FOR IMMEDIATE RELEASE: February 14, 2008
Schumer Reveals: State Farm Covertly Cancelling Homeowners Insurance Policies All Across Long Island, As Other Insurers, Such as Allstate, Continue to Flee
Schumer's Office and Recent News Reports Finding State Farm Pulling Out of Long Island Homeowners Forced to Scramble to Find New Coverage Tagged with Outrageous Premiums Schumer Demands State Farm Stop Cancelling Policies, Backs Changes to National Flood Insurance Program to Help Protect Coastal and High-Cost Areas
In the wake of major insurance companies such as Allstate refusing to write new homeowners insurance policies and even cancelling existing plans, U.S. Senator Charles E. Schumer today revealed that State Farm has followed Allstate’s lead and joined the ranks of companies who are suddenly cancelling homeowners policies in communities across Long Island. Schumer’s office has received several calls in the last six months from Long Island residents who received word from State Farm that their policies would be terminated and they would be forced to find new, more costly insurance. Schumer said with the rash of insurance companies already having already pulled out of Long Island , many of these homeowners would be forced to take out so-called “extreme insurance”, usually reserved for fireworks stores, which can carry premiums that are more than double. Schumer said that companies that cite the risk of flood from a hurricane as the reason for completely cancelling existing policies and refusing to write new ones could bust the budget for many Long Island families.
“ Long Island families work long and hard for a piece of the American dream – their own home. But increasingly, once they get that home, insurers are now telling them that there’s no way to protect it,” said Schumer. “Refusing to renew the policies of customers who faithfully paid their bills is no way to run a business. This behavior makes State Farm the poster child for terrible corporate citizenship. Insurance companies should work with local governments and homeowners to make sure their risk is covered without completely pulling the rug out from Long Island residents.”
In recent years, at least half a dozen companies have either stopped writing policies on Long Island, or refused to renew existing policies, some of which were decades old. Allstate, MetLife, Travelers, Liberty Mutual and Nationwide are among the insurers who have begun to pull out of Long Island , citing overexposure and risk due to a potential hurricane strike. Despite a state law that prohibits companies from dropping more than 4% of policies in a year, some companies have found a way around the rule, convincing customers to move to other companies, or offering bonuses to agents who persuade “high-risk” customers to drop coverage. However, even the customers the companies keep face spikes in their premiums this year, with Allstate Indemnity hiking its rates a staggering 11% this year alone.
Schumer said his office has received a number of calls from Long Island residents in both Nassau and Suffolk counties reporting that their State Farm policies had been suddenly terminated. Last week, Eyewitness News profiled Kevin Keenan of Bayville who was insured by the State Farm for 20 years, until recently when he received a notice saying his homeowner policy will be dropped because of a fear of a potential storm.
For those homeowners who are dropped, finding traditional coverage from another company can be either costly or impossible, with those unable to find traditional insurance forced to resort to “extreme” insurance, known as excess line or surplus insurance. This “extreme” insurance is only available to homeowners who have been denied coverage by every licensed insurer in New York , and is provided by insurers licensed in other states or foreign countries.
“For cash-strapped Long Island families, who already shoulder a too-heavy tax burden, increased home insurance rates could be the straw that broke the camel’s back,” said Senator Schumer.
Despite the fact that this insurance is typically meant for high-risk commercial enterprises, like a fireworks factory, more and more Long Island homeowners have been forced to purchase this “extreme” insurance, typically paying double or more for less coverage than they previously had. In fact, over the past five years, the number of New York homeowners with this insurance-of-last-resort has more than doubled, with the highest concentrations in Nassau and Suffolk :
Schumer today blasted State Farm for turning its back on Long Island homeowners and in a personal letter to State Farm CEO Edward Rust, Jr said “the arbitrary and capricious decisions to cancel existing policies should be stopped immediately.”
Schumer today unveiled the following plan to combat this rising tide of insurance premiums on Long Island: Schumer will push two pieces of legislation to help prevent more Long Island homeowners from losing coverage. The first would increase coverage limits in high-cost areas, which would help homeowners in areas with higher construction and rebuilding costs, such as Long Island . Currently, the maximum coverage amount allowed on a home’s structure is $250,000. This is simply not high enough for high cost areas like New York , which is why Schumer is looking to raise the maximum coverage amounts to $335,000. This provision is included in the House Flood Insurance bill, but not in the Senate. Sen. Schumer promised to work to include this language in the final version of the legislation.
The second bill would create a Commission on National Catastrophe Risk Management and Insurance, a 16-member commission to study the growing crisis of insurers abandoning communities with perceived risk, like Long Island . The new commission would study all solutions to the problem, from strengthening building codes and land-use regulations in affected communities to mitigate potential risk, creating public-private partnerships to fund catastrophe recovery, and the ability of private insurance companies to survive catastrophic events on their own. The commission would also report on the current state of the insurance market, as well as the outlook for the availability and affordability of private insurance across the country. Senator Schumer supported this bill when it passed through the Banking Committee and will be pushing for its passage by the full Senate.