captive in a number of ways.
17 In another world, this should be theirs. One
18 logical reason why it's not is you would want to
19 keep that liability away from -- you don't want the
20 pot of gold to exist. That is the problem. It is
21 not optimal to set up in another state. It's been
22 difficult. Of course it would have been impossible
23 to do what we are doing in this state. And I have a
24 lot of questions about what is going on at DFS. If
25 you'll recall, with Stiverson town, there was a
422
1 provision that previously HCR had taken as it
2 related to J-51. Turned out that was drawn up by a
3 staffer inside. No one really knew what was going
4 on. And when challenged in the court, it looked
5 very different than the reality they had been
6 posing.
7 My only point to you is if you think no one
8 knows anything about housing, no one knows anything
9 about insurance, especially as it relates to state
10 law. It's very complex. It's arcane and people
11 aren't engaged with it.
12 SENATOR KAVANAGH: I followed that analogy.
13 One thing we have heard -- we have heard anecdotes
14 that some people are being discouraged from -- your
15 enterprise doesn't cover the full range of property
16 insurance, at least at the moment. We have heard
17 stories of property owners being discouraged from
18 joining captive by other insurers by saying well, if
19 you join that, we won't give you insurance for other
20 purposes.
21 JOHN CROTTY: Correct.
22 SENATOR KAVANAGH: That would seem like
23 legally questionable behavior but can you talk a
24 little bit about to the extent that might be
25 happening.
423
1 JOHN CROTTY: That is absolutely happened.
2 Look, we are new. So we are clear, it is owned by
3 the members and the insureds. It is not owned by an
4 individual. It is set up for the benefit of
5 affordable housing. There is a two-step test to
6 becoming a member. You have to be financed by the
7 city, state or federal government and have a
8 regulatory agreement. We think that covers the
9 universe we want it to cover. We have been around
10 for about a year and a couple of months. So it's a
11 little bit new and there has been buy in.
12 If you'll recall, the Bible provides a decent
13 analogy. I think it was 12 pieces of silver that
14 Judas got, right? It happens. And, you know, it
15 happens with others as well, and so, you know, you
16 have to get through that. And then you have to, you
17 know, figure out how to appeal to everyone. It's
18 still a small operation. What I am really excited
19 about is the governor has given us a couple million
20 dollars. This is REFI. I'm not kidding when I say
21 the people at this table have been very
22 informative -- sorry about that. Very informative
23 and helpful in making this a reality. They have
24 pitched in in a variety of ways.
25 We are here individually I guess but I feel
424
1 very collective with them because of it. So it's
2 day by day. It's block and tackle. Mayor-Elect
3 Mamdani has talked about Milford excessively. We
4 look forward to working with him about it. So, you
5 know, nothing is perfect right away, and it takes a
6 little bit to get there and there has been some
7 limitations. But as it keeps growing, I think the
8 odds of making it a work all solution for affordable
9 housing is where it ends up.
10 The CPC's origins really kind of point to a
11 little bit of what should be practical. I don't
12 know if you remember this, but CPC came out of the
13 Tax Reform Act of '84, '86 was it? And no one
14 really knew what to do with those tax credits. They
15 wanted to invest in the inner city but they didn't
16 want any of the tag with it. So CPC gets created
17 because it's not Chase. Rockefeller was a big fan.
18 He wanted it to go away from him but to exist.
19 Liability is not unlike that. No one wants
20 the liability but they want this vehicle to exist,
21 which is why it was created the way it was, is to
22 make sure that everyone could have a seat at the
23 table. We think it's important. And it will be a
24 strength, not a weakness.
25 SENATOR KAVANAGH: And I think we'll leave it
425
1 there. Thank you all for all your work and your
2 testimony tonight.
3 So next up we have a panel of Kevin Wolfe,
4 Rebecca Poole, Sara Enright and Monroe Shannon.
5 Do you want to do the swearing in? In the
6 absence of Senator Skoufis, our official bailiff,
7 raise your right hand.
8 Do you swear to tell the truth, the whole
9 truth and nothing but the truth to the best of your
10 ability?
11 (Witnesses sworn.)
12 SENATOR KAVANAGH: First of all, I just want
13 to express some appreciation for your being here at
14 this late hour. It was a long hearing and we had
15 many different constraints, various people
16 testifying. So we appreciate you are here at this
17 late hour and your perspective is very important to
18 us. So I don't know if you have an order that is
19 preferable.
20 MARY ANN ROTHMAN: My name is
21 Mary Ann Rothman, and it is actually my colleague
22 Rebecca Poole who has done the work on this and who
23 should be testifying tonight. But we had a class to
24 give tonight, so I'm the pinch-hitter. And I thank
25 you three Senators, first of all, for holding this
426
1 hearing, and secondly for moving it along so nicely.
2 I left at 3:00 when you were on Panel 6, and I came
3 back in time for this.
4 I'm Executive Director of the Council of
5 New York Cooperatives and Condominiums and we
6 enormously appreciate the opportunity to participate
7 in this hearing, and in future discussions on
8 actions New York State can take to strengthen the
9 residential property insurance market percent
10 address the specific hardships facing cooperatives
11 and condominiums.
12 Our organization was formed in the mid 90s,
13 as a not-for-profit membership organization designed
14 to provide education, advocacy and information to
15 and for housing cooperatives and later for
16 condominiums. We instruct boards on best practices.
17 We hold regular evening classes, which is where
18 Rebecca is tonight; host an all day annual
19 conference, which was three weeks ago, our 45th;
20 prepares an annual comparative study of operating
21 costs that analyzes the major expenses of over 1,000
22 cooperatives and condominiums; shares pertinent
23 information and advocates on behalf of co-ops,
24 condos and their homeowners.
25 Co-op and condo homeowners span the full
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1 economic spectrum. They include first-time buyers,
2 established professionals, municipal workers,
3 seniors on fixed incomes and disabled homeowners.
4 In total, there are over 750,000 co-operative and
5 condominium apartments in New York City, which
6 provide a home to over 1.4 million, New Yorkers.
7 Regardless of location and homeowner
8 demographic, each homeowner's apartment generally
9 represents their largest investment, expense,
10 liability, asset and their home. For most
11 New York City residents, co-operatives and
12 condominiums provide the only affordable route to
13 sustainable homeownership. According to the
14 New York City comptroller's March 2024 spotlight on
15 New York City homeownership housing market, co-ops
16 and condos made up 99.1 percent of all homes
17 available for sale in the city, with an asking price
18 below $400,000. Co-ops were 84 percent of all homes
19 available for sale between 400 and $$800,000.
20 If New York City is to continue attracting
21 and holding first-time homeowners, it's essential
22 that co-ops and condos remain viable options. It's
23 not enough to ensure homes are affordable at the
24 point of purchase. They must remain so over the
25 course of the life of each homeowner. But long-term
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1 affordability is in decline.
2 Co-ops, condos and their managing agents have
3 self-reported annual insurance increases ranging
4 from 15 percent to over 300 percent annually. In
5 addition to an excessive number of non-renewals, an
6 expansive list of demands that carriers are making
7 to place insurance and reduced coverage.
8 Further, aggressive risk subrogation and
9 insurance requirements have limited the pool of
10 available vendors and increased the cost of
11 performing both major capital work and more minor
12 building repairs and maintenance. Across New York,
13 co-operative and condominium homeowners are
14 suffering.
15 Foremost among concerns expressed by co-op
16 and condo boards, is the increase in non-renewals.
17 Based on the notices of non-renewals shared with our
18 organization, co-ops and condos have been denied
19 continuing coverage due to potential litigation and
20 slip and fall concerns; apartment-to-apartment water
21 leaks; refusal to ban lithium ion battery e-mobility
22 devices; failure of existing buildings to meet new
23 building codes. May I go on a bit?
24 SENATOR KAVANAGH: A short bit, if you would.
25 MARY ANN ROTHMAN: Okay. Some statistics
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1 that I think you will be happy with. Well, you
2 won't be happy with them but they're specific.
3 Those co-ops and condos that are lucky enough to
4 receive renewals face impossible premium hikes.
5 Here is a sampling of data provided to CNYC. A
6 Bronx co-op with 141 units saw its insurance
7 increase from $174,000 per year to $595,000 per
8 year. That 242 percent increase will cost each
9 homeowner $2985 a year.
10 A small self-managed Brooklyn co-op, with 31
11 units saw its insurance increase from $26,000 per
12 year to $43,000. This 65 percent increase will cost
13 each homeowner $548 more per year.
14 Another Brooklyn co-op saw premiums rise from
15 $629,369 per year to $1394 --
16 SENATOR KAVANAGH: Ms. Rothman, these are
17 very interesting stats but I am going to have to ask
18 you to wrap up.
19 MARY ANN ROTHMAN: That was last one.
20 SENATOR KAVANAGH: I appreciate it because we
21 do have one more panel that has been even more
22 patient than this panel. So thank you.
23 Mr. Shannon.
24 MONROE SHANNON: Good evening. Thank you for
25 the opportunity to testify on behalf of Tonya Ores,
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1 CEO of Neighborhood Housing Services of
2 New York City. My name is Monroe Shannon. I'm the
3 program manager for Insurance and Resiliency
4 Services at NHS NYC.
5 For 43 years, NHS in New York City has
6 promoted and preserved affordable homeownership for
7 low and moderate income New Yorkers. Each year, we
8 reach more than 50,000 people across all five
9 boroughs through our home buyer workshops, homeowner
10 education and community outreach.
11 In our direct programming, which includes
12 home repair programs, foreclosure prevention, and
13 insurance and resiliency counseling, we work closely
14 with thousands of homeowners to help them access and
15 maintain stable and secure housing. Through
16 workshops and one-on-one counseling, we have
17 assisted dozens of homeowners this year with
18 insurance-related problems.
19 We are regularly seeing sharp premium
20 increases, in some cases thousands of dollars.
21 Non-renewals unless homeowners make repairs they
22 cannot afford, difficulty in finding insurers
23 willing to cover older homes, reduced coverage of
24 higher deductibles as costs climb.
25 More homeowners consider going uninsured once
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1 their mortgage is paid off. For low and modest
2 income homeowners, particularly seniors, these
3 pressures are creating real instability. Some are
4 stretching already thin budgets, others are reducing
5 coverage or facing the risk of losing their homes if
6 insurance becomes unaffordable.
7 I have two recent examples to illustrate this
8 reality. A two-family homeowner in Brooklyn had
9 gone more than 10 years without homeowners
10 insurance. When she applied for repair grants, she
11 learned she needed coverage but feared the cost. We
12 helped her compare five quotes and understand her
13 options. She ultimately secured a policy within her
14 budget and is now better protected.
15 The second is Ms. L, another homeowner who
16 received notice that her premium would rise by more
17 than $2,000. Living on a fixed income and
18 recovering from surgery, she feared she could not
19 afford this increase along with her mortgage
20 payments. After reviewing her policy with us, she
21 was able to return to her insurer and negotiate, not
22 just avoiding to 2,000 increase but reducing her
23 premium by more than $250, all while maintaining
24 robust coverage. We are seeing situations like this
25 regularly across New York City.
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1 As you consider policy responses, we urge you
2 to focus on the needs of small, low and moderate
3 income homeowners who are struggling to stay
4 insured. We respectfully ask that you.
5 1: Support solutions that help small
6 homeowners remain insured, including assistance for
7 repairs and upgrades, required for coverage.
8 Second: Strengthen consumer protections
9 around non-renewals, excessive premium increases and
10 ensure driven repair demands.
11 And third: Support the non-profits that
12 provide direct homeowner services who play a
13 critical role in helping families understand their
14 options and avoid financial harm.
15 These supports are essential to keeping
16 families safely housed.
17 Thank you for the opportunity to testify.
18 NHS of New York City stands ready to work with you
19 to protect small homeowners, particularly low and
20 moderate income families so that they can maintain
21 safe, stable and properly insured homes in every
22 neighborhood across our city. I welcome questions.
23 Thank you.
24 SENATOR KAVANAGH: Thank you.
25 SARA ENRIGHT: Good evening, Senators. My
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1 name is Sara Enright, I'm Senior Director of Safety
2 and Sustainability with Consumer Reports. We are a
3 non-profit non-partisan organization based up here
4 in Yonkers, New York; where we employ hundreds of
5 people who test products, report findings and
6 advocate for consumer rights. For nearly 90 years
7 we have worked side-by-side by consumers to create a
8 fair and just marketplace for all. As part of our
9 safety sustainability and financial fairness
10 advocacy work, we represent consumers who are
11 navigating the insurance -- the homeowners insurance
12 system. A system that, as we have heard today, has
13 become increasingly unstable as premium costs rise.
14 We commend this legislature's joint
15 investigation into the residential insurance market
16 and are here to underline the concerns of consumers,
17 urging reforms that safeguard, not only
18 affordability, but also transparency and fairness
19 for all policyholders. We encourage insurers also
20 to partner more closely with the communities that
21 they serve to strengthen household preparedness and
22 resilience for extreme weather events; steps that
23 can further reduce risks and stabilize the market,
24 controlling costs over time.
25 In 2024, directly following the devastation
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1 of "Hurricane Helene" in North Carolina, we heard a
2 wave of consumer complaints about the rising cost of
3 insurance and the lack of availability of sufficient
4 insurance. We collected nearly 600 consumer stories
5 nationwide about premium hikes, cancellations and
6 coverage denials. And since, we have engaged over
7 50,000 consumers around the country who have engaged
8 with us to co-create a Bill of Rights as well as to
9 petition the home insurance industry to do better.
10 As noted by this joint investigation, we are
11 concerned that in New York, homeowners have faced
12 average premium increases of over $1000 since 2020,
13 far above the national average, which is
14 particularly challenging for low income households.
15 And nearly half a million New Yorkers are now
16 completely uninsured and going it alone. This
17 crisis extends beyond homeowners. Renters face
18 higher costs as landlords are passing premium
19 increases on. And first-time homebuyers are locked
20 out of their mortgages where insurers have withdrawn
21 from high risk areas or are raising the premiums.
22 Just a few examples from your constituents
23 here in New York. Linda, a Manhattan co-op owner
24 saw her premium jump 60 percent in 2-years despite
25 making no claims and experiencing no disasters.
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1 "Helene," who lives in a flood zone community
2 fears she cannot shop for better insurance for fear
3 that she will lose her current coverage permanently.
4 Robert, from Upstate New York reports he
5 hasn't filed any claims in the last 10 years he has
6 owned his home but has seen his premiums rise by
7 300 percent in that time.
8 And Beth, a new homeowner in Endwell,
9 New York, fears that she is locked in with her
10 insurer because of her roof's age.
11 She has been told that she is unable to
12 switch providers without investing in a full
13 replacement despite making repairs that have
14 extended her current roof's life.
15 Consumer Reports investigations show that
16 these are not isolated cases but are part of a
17 national pattern. Steep, unexplained rate
18 increases, inadequate notice before cancellations or
19 hikes, fear of losing affordable coverage even among
20 responsible homeowners.
21 Many of these harms can be addressed through
22 stronger state regulations that require insurer
23 transparency, fairness and accountability in rate
24 setting, renewals and claims, while also supporting
25 community resilience.
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1 These principles are reflected in the
2 Consumer Reports Homeowners' Insurance Bill of
3 Rights developed this year with input from insurance
4 experts, academics and homeowners nationwide. We
5 outline nine essential protections every
6 policyholder should have. When applying for
7 insurance, we believe policyholders should be able
8 to receive a clear, plain language explanation of
9 what is and is not covered before they purchase or
10 are renewed. They should have the right to know
11 which risk factors are used to determine eligibility
12 and set their rates; to have fair access to
13 coverage, based on property risk and not their
14 finances. While covered, they should have the right
15 to adequate notice before cancellations,
16 non-renewals or steep premium hikes giving them the
17 chance to shop around and find other coverage.
18 They should have meaningful incentives for
19 homeowners who take steps to harden their homes;
20 protections against cancellations or non-renewals in
21 the aftermath of declared states of emergency. And
22 when making a claim, they should have the freedom to
23 make inquiries of their home insurance providers or
24 to make inquiries that result in no payout without
25 being penalized.
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1 Prompt, full and fair claim payments with
2 accountability for delays. And finally, immediate
3 financial assistance for emergency housing and
4 essential needs after a disaster with limited
5 paperwork requirements.
6 Since the release in October, over 43,000
7 consumers have signed our petition urging major
8 insurers to adopt these protections and to restore
9 fairness to the marketplace. New York State has
10 long led the nation in consumer protection and by
11 advancing the principles of the homeowners insurance
12 Bill of Rights, we believe we can help residents
13 make more informed decisions about where they live
14 and what coverage they need and ensure they
15 understand how to best protect their homes, their
16 most valuable assets and hold insurers accountable
17 to their promises through clear enforceable
18 standards.
19 Thank you for the opportunity to testify.
20 KEVIN WOLFE: Good evening. And thank you to
21 Chair Bailey and thank you, Chair Kavanagh, for the
22 opportunity to testify on this very important
23 subject of property insurance premiums and the
24 impact, the adverse impact that the increases have
25 been having on New York's homeowners in particular.
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1 My name is Kevin Wolfe. I'm with the Center
2 for New York City Neighborhoods and we are one of
3 the largest homeowner service non-profits in
4 New York City. We promote and protect affordable
5 homeownership, particularly for middle and working
6 class families in this state. Since 2008, we have
7 co-anchored the Homeowner Protection Program, which
8 I know both of you have supported and have been huge
9 champions of. That's assisted over 380,000 percent
10 avoid foreclosure and it's preserved $10 billion in
11 equity and wealth in the State of New York.
12 percent across the state are facing steep
13 increases in insurance premiums. Not only that,
14 they're facing shrinking coverage options and
15 cancellations, which may cause them to lose coverage
16 all together. A growing number of insurers are
17 leaving high risk areas of the state and are raising
18 premiums. And these increases are having a direct
19 impact on the stability of housing in this state.
20 Analysis from the Americans for Financial Reform
21 found that for every $100-dollar increase in an
22 insurance premium, the homeowner becomes 5 percent
23 more likely to experience mortgage delinquency.
24 When families are stretched thin, rising
25 insurance premiums can be the tipping point into a
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1 crisis. In addition, when controlling for property
2 characteristics, and geographic hazards, homeowners
3 with sub-prime credit pay roughly 30 percent more
4 for homeowners insurance than those with super-prime
5 credit. This disparity compounds the financial
6 strain for families with the least ability to pay
7 the increased expenditures.
8 Through the homeowner protection network, we
9 are seeing more homeowners push towards foreclosure
10 because they cannot absorb the increase in insurance
11 cost.
12 I want to just move on briefly to the
13 climate-driven disasters, which are now a major
14 driver of mortgage distress. Flooding in both
15 coastal and inland is the leading driver of
16 climate foreclosure risk. And we saw this
17 firsthand in "Hurricane Sandy" and "Ida" and
18 "Tropical Storm Henry" and when many of the homes
19 outside the FEMA flood zone suffered severe damage,
20 and they did not have the adequate insurance
21 coverage.
22 We see that about 7 percent of homeowners in
23 this state do not carry insurance at all. And
24 roughly a third of those live in majority black zip
25 codes in the state. So what we are seeing is that
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1 some of the most vulnerable families are exposed to
2 climate disasters and it deepens the racial
3 disparities in homeowner stability that are present
4 already.
5 Outdated FEMA maps, which is obviously a
6 federal issue, they have intensified the problems
7 and many of the areas that are currently labeled as
8 low risk would qualify as high risk due to an
9 increase in sea level rise, as well as an increase
10 in intense rainfall. Obviously, we would like to
11 see the federal government modernize those maps.
12 To fill the gaps from the federal government
13 and lack of action, we have piloted what is called
14 the Flood Recovery Fund, which is the first in the
15 nation model that uses a parametric insurance policy
16 to deliver fast and unrestricted cash grants to low
17 to moderate homeowners after severe rainfall and
18 flooding. This model eliminates the adjustor
19 process which can be slow and allows families to
20 make repairs immediately, strengthening financial
21 resilience and climate resilience as well as
22 reducing foreclosure risks. It also demonstrates
23 how there can be an innovative public and private
24 partnership that can close the affordability gaps in
25 climate vulnerable communities.
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1 I did want to also mention that we applaud
2 the work of the legislature of the Senate and
3 Governor Hochul and the $50 million -- providing
4 $50 million for the climate resilient retrofit
5 program which supports low to moderate income
6 homeowners with climate-related repairs. And
7 through our partnership with HCR, we are helping
8 homeowners strengthen their properties from future
9 disasters.
10 To craft effective policy from our
11 standpoint, one of the most important things we feel
12 we need is clear and transparent statewide data
13 specific to one to four-family homeowners. And I
14 just have one more line and I will be done. So
15 specific to one to four-family homeowners. We
16 commend HCR for collecting the data for multifamily
17 buildings and we encourage expanding this approach
18 to smaller homeowners.
19 I would also like to mention that we support
20 the Insurer Communities Act and thank Senator
21 Skoufis -- I know he had to run -- for sponsoring
22 that legislation.
23 So those are those items. The last thing
24 that I would like to mention is that we are at a
25 critical moment. We are seeing rising premiums. We
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1 are seeing climate become even greater, a greater
2 risk. And we are seeing hundreds of thousands of --
3 tens of thousands of homeowners destabilize due to
4 this. So we would like to see both the legislature
5 and the governor prioritize transparency and data as
6 well as strengthen investments in resiliency, in
7 order to ensure that homeowners in this state are
8 able to weather the rising cost and preserve their
9 homeownership.
10 So I thank you for the opportunity to testify
11 and welcome your questions.
12 SENATOR KAVANAGH: Thank you.
13 SENATOR BAILEY: I want to thank you all for
14 your testimony and I want to start where you left
15 off, Mr. Wolfe. My district are those majority
16 black homeowners in the northeast Bronx and the City
17 of Mount Vernon who come to the office and I will
18 redact the name but they willingly know that they
19 don't have the requisite coverage. But they're
20 afraid of losing that generational wealth because
21 it's the only chance that they have of being able to
22 pass something down to their children. So they take
23 that risk. And these are things that we should be
24 trying to figure out.
25 I'm very much open to these solutions. I
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1 have a question for you and everybody on the panel.
2 Excuse me.
3 Based upon the rise, the increase in
4 insurance, do you believe that homeownership has
5 been disincentivized? Are New Yorkers more willing
6 to get rid of that asset and go do the reverse
7 migration back to North Carolina as opposed to
8 keeping that asset in their family? Are you seeing
9 that happen in your respective areas?
10 KEVIN WOLFE: I can say that it is a major
11 disincentive. There has been an increase of cost of
12 living generally, so insurance and property taxes.
13 One of the things that we see about insurance is
14 that because it's lender driven usually, the lenders
15 are requiring the homeowners to have some form of
16 property insurance. Those who have paid off their
17 homes, those who have that generational wealth that
18 has been in the family, it's an expense that they
19 can drop. No one is requiring it. And so it's less
20 of a displacement pressure but then at the same
21 time, what we are seeing is that for those
22 homeowners, including in the Bronx, who thought,
23 hey, we're not at risk, you know, from things like
24 flooding, when that catastrophe does strike, they're
25 very vulnerable. They don't have access to capital
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1 to make those repairs and they don't have that
2 insurance coverage.
3 And so that is one of those drivers into
4 foreclosure because now they're in a situation where
5 the home is dilapidated, maybe they're not able to
6 live in it and then that may drive them, displace
7 them from the state all together.
8 SENATOR BAILEY: Mr. Shannon.
9 MONROE SHANNON: Insurance is definitely
10 affecting affordable housing, not just from a renter
11 perspective, but from homeownership as well.
12 Entering the market, margins are extremely
13 tight in terms of affordability, but we have an
14 aging community, an aging housing -- so two pieces.
15 You got to maintain your home. You know, and that's
16 part of insurance coverage and the cost of that.
17 But then the cost of increased insurance coverage.
18 So that idea of moving to another market, while
19 maybe the housing is newer, and requires less
20 maintenance and investment. Insurance costs are
21 cheaper because of various factors.
22 So it makes it less attractive to pass that
23 property on, especially if maintenance has been an
24 issue if insuring that property is an issue. And we
25 won't get into the whole conversation about having
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1 the conversation about the property and transferring
2 that generational wealth. So that's another piece.
3 But the insurance cost and restrictions makes it
4 less attractive.
5 SENATOR BAILEY: Did you have something on
6 that point, Ms. Rothman?
7 MARY ANN ROTHMAN: A very important point.
8 There is a full gamut of economic ability within
9 most co-ops because some people who bought years ago
10 are now seniors on fixed incomes and every time
11 there is more money that has to be sent, every time
12 the board has to raise the maintenance, they have to
13 worry about those people who may not any longer be
14 able to afford to live in the co-op that has been
15 their home since forever or since a good long time.
16 So we are tremendously concerned about the
17 new families coming in who think that they're going
18 to be fine, but compliance costs get them. And then
19 most particularly, the long-term residents.
20 MONROE SHANNON: I just want to add. Dealing
21 with a client and where we are with rainfall and
22 changing flood maps, that the need for flood
23 insurance, even in areas that are not coastal, that
24 may not show up on our current flood maps as high to
25 moderate risk, the reality is that risk is
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1 everywhere. We saw, back on October 30, you know,
2 Flat Bush, Fulton Avenue and areas in Queens
3 suffered a tremendous loss due to flood. People can
4 no longer use historical information to make
5 decisions.
6 We have to use information that we, as
7 persons in the industry, can educate. Education has
8 been a big conversation, not only about
9 weather-related coverage, but also understanding
10 your coverage limits and understanding the pages
11 beyond your declarations page. What is on those
12 other 17 pages? What is excluded? What isn't
13 excluded? The importance of shopping around.
14 And I won't take up any more time, but the
15 market has changed. People, for 30 years, never
16 really concerned themselves with their insurance.
17 They did business with the same person. They never
18 filed a claim. They thought they were fine. The
19 only reason why they took a look at that policy is
20 because last year they saw it go up by $100. This
21 year it went up by $1,000 and it's like, what is
22 going on. I didn't file a claim. Nothing has
23 changed. That's where the inquiry about insurance
24 and the instability and the marketplace comes about.
25 SENATOR BAILEY: You really dovetailed nicely
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1 into my next question which was going to be about
2 policy limits. And do your organizations counsel
3 people on whether their policy limits are
4 appropriate?
5 MONROE SHANNON: Yes. It's a huge piece. I
6 won't take up any more time. But people use price
7 as a decision making -- as a part of their decision
8 making.
9 And that is challenging because it usually
10 leads to being underinsured and not properly
11 covered. It could also be that you are over insured
12 and your dwelling coverage, which drives your other
13 coverage limits, drives the cost of your premium
14 being higher than it needs to be and your insurance
15 is excessive. So also dealing with what is included
16 and what is excluded from your coverage. So
17 shopping around, and not just focusing on price, but
18 all of those components: Exclusions, inclusions,
19 dwelling coverage, and the whole gamut.
20 SENATOR BAILEY: That's very helpful. So I
21 know that there is 30 days to cancel the policy in
22 New York by state law. But I think you as well as
23 Ms. Enright mentioned something happening where
24 the cancellation of policies and people that need to
25 be able to make the requisite repairs before a
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1 policy is not renewed. How much time, in your
2 collective expertise -- anybody can answer this --
3 is a homeowner given to cure a defect that could
4 potentially result in a non-renewal? How often --
5 does it vary? Is it context specific?
6 MONROE SHANNON: I just want to say it's not
7 just people who have long-term policies. I've seen
8 people that get a new policy, and because the
9 property is inspected, which is -- happens more --
10 it happens more now because insurance companies
11 don't want to take on existing risk. So even if you
12 have successfully gotten a new policy, I have seen
13 that cancellation notices come 30 days or so after
14 you have received a new policy. So it's a challenge
15 for existing policyholders and it's also
16 policyholders that are newly acquiring policies
17 because of the restrictions on the risk that
18 insurance companies are willing to take on.
19 Roofs, handrails, cracks in sidewalks, so on
20 and so forth, which is real. But it affects those
21 margins.
22 SARA ENRIGHT: Thank you, and obviously this
23 is -- it varies state by state. We've seen some
24 states have as low as 10 days requirement for
25 insurers to inform their policyholders that they're
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1 canceling, up to I think California requires 75
2 days. We estimate about 60 days would be an
3 appropriate amount of time for people to be able to
4 contest, and to also review and request information
5 from their insurers about why they have been dropped
6 and have the opportunity to have that dialogue and
7 remediate if possible.
8 SENATOR BAILEY: Along with the information
9 that you provided about the consumer Bill of Rights
10 and how we can have a conversation about how do we
11 figure out to -- figure out how we can have a
12 constructive conversation about that being in a
13 legislative form where that can make a difference.
14 Last thing I'll say is this: I not just
15 represent Wakefield and Mount Vernon, I live in
16 Wakefield. And I have seen my neighbors leave
17 because they can no longer afford the water bill,
18 the possible tax liens and the insurance there. My
19 overarching concern is not necessarily just with the
20 insurance companies. It's about what we're doing to
21 stop people from remaining in their homes and it is
22 about the person inside the home as opposed to the
23 societal impact -- and the societal impact.
24 So I just want to thank you all for helping
25 homeowners who often feel, at the margins they feel
450
1 ignored and they feel like they're not valued. And
2 I want to thank you for helping them out.
3 Senator Kavanagh.
4 SENATOR KAVANAGH: Thank you. I think I will
5 be relatively brief given the late hour here. But a
6 couple of particular questions. First, Kevin Wolfe,
7 you described this flood insurance product
8 parametric insurance policy, which sounded too good
9 to be true, right? The flood happens and people get
10 paid and everybody is, you know, happy and adjustors
11 don't have to step in. Can you just describe --
12 that was -- I think it was done in part in
13 cooperation with the City of New York, the mayor's
14 office. And was there -- did you -- you created a
15 product in collaboration with a private insurer.
16 How did that work?
17 KEVIN WOLFE: We got grant funding to do it.
18 So, we created the product, and essentially the
19 insurance is against an unforeseen event happening.
20 So if there is a flood, if there is a hurricane,
21 then the way that it worked, is the sponsor would
22 give us a payment when that happened. And it could
23 be up to a million dollars or as low as $50,000.
24 And then what we would do is that the homeowners
25 that were in that coverage zone, we would give them
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1 bonds in order to -- whatever the damage was, in
2 order for them to repair that damage to their homes.
3 So it was really a pilot project and designed to say
4 here is a model for how to provide insurance for
5 areas that may be at risk, but then that risk is a
6 little bit unknown, given, you know, we don't have a
7 lot of the data that we need from FEMA and so on and
8 so forth.
9 SENATOR KAVANAGH: And that, so far, I guess
10 my understanding is that maybe there haven't been
11 catastrophic events in that area yet; is that right?
12 KEVIN WOLFE: No. Yeah, in the areas that we
13 are covering, no, we have not had an opportunity to
14 receive a grant and then distribute it out to the
15 homeowners.
16 SENATOR KAVANAGH: I see. But it's an
17 interesting -- certainly interesting model.
18 Ms. Enright, so your Bill of Rights, which
19 we have had a little opportunity to talk about, but
20 my understanding is that it is sort of -- it's your
21 assessment of the rights people ought to have. It's
22 not necessarily proposed as a sort of regulatory
23 package that could be adopted per se, but to the
24 extent that we are looking at either encouraging our
25 state regulators to require sort of a stronger set
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1 of rights for property owners or, perhaps,
2 statutorily doing so, would you be available to sort
3 of bring your organization's experience to bear on
4 that and make recommendations about how we might
5 structure some of those obligations?
6 SARA ENRIGHT: I would be very happy to work
7 with you all on this.
8 SENATOR KAVANAGH: We are interested in
9 having those conversations.
10 I think, even though I have great interest in
11 what all of you have said today, I think I will wrap
12 it up there just because again we have one more
13 panel that is very patiently waiting. Again, thank
14 you. We will be in touch with each of you and
15 really do appreciate your patience and all the work
16 you do all year round as well as your testimony
17 today.
18 Our final panel of the evening, we have Lisa
19 Lounsbury, Bradford Lachut, and Joseph Culver.
20 Thank you. I appreciate that.
21 SENATOR BAILEY: I will take Senator Skoufis'
22 final swearing in role for the evening.
23 If you could please raise your right hand.
24 Do you solemnly swear that you will tell the truth,
25 the whole truth and nothing but the truth?
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1 (Witnesses sworn.)
2 SENATOR BAILEY: Thank you very much.
3 You may begin in the order that you wish to
4 begin in. Maybe we can start with Travis.
5 TRAVIS WATTIE: Fantastic. Much to your
6 disappointment, I am not Lisa Lounsbury, president
7 and CEO of Big I New York. She was unable to be
8 here today and sends her regards. I'm
9 Travis Wattie, AVP of Government Relations at Big I
10 New York. Big I New York represents independent
11 insurance agents and brokers across the state.
12 So rather than read the oral testimony, let
13 me just share some top line thoughts this evening.
14 So, for starters, I don't have some of the hard data
15 that we have been talking about with respect to
16 fraud and litigation challenges, et cetera. There
17 is a lot of that out there that you all have seen,
18 that we've seen. But what I do have is the
19 perspective and feedback that I get from our
20 1500-member agencies across New York State, agents
21 and brokers and the 13,000 plus employees.
22 And when I talk to them, what I hear from
23 them on a daily basis is about the challenges in the
24 insurance marketplace. As they sit down with their
25 customers, with your constituents, dare I say
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1 literally 24/7, it is a demanding job that really
2 never ends, especially when there are claims and
3 there are opportunities and need for those agents to
4 be there to support their customers. What I hear
5 from them is that it's tough out there, as you know.
6 It's challenging to find coverage at times, and
7 then, of course, the affordability challenges are
8 something that everyone in this room and all
9 New Yorkers, I think, are feeling at the moment.
10 What I heard today is that I think there is
11 strong agreement around many of the elements that
12 are putting upward pressure on rates. Climate,
13 labor, materials, supply chain challenges. Those
14 are affecting New York State. I would argue that
15 those same challenges are felt in probably every
16 single state at the moment. So carriers are
17 confronting that across their lines of business and
18 then the states that they operate in. What I think
19 is different though and what I hear specifically
20 from our New York members -- and I do have the
21 privilege of serving other states, and so I kind of
22 get that northeast perspective -- the anecdotal
23 examples of fraud and settling cases that shouldn't
24 be settled, where they see that there's something
25 not quite right with a claim, something not quite
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1 right with perhaps a labor law claim where, gee,
2 that person shouldn't have even been on that work
3 site. It was their day off. What happened there?
4 And so these are the anecdotal evidence that I'm
5 getting from my members and I think that's being
6 confirmed in many of the reports that are out there
7 and news stories.
8 And so the other thing that I see, that I
9 hear from my members is that when they hear from
10 their carrier partners, that there is brand new
11 fancy products in 49 states and not in New York.
12 And I'll talk in a moment about some of the
13 challenges at DFS. They also come to me and say,
14 look what is happening in this state where they had
15 some major tort reform, where they had some
16 challenges in their legal system. They addressed
17 it. And now they're actually talking about rate
18 reductions in some states. Why not New York is what
19 they ask me.
20 We are seeing carriers that are excluding
21 New York in coverage for their customers in
22 surrounding states. Why is that? And so let me
23 give just the top line points.
24 Labor law. We heard a lot about it today.
25 It's 140-year-old law that severely restricts
456
1 someone's ability to defend themselves. Imagine
2 restricting an ability to defend yourself in any
3 other context and I think there would be outrage.
4 TPLF, Third Party Litigation Funding. I'm
5 glad you are sitting because I'm going to agree with
6 our friend at the Trial Lawyers Association and I
7 would say that yes, sunlight is the best option
8 there. It's the disinfectant we need on Third Party
9 Litigation Funding. Thank you to the state
10 legislature for passing important guard rails on
11 TPLF. We missed a little piece there, which is the
12 disclosure, during litigation during proceedings in
13 discovery. We can still change that. That bill is
14 not yet been sent to the governor. So that is
15 something -- that's the sunlight we need on Third
16 Party Litigation Funding to really put the cherry on
17 top of that important bill.
18 Fraud. Regardless of the frequency, whether
19 it's one or 10,000 times someone is committing
20 fraud, it's wrong. It needs to stop, and we should
21 give people the tools and resources to stop.
22 And finally Department of Financial Services,
23 we know there are challenges there. We have been
24 supportive, Senator Bailey, of the DFS consultant
25 bill. Thank you for carrying that. And we want to
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1 continue to work with them to get them the resources
2 and support they need to move rate filings through
3 and put new products through and help right the
4 course.
5 BRADFORD LACHUT: Yeah, so I will do the
6 same. I won't read my entire testimony because
7 you've already seen it and you've heard a lot of it.
8 I really appreciate you guys putting us at the end.
9 It's like a concert. Right, the headliner at
10 the end, like the headliners. Don't tell DFS that.
11 SENATOR KAVANAGH: You're the rebuttal.
12 BRADFORD LACHUT: I would ditto literally
13 everything that Travis said I think is absolutely
14 right. But I do want to mention what a lot of other
15 groups have mentioned and that is risk mitigation.
16 Ultimately people want to be protected not
17 just compensated. Even the best insurance policies
18 cannot replace the loss of a home or belongings or
19 that sense of safety that you have. So everything
20 that we are talking about is great but it's not
21 going to keep people safer. So anything that we can
22 do to do that I think is beneficial.
23 You know, too many New Yorkers right now,
24 especially in coastal urban communities, as you've
25 heard, are facing skyrocketing premiums and
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1 shrinking coverage.
2 So, you know, if we could concentrate on risk
3 reduction, one real world example, many insurers are
4 reluctant to write or renew homes with roofs over 20
5 years. We hear that all the time. I'm sure Travis
6 can relate. All the time from members. All the
7 time.
8 One response would be to mandate insurance
9 carriers to cover those roofs but that's going to
10 have an impact, right? Increased premiums, perhaps
11 reduction in participation. If we incentivize a
12 program to make safer homes, make safer roofs, that
13 not only leaves people safer but reduces rates as
14 well.
15 We already have programs like that in the
16 state. So this is not a matter of creating
17 something out of old cloth. It's a matter of taking
18 something we already have and amending it to add new
19 protections.
20 With that, I'll end. You have heard a lot of
21 everything I've said so in the interest of time,
22 thank you very much.
23 JOSEPH CULVER: My name is Joe Culver, I'm
24 the Executive Director and Chief Operating Officer
25 of the New York Mortgage Bankers Association.
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1 Appreciate the opportunity to testify today.
2 I'm also a 45-year veteran of the residential
3 mortgage banking industry here in New York. I have
4 held management and senior management positions with
5 banks, in addition to the role of leading the
6 New York Mortgage Bankers since 2024.
7 The MBA is a 108 corporate member
8 association. We represent both lenders and
9 non-lenders across all facets of the industry,
10 including title insurance, private mortgage
11 insurance and then today's topics, which are
12 property and casualty insurance. The market
13 dynamics in New York and across the U.S. in the past
14 3 years, as you all know, we have seen a once in a
15 40-year dynamic. 1981, interest rates were
16 18 percent. 2021, they hit 2.75 percent on a
17 30-year fixed rate mortgage. And then have popped
18 back up into the 6 percent range.
19 Quite an interesting time for anyone that was
20 a homeowner during that time period as well. The
21 cost of homeownership has also been impacted by the
22 continuous influences impacting affordability and
23 that includes property and casualty insurance.
24 Borrowers applying for residential mortgage quickly
25 learn the term PITI, right -- principal, interest,
460
1 taxes and insurances -- which is one of the key
2 components that we make sure there is proper
3 coverage for both the lender and the borrower as the
4 homeowner. New York, here as you know is very
5 specific with the market dynamics, mostly one to
6 four family owner occupied and rental properties in
7 Upstate New York, and then the dynamics that you
8 have Downstate here with a large number of co-ops,
9 condos and apartments. They all require various
10 insurance coverage and risk. Private insurers write
11 most of the homeowners business, as you know. And
12 there has been a lot of talk today about FAIR Plan
13 insurance and also properties that individuals,
14 unfortunately, cannot find insurance for.
15 The drivers of the affordability, again,
16 which you have heard a lot today, climate and
17 catastrophic risk. You have heard about the
18 reinsurance mortgage volatility that is happening
19 not only here in New York, but the United States and
20 around the world. Inflation and replacement costs,
21 construction labor also a big piece that I don't
22 think anybody has really felt yet but we know we are
23 going to is the tariff component that comes into
24 play obviously for the cost of construction, right?
25 We are going to all learn more about that over the
461
1 next several years.
2 So how do we balance the risk pricing with
3 affordability? The insurers strive for access for
4 broad availability, for affordability, for risk
5 sensitivity, for market stability and then equity
6 and transparency. And protect consumers from some
7 of these unfair practices and the educational
8 components that I think you have heard a lot about
9 today, that should be happening much more than they
10 do in the industry.
11 Three quick things. We have a short, medium
12 and long-term recommendation that we have put out
13 there for the short-term, establish time-limited
14 state subsidies or vouchers for low and moderate
15 income homeowners in the areas have a means testing
16 and a phase down of that over a potentially three to
17 five-year period.
18 And the medium term, state-backed reinsurance
19 or partial risk sharing pool. And I know, Senator,
20 you were asking some questions about it. I have
21 noted that here as well.
22 The recently authorized, I think it was
23 either a year or 2-years ago for the parametric
24 options in insurance law. We think that could be
25 very important. Extend and establish that public
462
1 reinsurance facility or parametric reinsurance
2 backstop here in New York. Formalize building level
3 mitigation, crediting whether it's elevation, wind
4 proofing, retrofitting, create low cost grants for
5 resilient upgrades, targeting those vulnerable
6 households in your market areas. This could be
7 achieved, we think, through coordination with the
8 New York State DFS, with housing agencies that have
9 spoken here today, utility companies as well can
10 integrate mitigation metrics into some of these
11 premium calculations.
12 And then longer term, raise the minimum
13 building standards in some of the high risk areas
14 near the waterfronts, right? Require resilience
15 measures for new construction, align some of the
16 mortgage underwriting also with the insurance
17 availability that is out there.
18 And then access for the publicly available
19 high resolution hazard maps. And again to the
20 education, require mandatory disclosure at sale to
21 ensure the borrowers truly understand those
22 additional eight pages of what is included,
23 excluded, all those different things that impact it.
24 So just to wrap it up quickly. Many of
25 today's market pressures originate from these risks
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1 that you have heard about. Climate, cost
2 construction, tariffs, global markets with
3 reinsurance. So the key to sustain affordability
4 requires reducing any physical risk, right? Land
5 mitigation, diversifying insurance and large
6 targeted financial help for the vulnerable
7 households. And I will wrap up with that. Thank
8 you, gentlemen.
9 SENATOR BAILEY: So I just want to thank you
10 for your patience, first and foremost. No, no, you
11 have been here for quite a long time, and you have
12 been absorbing the rest of the testimony and I do --
13 I know this is a long arduous day. I just want to
14 really legitimately thank you for sticking around
15 and listening.
16 So with that being said, I don't have a lot
17 of questions, but because you are at the end, you
18 have heard a lot of conversation about the insurance
19 industry and about things from a number of different
20 folks. I just want to give you the opportunity, if
21 you would like to respond to anything -- and I don't
22 mean this like a rap battle or anything like that.
23 I don't want this to go back and forth. Though if
24 you want to rap, it's 7:00 and the people that are
25 watching, you know, my constituents are watching
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1 channel 116 right now. This is like, you know, they
2 are watching right now.
3 But in all seriousness, if there is a
4 rebuttal that you would like to have, just something
5 that has been articulated throughout the day, I
6 would just like to give you the opportunity to do so
7 because you are the members of the industry and you
8 have heard a lot. I just want to make sure that we
9 have equal time and equal conversation. So if there
10 is nothing, then great, but if there is something, I
11 would like to hear it.
12 TRAVIS WATTIE: I will share some -- not a
13 rebuttal but a lot of conversation about insurance
14 discounts today. Good conversation. It would be
15 interesting to see what the department has on file
16 in terms of what discounts are out there, what
17 discounts are allowable. I would say a few things.
18 Insurance agents and brokers are really in that
19 position -- and it was mentioned by a couple of
20 panelists about having a strong working relationship
21 with your broker. Very important, as we know, when
22 you are protecting against loss in this environment
23 and the amount of money we are talking about, work
24 with your broker. Understand the products. I was
25 maybe a little confused or concerned by some of the
465
1 comments around just, well, we get the number and
2 that's the premium and that's that. I'm not -- I
3 don't think that's how this works. You have a
4 relationship with your insurance broker. They can
5 work with you on what are the available discounts?
6 I would say that not having a claim is a pretty good
7 incentive, without discounts. You really want to
8 avoid having claims. We are risk managers. We are
9 there to help prevent loss. But insurance is not a
10 home warranty program.
11 Insurance is not a home maintenance program.
12 It's not there to help you do things to -- that are
13 not necessarily covered perils. Homeowners,
14 building owners, should be incentivized to just keep
15 their properties safe from loss generally. And if
16 there are discounts that carriers see are
17 significant in terms of reducing or preventing loss,
18 then that's fantastic, and they should be working
19 with the department to get those approved; working
20 with their agents and brokers to make sure that the
21 customers understand what those options look like.
22 BRADFORD LACHUT: I guess I'll just, one
23 clarification, mention that New York law already
24 provides 45 to 60 days for cancellation, not
25 30 days. Just to give you a heads up on that.
466
1 JOSEPH CULVER: Nothing additional for me but
2 again, thank you for giving us this opportunity. As
3 you said, we have been here a while. But our
4 takeaways obviously are what we learn from the
5 conversations, from the questions you asked of some
6 of the different panelists and what we can take and
7 share. So appreciate the opportunity very, very
8 much and for you guys staying as late as you do.
9 SENATOR BAILEY: This is the job and we are
10 happy to do it. I'll certainly pontificate a little
11 bit further in my closing remarks but I do have, I
12 guess, just one last question from my perspective.
13 Is there something that the legislature can
14 do -- I've asked a number of different folks here --
15 that we can increase the overall information and
16 knowledge that people have about insurance and what
17 it does. I believe -- and Travis, I think you have
18 heard me say this -- I think the two most
19 fundamentally misunderstood things in America today
20 are insurance and taxation. Everybody has to pay
21 both of them. What can we do to make sure people
22 understand insurance -- even if they don't agree
23 with the policy, even if they don't agree with the
24 rate, what can we do to make New Yorkers understand
25 insurance law better?
467
1 BRADFORD LACHUT: Shameless promotion. Work
2 with an agent or broker. Honestly, that's really
3 helpful. A lot of people will go direct and they're
4 only going to get the information that's in front of
5 them on the computer screen. They're going to look
6 at the limits and somebody earlier talked about
7 price. Price sensitive. All right. That's the
8 lowest price. That's what I'm going to get. But
9 you don't realize what is not in that policy, right?
10 You are getting what you pay for.
11 So working with an agent or broker doesn't
12 cost a person anything and they're going to get all
13 of that information that they don't really care
14 about because nobody cares about insurance unless
15 they're paying their premium, right? That's what I
16 would say, totally self-interested but I think it
17 would be hugely helpful.
18 SENATOR BAILEY: So if you are Nike, as a
19 reversed check, you should be mindful of whether
20 it's really a pair of Nikes or not. I'm guessing
21 the conversation of you get what you pay for, as my
22 grandparents would tell me, resonates very true.
23 Rings true in the insurance business.
24 TRAVIS WATTIE: Senator, I would add, the
25 State of New York is now -- and I don't know what
468
1 the word is exactly but I do believe we are finally
2 moving along in terms of requiring elements of
3 financial literacy in our schools at various stages
4 throughout middle school and high school. That's
5 incredibly important, but it's incredibly important.
6 And let's add in -- let's make sure that we are
7 talking about insurance, particularly the basics,
8 auto insurance, renters, homeowners, life insurance.
9 Let's get that baked into the curriculum so that
10 students are hearing about it from an early age.
11 SENATOR BAILEY: Thank you very much.
12 I appreciate your time. Senator Kavanagh.
13 SENATOR KAVANAGH: Just a couple of
14 questions. And again, thank you again for being
15 here still.
16 We are also going to ask anyone else who is
17 here -- we don't know why you're still here but we
18 are going to give an open mic opportunity to testify
19 if you are still in the room in a minute but thank
20 you all for being here.
21 I just want to clarify this question of
22 discounts. I'm just going to lay out a perspective
23 and get your reactions to it. So I don't know if
24 you were here in the room when I mentioned earlier,
25 but there was an insurance industry association
469
1 executive who was, you know, meeting with us to be
2 helpful and educate us as we were preparing for
3 this.
4 And he works in a state that has, you know,
5 discounts for roofs. And he said it works great,
6 you know, I had my roof repaired and then I called
7 them up and asked is there a discount and was told
8 indeed there is a discount and he got a discount.
9 And that struck me as, first of all, it's nice that
10 that discount is available and he got it. But it
11 strikes me as odd that as somebody that's actually
12 in the insurance industry has to sort of wonder
13 whether this thing that they're doing to diminish
14 the vulnerability of their home is going provide
15 them with a discount.
16 And it seems to me that those of us in
17 government that are going to spend a great deal of
18 public money in the near future on figuring out
19 what -- and I chair the Committee on Housing,
20 Construction and Community Development, which is
21 residential -- it's about housing. But it's also
22 about how everything is constructed and codes and
23 all of that. But we are already spending a lot of
24 money subsidizing resiliency improvements at the
25 community level. We are spending at least
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1 $5 billion already authorized just in my district on
2 coastal resiliency. And we are also going to spend
3 a lot of money providing subsidies for people to
4 improve conditions of their buildings. So in order
5 to do that well, we are going to have to make
6 choices about what is cost effective. What is
7 likely if we invest in it, will it have a payoff in
8 terms of reduced risk.
9 It seems to me DFS has to do the same thing
10 with respect to any discount that is proposed by an
11 insurer. And it seems, of course, insurers have to
12 do that as well. If they're going to voluntarily
13 give a discount, they only want to do it if it is
14 likely to reduce payouts in the long run.
15 It seems to me that that analysis ought to be
16 something that we are kind of doing collectively,
17 kind of doing jointly. If an insurance company, if
18 we are going to try to get them to do a discount for
19 something and they're going to tell us that it's not
20 actuarially sound, it seems like we should have the
21 debate whether it's actuarially sound with DFS, with
22 the regulators, with the insurers and with those of
23 us who are going to have to subsidize some of this
24 stuff, especially with affordable housing. And then
25 make choices, and they're policy choices about how
471
1 resources are going in.
2 All of that suggests to me that right now
3 there are two kinds of discounts that you get more
4 or less automatically in New York, from testimony
5 from today. It seems to me that there are other,
6 you know, fortified roofs. We were told there were
7 only five of them anywhere in the state at the
8 moment. That seems like we are behind the curve on
9 that, given that convective storms are a thing here.
10 Wouldn't it be logical to -- and I think the way Joe
11 put it, formalize building level mitigation
12 crediting in rate filings. But formalizing in rate
13 filings and then formalize it for customers to say
14 if you do x, you will get a discount. And you know,
15 the pricing of the discount may vary depending on
16 geography or other things.
17 But doesn't creating a much broader range of
18 discounts, figure out which ones make sense and then
19 effectively require them through regulation or
20 statute? Doesn't that make some sense?
21 TRAVIS WATTIE: Let's remember that we talk a
22 lot about competition in the insurance marketplace.
23 And if you -- if a carrier decides that they found
24 that doing x will reduce claims severity, and they
25 decide that they're going to buy into that, and they
472
1 want to offer a certain discount and get that
2 approved in New York State, that may become a
3 competitive advantage for that carrier and for those
4 brokers and agents as they're talking with the
5 customer and they say, hey, you know, we have these
6 three options. But you know, we can do x with this
7 carrier and get a discount. So I think -- I'm
8 certain carriers will bristle at any sort of
9 mandatory discounts.
10 I think we want to keep an open mind around
11 freeing up that process with carriers and the
12 department moving things along a little faster there
13 and let the free market work.
14 SENATOR KAVANAGH: I agree about bristle but
15 why as a public policymaker should I be hoping that
16 the free market stumbles on to the right mix of
17 incentives to prevent the destruction of people's
18 homes, especially if the public is going to end up
19 subsidizing the cost? Shouldn't we be -- first of
20 all, New York is not going to operate in a vacuum.
21 There are going to be best practices that are
22 developing. We mentioned Florida has mandatory
23 discounts for wind and Colorado for some things.
24 Shouldn't we be trying to figure out what the best
25 practices are and then -- again, we can have a
473
1 debate about what the appropriate pricing of it is.
2 And maybe we could have a system where insurers can
3 vary in terms of how much of a discount they get
4 based on their own actuary analysis.
5 But shouldn't we be trying to create a
6 structure where incentivizing the best practices and
7 incentivizing all property owners to minimize the
8 harm that we know is coming as extreme weather gets
9 worse?
10 BRADFORD LACHUT: I'll say, yes, I like what
11 you said at the beginning there. A lot of what you
12 said. But in terms of bringing everybody together
13 at the beginning and having that conversation,
14 right? Because I think that's really important. A
15 lot of times you have these mandates, right? But if
16 you have everybody together at the beginning talking
17 about, okay, this makes sense, this doesn't make
18 sense, that it makes it a little bit more palatable.
19 At least in my mind. So, yes, I think we absolutely
20 should bring everybody together to figure out what
21 makes sense for everybody across the state.
22 SENATOR KAVANAGH: So the way we do that,
23 since we are legislators, the way we do that is
24 propose legislation and then get lots of input. And
25 again, we also know DFS is looking at the question
474
1 of discounts in a sort of hopefully holistic way.
2 But again, I appreciate your perspective on that.
3 Do you think generally speaking, you know,
4 customers are aware of kind of what behaviors might
5 get them a discount and what might not?
6 BRADFORD LACHUT: I don't think as a
7 general -- it kind of goes back to what we talked
8 about earlier with insurance literacy. They're
9 relying on a professional, if they have one, for
10 that information.
11 SENATOR KAVANAGH: So maybe a greater need
12 for education, public education and agents, as I
13 heard.
14 BRADFORD LACHUT: Absolutely. And agents
15 play a huge role in making sure that they get that
16 information to their clients.
17 TRAVIS WATTIE: We are not alone in this --
18 whether it's insurance or whether it's in
19 New York State, educating the public on products,
20 services, opportunities. It is a challenge and I
21 hear in other states, too, you know, around
22 conversations like flood insurance. So it is not a
23 unique challenge, but it's certainly one that I
24 think from the agent/broker perspective -- and I
25 don't mean to speak for Brad -- but I think we are
475
1 both committed to educational opportunities for
2 consumers. It is extremely important.
3 SENATOR KAVANAGH: Just one more question,
4 Joseph. Just we've heard Jerome Powell being quoted
5 as entire segments of the country potentially not
6 being insurable, which means it will be difficult to
7 borrow -- how concerned are you about insurance
8 costs as a threat to the health of the mortgage
9 markets?
10 JOSEPH CULVER: Well, it's an extremely
11 important part, right, because not only lenders,
12 right, want the insurance in place. They're going
13 to force place the insurance if it's not there and
14 available if the consumer doesn't pay for it.
15 So, you know, it's a component of the
16 industry. It's a primary component, especially when
17 you put it in perspective, as we all know,
18 purchasing a home is the largest individual
19 investment an individual is going to make. So why?
20 Why would there be any discussion about not making
21 sure, whatever the sacrifice has to be that your
22 property is insured, knowing the climate change,
23 knowing all these different things that are
24 occurring, that certainly could have some effect on
25 your property. The days of, you know, it's not
476
1 going to happen to me, or I hope it doesn't --
2 that's part of the education piece that starts early
3 on and making sure young children and young adults
4 are aware, you know, whether you think you want this
5 or not, this is not a want. This is a need. And
6 there are certain needs in life that you have to
7 prepare for, right? Put down that cup of $8 coffee
8 and put that $8 over in another container to help
9 save up for the needs that you have in life. So it
10 goes back to that great comment about financial
11 literacy for sure, Brian.
12 SENATOR KAVANAGH: Okay. Again, I think with
13 great appreciation for both your patience and your,
14 you know, your testimony which we also have in
15 writing and I think I'll leave it there and also
16 because my colleague has promised to pontificate a
17 little bit and he is very good at that. So we will
18 adjourn this panel but thank you very much.
19 SENATOR BAILEY: Thank you. So as we come to
20 a close, I just want to thank everybody, everybody
21 that came to testify, your voices are important.
22 The greatest thing about democracy, I believe, is
23 the ability to dissent respectfully. The more that
24 we know that we don't know everything, the better we
25 are at knowing things. And I think today's hearing
477
1 was instructive of that. Everybody's perspective is
2 valuable, albeit different, but valuable.
3 And we take those things to heart percents we
4 go into a legislative session. And this was great
5 cross training for budget season. And you know, we
6 have been sitting here for a little bit. Now we are
7 ready for budget season. We are ready to sit in the
8 chairs and do the good work of the people that have
9 sent us to do. I just want to thank all of the
10 staff here today. Our legislative staff, central
11 staff, STS building staff. Thank you for keeping
12 the lights on literally and allowing us to be able
13 to do this work. We often get the credit, we get
14 the honorables, we get the titles, but you do a lot
15 of the work and we sincerely thank you for all that
16 you do to truly shape New York's policy.
17 I want to thank my predecessor Neil Breslin.
18 The Celtics are coming on shortly so he is probably
19 not watching, he's probably watching the Celtics.
20 But I want to thank Neil for guiding me and thank
21 you for your patience to the industry and everybody
22 around it. You know I am not Neil. I have not been
23 able to learn it just yet but I'm hopefully well on
24 my way to doing so.
25 And to everybody that testified today and to
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1 my colleagues in government, most importantly I
2 would say Senators Kavanagh and Skoufis, we have
3 been speaking about this hearing for quite sometime
4 and I'm glad we were able to do it. So I just want
5 to send good wishes and wish you a happy
6 Thanksgiving. Happy Hanukkah, Happy Festivus if you
7 observe, a Merry Christmas, a Happy Kwanza, a Happy
8 Boxing Day, for Caribbeans, Big up. Three Kings
9 Day, Happy New Year.
10 And if you can just do one thing for me, do
11 something nice for someone. We have spoken a lot
12 about costs. Do something nice for someone.
13 Doesn't cost you a dollar. Take care.
14 SENATOR KAVANAGH: I will follow that tough
15 act by just, first of all, echoing the thanks. I
16 want to thank Andrew Goldstein who just walked into
17 the room for facilitating this. And also I want to
18 note that we are only 2 minutes past the time we
19 scheduled. I want to thank -- I'm actually not
20 going to name the names of the many staffers that
21 have worked so closely on this, maybe take the
22 prerogative of saying thank you to Hally who has
23 been sitting behind us all day who is our housing
24 committee director, and Coco, my Deputy Chief of
25 Staff, and Emily Fuentes of Senator Skoufis' staff
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1 since he is not here, not to mention your
2 extraordinary work, and Emily Lang, Chief of Staff.
3 And again, the central staffers of multiple
4 committees and the finance committee who have been
5 working very hard to process an enormous amount of
6 information we have already gathered and will no
7 doubt be processing the testimony and the
8 information that was provided orally today. And
9 just to say this is, as my colleague Senator Skoufis
10 mentioned at the beginning of the day, this is
11 another step in a process that began in August and
12 will continue. We are going to be looking to craft,
13 you know, solutions to some of the problems that
14 have been addressed. And that will also involve, as
15 I just mentioned, lots of discussion with all of the
16 stakeholders about what works and what does not.
17 There are some pending pieces of legislation that
18 have been mentioned today. But, you know, all of
19 that is going to be an ongoing process and we do
20 hope ultimately to distill this into a report that
21 will reflect a consensus of these three committees
22 and hopefully allow us to move forward as a state.
23 Again, just thank you to everyone who has
24 participated in this today. All the witnesses, even
25 the ones that we had a little contentious back and
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1 forth on because that's part of the way we get to
2 understand the truth. And again, this conversation
3 is to be continued going forward.
4 But thank you all.
5 (Whereupon, the public hearing concluded,
6 and adjourned.)
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