I just returned from several days of meetings with the local independent agent boards that represent independent agents on Long Island as well as three New York City boroughs. To say they are frustrated is an understatement.

For quite some time these agents, as well as IIABNY, their state association, have been trying to get the attention of insurance carriers, state regulators, and legislators focused on the serious issue of a coastal market crisis that exists predominately within 2,500 feet of the water on Long Island.

A majority of the insurance companies that write homeowners and property coverage in New York have dramatically restricted their acceptance of new policyholders or stopped writing new business altogether. In addition, many carriers are non-renewing existing homeowners and property clients in an effort to reduce their exposure to coastal risk. Sometimes, the clients being non-renewed do not even fit the characteristics of a high-risk coastal exposure and agents cannot explain the companys action.

Further, the market of last resort, NYPIUA (New York Property Insurance Underwriting Association) is unable to provide adequate protection for consumers. Currently, I am not aware of any insurance company that offers a wrap around policy to the NYPIUA policy that can raise the coverage to the level of the widely used HO-3 policy. In addition, the NYPIUA program expires every year and requires legislative approval to extend its life. Everyone acknowledges that there is no real reason for not making NYPIUA permanent. Unfortunately, the passage of such legislation is tied to party politics. To use such an important entity as a political chip to be traded not only cheapens the political process, but seriously endangers the financial security of New Yorkers living in these areas. The current C-MAP program, administered in New York by NYPIUA, doesnt offer an alternative as it is just too hard to use effectively.

Insurance companies and their trade associations, meanwhile, have cited major issues with the New York Insurance Departments rate approval process. It is extremely slow and companies complain that waiting as much as a year or more for rate approval makes the rates inadequate by the time they are approved. They also want the Insurance Department to consider their catastrophe models in developing rates. Companies would also like the ability to pass along some of their reinsurance costs through rates.

The Insurance Departments speed-to-market rate approval process is obviously dysfunctional or property/casualty insurance companies would be using it. The department is well aware of the coastal problem as it watches carrier after carrier significantly restrict new coverage while non-renewing existing customers. The marketplace is shrinking.

At best, consumers can expect to pay significantly more for their coverage while assuming significant deductibles relative to windstorm losses. In the worst cases, consumers cant find coverage in the voluntary market and they are forced to accept inadequate coverage through NYPIUA or pay for high-priced coverage in the excess and surplus market.

Independent agents have been concerned for a long time with the varying trigger mechanisms in policies relative to what constitutes a windstorm. Because of the wide variance of triggers, it will be very hard to explain to consumers after a storm why they have to pay a significant windstorm deductible while their next door neighbor doesnt. This problem is further compounded by the percentage of coverage A deductibles being used by carriers relative to windstorm. These deductibles can be as high as five percent, meaning a consumer whose house is insured for $500,000 will have to pay the first $25,000 of a loss before insurance coverage kicks in. Unfortunately, $500,000 homes in metropolitan New York are on the low side of average and many more homes are insured for significantly higher amounts.

New York agents have observed the problems being experienced in Florida and along the Gulf Coast. They see the problems in New York, too, and want to develop solutions before its too late. Consumers and their independent agents have been experiencing a constantly shrinking marketplace over the last 12 to 18 months. We have been lucky so far in that a major storm or hurricane has not hit the metropolitan New York area, however its only a matter of time. What is it going to take to get the changes necessary to provide a highly functional insurance market for homeowners and property coverage in metropolitan New York? No matter what the outcome, no one can say that independent agents werent the unrelenting advocates for the insurance needs of New York consumers.

As IIABNY member advocate and assistant vice president of member programs, Jamie Deapo acts as communicator between agent, company, and trade association. His 15 years of experience as an independent agent coupled with a background in underwriting and marketing for insurance companies has given him a well-rounded perspective. A daily dose of conversation with independent agents from every corner of New York helps him understand the issues and concerns of the day. Deapo is also the outspoken voice on IIABNYs Word on the Street Podcast. Listen to these candid conversations at www.iiabny.org, by clicking on the News link on the left-hand side of the homepage, then Newsletters and Publications and Word on the Street Podcast.