Provides that the superintendent of financial services shall establish standards for hurricane windstorm deductibles, creating uniformity in the operation of such deductibles with respect to the triggering event.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2866
SPONSOR: Pheffer Amato TITLE OF BILL:
An act to amend the insurance law, in relation to homeowners insurance
deductibles triggers
PURPOSE:
The purpose of this bill is to help promote better understanding of the
applicability and amount of hurricane windstorm deductibles in homeown-
ers and dwelling fire policies and to establish reasonable standards for
the operation of hurricane windstorm deductibles.
SUMMARY OF PROVISIONS:
Section 1. This section makes amendments to section 3455 of the insur-
ance law to require the Superintendent of the Department of Financial
Services to promulgate, within 180 days of the effective date of this
bill, regulations providing standards for hurricane windstorm deduct-
ibles which create, to the greatest extent possible, uniformity in the
operation of such deductibles with respect to the triggering event.
Section 2. This section sets forth the effective date.
EXISTING LAW:
Section 3455 of the insurance law requires the superintendent to estab-
lish disclosure requirements in regulation with respect to the operation
of windstorm deductibles in homeowners and dwelling fire policies. The
regulation sets standards for such notice on the declarations page and
in a separate notice accompanying all new and renewed policies.
JUSTIFICATION:
Legislation is required to ensure that insurance consumers fully under-
stand the terms of the catastrophic windstorm deductible in their home-
owners and dwelling fire policies. In particular, consumers need to
understand the increased exposure they are assuming. Currently, insur-
ers are utilizing a wide variety of windstorm deductible programs in
their homeowners and swelling fire policies. Windstorm deductibles,
which can range from 1% to 7.5%, are usually expressed as a percentage
of the homeowners' Coverage A limit (the value of dwelling structure). A
6% deductible on a $500,000 would result in the policy-holder having to
pay the first $30,000 of damages sustained to the home during a wind-
storm.
While windstorm deductibles are expressed as a percentage, most policy-
holders are used to relatively low deductibles expressed as a dollar
amount (i.e., $250, $500, $1,000). Percentage deductibles are generally
found in health insurance programs, where policy holders are required to
pay a percentage of a medical claim. Therefore, policy holders can easi-
ly misconstrue a 6% windstorm deductible as requiring them to pay only
6% of the damages sustained, rather than up to 6% of the value of their
home. Additionally, while the deductible is often described in terms of
a percentage of the Coverage A limit, it typically applies not only to
the losses to the dwelling structure, but also to additional structures
on the premises (Coverage B) and to the contents of the home (Coverage
C) Requiring insurers to issue a notice to policyholders which explains
in plain language the amount and circumstances in which the deductible
applies will help policyholders better understand these various and
complicated deductible provisions. Also, consumer confusion regarding
the amount and applicability of their percentage deductibles will be
further reduced by requiring the deductible to be expressed, on the
policy and declarations page, as a dollar amount of each coverage part
to which it applies.
Another area of confusion for consumers is understanding the event which
activates or "triggers" the applicability of their windstorm deductible.
Currently, insurers' deductible programs contain a variety of 'trigger-
ing' events. Since the triggering event will determine whether a wind-
storm deductible applies to a policyholder's loss, it is crucial that it
be fair and reasonable to both the policyholder and the insurer. Uniform
standards for and notice explaining the operation of catastrophic wind-
storm deductibles are necessary to promote easier comparison between
different insurers' options, and to ensure clear understanding of the
extent of policyholder exposure under these options. The requirements
for understandable and fair standards will ensure that catastrophic
windstorm deductibles are reasonable, actuarially appropriate and
applied in the proper circumstances.
LEGISLATIVE HISTORY:
2020-21: A.950-B Advanced to Third Reading
2019-20: A.2902-A Advanced to Third Reading
2017-18: A.6665-A Passed Assembly
2015-16: A.7537-A Passed Assembly
2013-14: A.2729 Passed Assembly
2011-12: A.3283-A Passed Assembly
2009-10: A.4847-A Passed Assembly
2007-08: A.4860 Passed Assembly
FISCAL IMPLICATIONS:
None to the State.
EFFECTIVE DATE:
Ninetieth day after it shall have become law, and shall apply to all
polices issued or renewed on or after the one hundred eightieth day
after the adoption of the required regulations.
STATE OF NEW YORK
________________________________________________________________________
2866
2023-2024 Regular Sessions
IN ASSEMBLY
January 27, 2023
___________
Introduced by M. of A. PHEFFER AMATO, JONES, WALLACE, BENEDETTO, ZINER-
MAN, CRUZ -- read once and referred to the Committee on Insurance
AN ACT to amend the insurance law, in relation to homeowners insurance
deductibles triggers
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 3445 of the insurance law, as added by chapter 44
2 of the laws of 1998, is amended to read as follows:
3 § 3445. Windstorm insurance notice; deductible trigger standards. (a)
4 The superintendent shall by regulation establish disclosure requirements
5 with respect to the operation of any deductible in a homeowner's insur-
6 ance policy or dwelling fire personal lines policy which applies as the
7 result of a windstorm. Such regulations shall prescribe the form of a
8 notice to be provided by an insurer to an insured. The notice shall
9 explain in clear and plain language the amount of the deductible, the
10 circumstances under which the deductible applies and any other matters
11 which the superintendent, in his or her discretion, shall deem necessary
12 or appropriate.
13 (b) The superintendent shall by regulation establish standards for
14 hurricane windstorm deductibles, which create, to the greatest extent
15 possible, uniformity in the operation of such deductibles with respect
16 to the triggering event.
17 The superintendent shall promulgate such regulations by emergency
18 adoption or otherwise, within one hundred eighty days of the effective
19 date of the chapter of the laws of two thousand twenty-three which added
20 this subsection. Notwithstanding paragraph seven of subsection (a) of
21 section three thousand four hundred twenty-five of this article, any
22 changes in a homeowner's insurance policy or dwelling, fire, or personal
23 policy registered as a result of the adoption by the superintendent of
24 regulations under this section, may be applied to such policies on the
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD06414-01-3
A. 2866 2
1 policy's initial renewal date or the policy's next annual renewal after
2 the effective date of such regulations.
3 § 2. This act shall take effect on the ninetieth day after it shall
4 have become a law, and shall apply to all policies issued or renewed on
5 or after the one hundred eightieth day after the adoption of the regu-
6 lations required in section 3445 of the insurance law, as amended by
7 this act.
