Imagine if these Winter Blizzards Had Been Summer Hurricanes

I received a phone call this week from a former client whose entire family I used insure. About two years ago, the whole family left my business to go with State Farm for cheaper policies. Now, they’ve all received non-renewal notices because their homes are too close to the coast. I’m glad they came back to me, and that I could help them with a market. I don’t want to rub it in, but I’ve been in this business long enough to know that customers who leave me for a direct writer or another carrier that undercuts price for coverage are likely to come back after a sad claim experience, or when the carrier loses its appetite and drops them under New York’s 4 percent rule. My client’s experience has me thinking— It’s clear that this carrier, which is not writing new business on Long Island anymore, is dropping customers to alleviate its exposure to coastal liability. State Farm advertises that it is bigger than Allstate and GEICO combined, yet they’re non-renewing customers? Perhaps this is an omen that they know something about the next hurricane season.

I have a bad feeling about this season. As I write this article, I’m sitting in my office in Long Island, getting ready for our “umpteenth” snow storm, and I can’t help but wonder: What if these were not blizzards, but hurricanes? Early in January, Weather Services International (WSI), part of the Weather Channel Companies, predicted that 2011 will be an even busier hurricane season than last year, forecasting 17 named storms, nine hurricanes and five intense hurricanes of at least Category 3 intensity. It’s time now to remember how we missed a major storm by the skin of our teeth last summer.

I hate to harp on the subject of common triggers, but now is the time-before the hurricane season starts in June to address this issue. Last summer, Assemblyman Harvey Weisenberg. D-20. introduced amendments to a bill (A.4847-A) that would have added a directive to the New York State Insurance Department superintendent to establish reasonable, industrywide standards for hurricane windstorm deductible triggers. The bill passed the Assembly, but did not make it to the Governor’s desk last session. PIA continues its push for standardized triggers, and the association is working with Assemblyman Weisenberg and State Senator Kenneth LaValle, R-1, who reintroduced the bill this month. Homeowners, our clients, deserve certainty in the coverage provided by their insurance policies. We absolutely must address this issue before public distress and outcry happens, and it will happen if that big one hits our coast. At the same time, I think we are entering a crisis on coastal coverage. Despite the happy ending for my clients who were dropped by State Farm, I’m finding it’s harder and harder to place. Calling CMAP (New York’s Coastal Market Assistance Program) might help to alleviate the problem. C-MAP was established by the NYSID and is administered by New York Property Insurance Underwriting Association, with the purpose of assisting homeowners in New York’s coastal areas obtain insurance for their homes. It is intended to match willing insurers with homeowners whose coverage has been terminated through no fault of their own, or who need a new policy to protect a newly acquired home. CMAP’s importance is highlighted by my client’s experience with State Farm.

From my experience working with the CMAP panel, I understand that the NYSID feels there are plenty of carriers in the CMAP program, yet my experience says differently. When you write a CMAP policy, you find only a few carriers actually actively participating. Though many carriers say they write in CMAP, very few of them do, and that’s simply not fair to the few admitted companies carrying the load. I wonder if the state might consider credits to admitted carriers that write in the CMAP program so it would be to their advantage to write such policies.

CMAP is largely misunderstood, and agents who’ve never really needed it because their carriers have offered coverages may have a learning curve. As availability becomes tighter and more expensive, this market will be more viable and useful to members. It is in our interest to learn more and to encourage carriers to participate in the program.

Another issue PIA has brought to the department is that problems can be created when CMAP carriers choose not to offer full homeowners policies or provide the CMAP “wrap-around” coverage that would provide the best coverage when combined with a policy from NYPIUA. Often, they opt to offer the HO-4 wrap-around with CMAP, combining basic property insurance coverage through NYPIUA with an HO-4 wrap-around policy. As a result, some of the most common property claims fall through the cracks of these two policies. I know many fellow agents who are as uncomfortable as I am leaving our clients with coverage gaps, and PIA continues to bring this issue to the department. With PIA educating both agents and lawmakers about the benefits of CMAP, and working to alleviate the challenges of the program, perhaps we can find some relief to the coastal crisis we’re facing.