FOR IMMEDIATE RELEASE: February 3, 2006
Schumer: Allstate, Citing Bogus Concerns Of Hurricane Exposure Stops Writing Policies In Ny; Will Unfairly Raise Homeowner Premiums Across The State
In Effort to Get Feds to Pick up the Tab, Allstate Stops Writing New Policies “Because of Hurricane Threat;” Senator to Expose Scam
Senator Demands Allstate Continue Selling Homeowner Coverage without Raising Premiums
Today Senator Chuck Schumer slammed Allstate Insurance, the largest provider of homeowners insurance in New York for no longer selling new homeowner policies to New York City, Long Island and Westchester citing bogus hurricane risk, in an effort to boost their profits. Though there is no risk based hurricane prediction for the future, Allstate offering these homeowner policies on the first of the year and has no plans to offer them again soon. Today Schumer sent a letter to Allstate demanding that they reinstate writing new coverage without raising premiums. He also called on the General Accounting Office undertake a review and write an objective report on catastrophic hurricanes and insurance industry profits over time.
“Allstate is the poster child for terrible corporate citizenship. They won’t write new policies for fear of hurricanes when the odds of a severe hurricane hitting in New York City is one on every 500 years,” Schumer said. “They should be ashamed of themselves.”
On the first of this year, Allstate announced that they would not write new homeowner policies in New York City, Long Island and Westchester as a part of an overall “hurricane risk management strategy” that they implemented at the start of 2006. However the new policy allows them to write new policies for condominiums and coops in the very locations that they are not insuring homes. Its claims however of a hurricane risk are bogus. Recent statistics from the National Oceanic and Atmospheric Administration (NOAA) show that the odds of a category four or higher hurricane hitting New York City is once every five hundred years and on Montauk Long Island once every 130 years. Miami, by contrast is once every 15 years. The risk of a hurricane hitting Miami is 900% greater than on Eastern Long Island and 3300% greater than in NYC.
One of the reasons that may be behind this effort is the desire by insurance companies like Allstate to create a catastrophic fund that would indemnify them from costs of devastating events like Hurricane Katrina. A catastrophic fund would put the Federal government and in turn, taxpayers in charge of footing the bill for events like enormous hurricanes. The theory behind dropping markets in the way that Allstate did, is that when they do exit, residents get angry and lobby for the creation of catastrophic fund. This is all part of the effort by these insurance companies to make as much money off of premiums that they can and not payout on claims.
“The hurricane data hardly demonstrates a risk,” Schumer said. “It already costs a massive amount of money to buy a home in New York City, LI and Westchester. Allowing homeowner insurance prices to spike will only make that situation more unbearable. The hard working homeowners of Westchester , Long Island and New York City should not be made pawns by an rapacious insurance industry looking to manufacture a false crisis to pressure designed to pressure the federal government to create a taxpayer-financed disaster bailout system.”
Allstate’s reach in the markets that it has pulled out from is wide. It has an 18% share of the homeowner’s market in New York, and 25.9% of the market in the eight affected counties meaning that there is far less competition and prices for homeowners insurance will go through the roof.
After Hurricane Andrew in 1992, Allstate attempted to cancel 300,000 homeowners’ policies, and then sought a rate hike of up to 65% on remaining policies. The State of Florida declared a moratorium forbidding insurance companies from abandoning policyholders until the state could make alternative plans
From 2001 to 2004, Allstate’s profits have spiked from $990 million in 2001 to over 3.8 billion in 2004, for an increase of over 300%. In New York State, Allstate’s ‘loss ratio’, which measures the percentage of premiums paid out in claims, was better than the national average in 2004. In New York State it was 55, while nationwide it was 59. A score of under 60 is considered very good, and above 80 is considered problematic.
Today, in an effort to combat this burgeoning crisis Schumer sent a letter to Allstate demanding that they restart writing new homeowner claims and not raise premiums. He also requested that the GAO undertake a review and report on the profitability of the property/casualty insurance industry between the 2002 and 2005 hurricane season. Specifically to review the reasons and rate at which they increase their premiums in markets less impacted by natural disasters.