While affordability is still an issue, insurance coverage is now widely available in coastal areas of New York, according to the New York Insurance Association (NYIA).
Addressing a public hearing before the New York State Assembly Standing Committee on Insurance, Ellen Melchionni, vice president of NYIA, said the state’s FAIR plan, the New York Property Insurance Underwriting Association (NYPIUA), has led to a more stable market.
Melchionni testified that since its inception in 1968, the NYPIUA, or FAIR plan, has evolved into a “true residual market mechanism, serving thousands of New Yorkers each year.”
Similar FAIR (Fair Access to Insurance Requirements) plans operate in 29 states, the District of Columbia and Puerto Rico. NYPIUA is among the largest plans in the country.
When first established, the association only offered basic fire and extended coverage, but now NYPIUA offers a range of additional coverages including vandalism and malicious mischief, sprinkler leakage and time element coverages.
On inception, the NYPIUA program was not designed specifically to address the issue of availability of coastal coverage, she added. Now NYPIUA reports that since 1996 voluntary residential writings have been increasing in all seven coastal areas of New York, she said.
While there may still be some availability concerns for new business located within 1,500 feet of coastal waters on Long Island and in New York City, the market is now fairly stable and no longer experiencing the market dislocation of the mid-1990s, according to the industry report.
“Due to the implementation of this program, there have been fewer complaints and the availability of insurance has been restored,” Melchionni observed. However, she maintained that affordability is a separate issue.
New Yorkers residing in high-risk areas are more likely to pay more for their insurance than those in other areas.
“The primary purpose of insurance is to spread risk and in doing so insurers are required to group like risks together and provide policyholders with an appropriate premium. In general terms – the greater the chance of a loss, the higher the cost of insurance.
“New Yorkers residing in high-risk areas are more likely to pay more for insurance due to the greater likelihood of a claim (frequency and/or severity),” she said.
According to Melchionni, in order to keep insurance affordable, many insurers have begun to offer co-insurance, windstorm deductibles or percentage of value coverages. These non-standard policies are becoming more common place and the agents have done a relatively good job of educating the consumers of the various coverage options, she said.
Melchionni observed that insurance is available in coastal areas of New York and that the insurance department is now able to better forecast future disruption as they require carriers to submit withdrawal plans if they intend to substantially reduce policies.
In addition, the NYIA has witnessed the market dislocation that comes with the periodic expiration of the NYPIUA. “For that reason we believe NYPIUA should be made permanent,” she said.
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