By Dan Israeli
Insurance Superintendent Eric Dinallo announced on Oct. 31 that Liberty Mutual will comply with state regulations by sending renewal notices to more than 3,300 New York customers who had previously received non-renewal letters from the company.
In August, Dinallo ruled that it was illegal for insurers to base renewal decisions on whether customers had other policies with them, such as life or automobile coverage, and identified Liberty Mutual and Allstate as two of the companies that were guilty of engaging in the practice. Both insurers were ordered to cease it immediately and begin renewing all of their previously non-renewed customers.
"Liberty Mutual is to be commended for acting as a good corporate citizen by promptly complying with the department's directive and diligently working to do right by its affected customers," Dinallo said in a statement. "This is an example of how regulation works best, with the industry and regulators working together to reach the best possible outcome for customers."
So far, Allstate has not complied with the insurance department directive as willingly as Liberty Mutual. The company was sanctioned by state regulators in September after it stood by its claim that the practice of considering other forms of insurance in the renewal process was legal. According to the insurance department, regulators are continuing to negotiate with Allstate to find a resolution similar to the one reached with Liberty Mutual.
More than half of the customers expected to receive letters from Liberty Mutual live on Long Island. The company accounts for roughly 8 percent of the island's homeowner's insurance market, compared with Allstate's 25 percent. Liberty Mutual's plan, according to company spokesman Glenn Greenberg, is to send letters to all affected policyholders over a 10-week period, offering them immediate quotes for renewal of their policies for at least three years.
Greenberg added that the new policies would include a 5 percent hurricane deductible for customers in the eight downstate counties. He also noted that there would be rate increases over last year's policies averaging 20 to 30 percent. According to Greenberg, the company's goals are to comply with the insurance department and provide for its customers, while still managing its coastal market risk.
"This is a promise we made to our affected customers and the insurance department back in August," Greenberg said. "Non-renewals are always a last resort for us. [Liberty Mutual] is always looking to impact its customers as little as possible. Our continued promise is to sit down with the insurance department to find solutions that are good for our customers, and for managing our coastal risk."
Early in 2006, in the wake of Hurricane Katrina, a number of large insurers began announcing plans to discontinue coverage for residents in coastal communities. Liberty Mutual, Allstate and other companies explained that they wanted to reduce their liability in areas prone to bad hurricanes, in order to avoid paying billions of dollars in claims. Since then, more than 6,500 homeowners in Nassau County had received non-renewal notices.
Despite Liberty Mutual's plan to send out letters of intent to renew its dropped customers, some community activists feel that the effort will not save the coastal insurance market - specifically Long Beach - in the long run. Richard Boodman, a Long Beach resident and a cofounder of Homeowners Insurance Scam Stoppers, or HISS, said he never received a non-renewal letter, but believes that he and others are at risk of losing their homeowner's coverage down the line.
"The big issue is that the companies are still allowed to cancel up to 4 percent of their customers," said Boodman, referring to a statewide policy for insurance companies. "The only thing we won here was a skirmish, not a battle. We still haven't heard a single solitary word about eliminating the 4 percent. In 10 years we are going to have [only] substandard policies available, with rates higher than school taxes."
Boodman said that if companies want to sell insurance in New York, they need to sell it to all homeowners, including those living in coastal areas. As for Liberty Mutual's effort, Boodman was not quick to commend the company. "They got caught doing something wrong, and as a result a lot of people were canceled," he said. "If they hadn't gotten caught, I doubt they would send these renewal letters." At last week's City Council meeting, pushed to Wednesday evening due to Election Day, Boodman presented the council with blank petitions that he said "demand elected officials to represent the interest of their constituents." So far, it is estimated that HISS has collected over 500 signatures on its petition.
Edwin O'Toole Sr., an insurance agent in Rockville Centre with many Long Beach clients, said he is also concerned about the future of the coastal homeowner's insurance market. "I think the insurance department is still skirting issues, as far as companies not renewing in coastal communities," O'Toole said. "It's good that the department acted on [Liberty Mutual's practice], but we still have companies that are not renewing policies in coastal towns."
Dinallo suggested that customers waiting for letters from Liberty Mutual weigh their options with other insurance carriers - especially those that have found other coverage since their policies were canceled. "Do not cancel your current policy until you carefully review your letter and any quote from Liberty Mutual," Dinallo said in his statement. "Liberty Mutual has taken a number of steps to make sure you are treated fairly, but the company's rates have increased over the past year and its hurricane deductibles have gone up, so you may prefer to keep your current policy."
Comments about this story? Dmiller@liherald.com or (516) 569-4000 ext. 213.
