Amd S3425, Ins L; amd S12, Chap 42 of 1996; amd S23, Chap 136 of 2008
Directs superintendent of financial services to amend rules and regulations with respect to homeowners' policies; also directs study of certain facets of insurance industry including, but not limited to the profitability of the property/casualty insurance in coastal areas.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6601
SPONSOR: Benedetto TITLE OF BILL: An act to amend the insurance law, in relation to
homeowners' insurance policies; to amend chapter 42 of the laws of 1996,
amending the insurance law relating to homeowners' insurance and a
temporary panel on homeowners' insurance coverage, in relation to the
panel's evaluation regarding coastal areas; and to amend chapter 136 of
the laws of 2008, amending the insurance law relating to extending the
effectiveness of certain stand-by powers of the New York property insur-
ance underwriting association, in relation to attracting more compet-
itors to the coastal counties
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this bill is to expand the definition of "materially
reduce its volume of policies" to reduce the threshold before insurers
must submit a withdrawal plan to the Insurance Department when non-re-
newing substantial numbers of homeowners' insurance policies in this
State's coastal areas. Further, the bill expands the definition of the
term "minimizes market disruption" so that it is tailored more to the
needs of homeowners who are near the coast and unable to obtain afforda-
ble homeowners' insurance or are captive insurance agents that have no
other fall back insurance policies to sell to their clients after being
cancelled by their captive insurer.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 amends insurance law section 3425(0) (2)to reduce the percent-
age or net number of non-renewed homeowners' policies that insurers
terminate in coastal areas that triggers the mandate that such insurer
must file a withdrawal plan to minimize market disruption. Under current
law, if an insurer plans to "materially reduce its volume of policies"
by cancelling or non-renewing 20% or more of its homeowners' policies or
the net number of policies by at least 500 on a state-wide basis during
the next five-year period or the same ratio of cancellations during the
course of a single year, then such insurer must file a withdrawal plan
that demonstrates how the homeowners' insurance market will not be
disrupted.
This bill adds a supplemental definition for the term "materially reduce
its volume of policies" that adds a lower threshold for those insurers
that are non-renewing policies in the state's coastal areas. Under this
definition, if a carrier plans to reduce its number of policies by 8%
over 5 years or the net number of policies by 50 over a five year period
of time, or similar percentage of polices over a one year period of time
in coastal areas, then the carrier must file a withdrawal plan that is
specific to the coastal homeowners' insurance market. Coastal areas are
defined as within one mile of the salt water line of New York's shore-
line. This bill was amended to ensure that the Department of Financial
Services will be specifically looking at the market dynamics in coastal
areas by either zip code or by rating territories that are fully or
partially within one mile of the shoreline.
The Department in reviewing and accepting insurer withdrawal plans must
specifically look at: 1) the ability of homeowners in the affected coas-
tal area to obtain suitable homeowners' insurance coverage to substitute
for the policy that was cancelled by the withdrawing insurer, and 2) the
adverse effects such cancellations may have on captive agents and insur-
ance agencies who rely solely on the sale of policies issued by one or a
few companies and how such mass cancellations may adversely affect the
business prospects of such insurance agencies or brokerage firms_ This
bill was specifically amended to ensure that the Department look into
the adverse economic effects faced by insurance agents and agencies that
lose clients due to large numbers of insurer policy cancellations.
Section 2 amends chapter 136 of the laws of 2008 to expand the charge of
the Temporary Panel on Homeowners' Insurance Coverage to include evalu-
ating the profitability of insurers that write homeowners' insurance in
this state and the profits or losses such insurers sustain by writing
coverages along this state's coast line. Further, such Task Force shall
look into the estimated cost of obtaining comparable homeowners' insur-
ance if their previous coverage has been cancelled.
Section 3 amends section 23 of chapter 136 of the laws of 2008 to
encourage the Superintendent of Insurance to seek to new ways to identi-
fy new insurance carriers that may want to write homeowners' insurance
in the State's coastal areas to help replace those carriers that are
slowing withdrawing from this market. Encouraging more private carriers
to write coastal homeowners' insurance should help to increase the
availability of coastal homeowners' insurance and give consumers more
choice in this tightening market.
JUSTIFICATION:
One of New York's largest insurers, recently announced plans to cancel
or "non-renew" more than 26,000 homeowner's insurance policies in the
coastal portions of New York City, Westchester County and Long Island.
However, because this number represents less than 4W of its total number
of policies written in New York State, such insurer is not required by
law to notify the State Insurance Department of his plans, file a with-
drawal plan, or take any steps to ensure that its departure from this
segment of the market is conducted in an orderly manner to minimize the
disruption that is sure to be caused by so many homeowners scrambling
for replacement coverage and for insurance agents and agencies that will
inordinately suffer economic losses due to such cancellations.
This bill adds a new alternative definition for "materially reduce its
volume of policies" so that if an insurer inordinately begins to with-
draw from the coastal homeowners' market, such an insurer must also file
a withdrawal plan. In this withdrawal plan filed with the Insurance
Department, the insurer must set forth the reasons for such withdrawal,
describe the measures to be taken by the insurer to minimize market
disruption, and provide other information that the Superintendent may
require. The filing of this plan not only forces the withdrawing insurer
to justify its actions to the Department, but gives notice to the
Department so that they can use the regulatory tools at its disposal to
encourage other insurers to increase the number of homeowners' writings
in coastal areas or to offer substitute products that can be sold by
insurance agents.
Further, the Department can assist insurance agencies to cope with large
losses in the number of policies that they issue. Further, the Depart-
ment may be able to encourage the withdrawing insurer to allow its
captive agents to issue or write other substitute homeowners' insurance
offered by other companies so that such agents will be able to offer
their customers an adequate substitute policy when they are cancelled.
PRIOR LEGISLATIVE HISTORY:
2012: S.1041A - Referred to Insurance/A.4261 Referred to Insurance
2010 - S.1845- Referred to Insurance - A.6680-A Referred to Insurance
2008 - S.2269-A - Referred to Insurance 2006 - S.7609 - Referred to
Insurance
FISCAL IMPLICATION:
None.
EFFECTIVE DATE:
January first of the year next succeeding the date upon which it shall
have become law.
