Lower Hudson Valley insurance market holding up

By JAY LOOMIS THE JOURNAL NEWS  (Original publication: August 26, 2006)

The insurance industry's drive to cut its hurricane exposure in coastal states a year after the record losses from Hurricane Katrina is having a relatively small impact on the average homeowner in Westchester, Rockland or Putnam counties so far.

Most homeowners in the Lower Hudson Valley can still get coverage with only a modest increase in premium costs, unlike coastal areas of Florida that have faced mass policy cancellations and rate hikes as high as 100 percent in response to the forecasts of giant storms plaguing the Atlantic and Gulf coasts for years to come, industry officials said.

"We have not seen a marked increase in difficulty to get coverage in Westchester, compared to some parts of the country," said Stephen Rosen, president of Rosen & Co., an independent insurance agency in Armonk. "The market has been stable overall."

Rosen estimated that premium costs for his agency's customers in Westchester are 2 percent to 5 percent higher than a year ago. The Insurance Information Institute, an industry-sponsored group, estimated a 6 percent to 10 percent jump in insurance costs in the downstate New York, which includes Westchester County.

"The prices have gone up somewhat but not markedly so," said Robert Hartwig, the chief economist for the Manhattan-based institute. "The situation for the vast majority of people in Westchester has not changed that much."

Leigh Abrams, 64, owns homes in Hartsdale and the Hamptons area of Long Island. Abrams, the chief executive officer of Drew Industries Inc. in White Plains, said the premiums on the Hartsdale home have remained stable. He added that he got a lower rate on the Hamptons home after changing insurance carriers.

"I haven't really noticed that much change," Abrams said.

That doesn't mean, however, that some people aren't feeling an impact.

Allstate Corp., the largest insurer in downstate New York with 26 percent of the market, announced earlier this year that it would no longer write new homeowners' coverage in Westchester, Long Island or New York City as part of a move to lower its hurricane risks in coastal states. It also said that it would not renew some homeowners' policies in those areas as they expire, with total attrition of policies not to exceed a state-mandated limit of 4 percent a year.

In Westchester, owners of the most expensive homes close to Long Island Sound in communities such as New Rochelle, Mamaroneck or Rye, while relatively few in number, are among the most likely to face more restrictions and higher costs on homeowners policies, agents said. That's because the industry sees homes along the shore as more vulnerable to hurricanes.

"If you have a home located a mile off the coast, in the past you might have seen six or seven companies offer to write that business," said Russell B. Grant, a producer at Grant, Smith & Dassler Inc., an insurance agency in Pearl River. "Now, it may be two or three."

Some insurers are also including a wind-storm deductible that can lower the upfront premium costs but leave the homeowner on the hook for some repair costs, if a storm hits. For example, a homeowner with a 10 percent wind storm deductible on $200,000 home might have to pay $20,000 of the repair costs out of pocket if a hurricane hit.

"People may not be aware of these deductibles," said Grant, also regional director for the metro suburban region of Independent Insurance Agents and Brokers of New York. "It is important to educate themselves about them. ... Anyone who is concerned about whether their home is adequately covered should seek out their local agent for an individual consultation."

JoAnne Murray, president of Allan Block Agency in Tarrytown, said most insurers are still writing homeowners coverage in local markets, but are doing more homework to make sure that the policies meet underwriting standards. Homeowners who have filed claims previously or failed to upgrade their homes to the proper electrical, plumbing or construction standards will have a harder time getting a competitive rate, she said. Better rates, she added, also will go to homes that are least 2,500 feet from the shore.

Insurers are also making sure that the policies take into account the escalating cost to rebuild a damaged home. Those rebuilding costs have soared since Katrina and other hurricanes triggered large increases in the prices of building materials. A home that was insured for $500,000 last year might be insured this year for $550,000 this year because of the higher rebuilding costs, according to Murray.

"Companies are much more diligent about making sure that the homes are insured properly," Murray said. "They want to get the proper premium for the risk that they are taking. ... One lesson from Katrina is that people didn't have the right insurance."

While premiums have not gone up dramatically in Westchester since Katrina, the situation is far worse elsewhere. Earlier this year, insurers in Florida said they planned to cancel more than 500,000 homeowners policies. The cost of policies has climbed 20 to 100 percent in coastal sections of Florida and other southern states during the past year, according to the Insurance Information Institute.

"I think that homeowners in coastal areas are going to have to pay more," said George Yates, president of Dayton, Ritz & Osborne, an insurance agency on eastern Long Island. "The statistics show that these are more vulnerable properties. There is a huge concentration of risks. ... If you look at Andrew in 1992 and Katrina in 2005, the monies that were lost in those two hurricanes exceeded all the profits made by all the companies writing homeowners insurance in all the states."

Yates said that homeowner insurance costs on eastern Long Island have climbed 10 to 20 percent during the past year.

The industry maintains that the higher insurance costs reflect the growing risks of big storms. Seven of the 10 most destructive hurricanes in U.S. history made landfall during the past two years. For insurers as a whole, $50 billion in losses from Katrina and other hurricanes last year was more than double the old record set in 1992.