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PIANY recommends standard triggers for hurricane deductibles

A nightmare awaits people with homes in New Yorks coastal areas, representatives of the Professional Insurance Agents of New York State, Inc. told state legislators on May 10, 2010. Its buried in the fine print describing when insurers can apply large deductibles to claims for windstorm damage. PIANY focused on the deductible issue in a roundtable on coastal property insurance problems, hosted by Sen. Neil Breslin and Assemblyman Joseph Morelle, chairmen of the Senate and Assembly Insurance Committees, respectively.

Assemblyman Joe Morelle, Sen. Neil Breslin and Evan
counsel to the Senate Insurance Committee.

PIANY Director Peter Resnick held up a 29-page chart from the Web site of the New York State Insurance Department. The table describes companies deductible provisions, including amounts, circumstances dictating when the deductible applies (the "trigger"), and geographic areas where the deductibles are used. "Look at all the different triggers in this chart - your head will spin," Resnick said. "The average person wont understand all these differences."

Resnick and PIANY Past President N. Stephen Ruchman, CPIA, asked lawmakers to create greater simplicity for the sake of policyholders. Ruchman, who writes regularly for Insurance Advocate, distributed copies of a column he penned after a March 2010 storm, when his office handled over 400 claims in a single morning, Ruchman said the storm, which was not a "hurricane," foreshadows a time when many may call again, only to find they have no coverage due to high deductibles. "This storm was our warning sign," Ruchman wrote in the April 5, 2010 issue. "What more signal do we need, to prove our industry needs a uniform trigger?"

Peter N. Resnick

Resnick said its important to distinguish between deductible amounts, which people readily understand, and when deductibles will apply -- a multi-part verbal formula that differs from company to company. "The Insurance Department has done a great job making companies clearly explain to people how big their deductible is," Resnick said. "But no one explains the trigger formula. The problems will come after a big storm. People will say, Why didnt you tell me, why didnt you explain the trigger?"

PIANY believes companies should have discretion over deductible amounts, but that there should be greater standardization in their triggers. Responding to agents focus on this issue, Assemblyman Morelle probed for its relevance to his main concerns - availability and affordability. "We have different issues here," Morelle said. "Number one, on the front end, do consumers understand the risk theyre taking on? Number two, can people afford their coverage? "

N. Steven Ruchman, Assemblyman Joseph Morelle and Peter N. Resnick.

Speaking for the Insurance Department, Chief Insurance Examiner Maurice Morgenstern said their aggregate data suggests that homeowners writings are fairly stable in the state. However, "in pockets closest to the coast, there remains a problem getting insurance," he acknowledged. Morgenstern described the states various programs and the departments vigilant monitoring "to make sure that everyone who needs the coverage gets the coverage."

In closing the discussion, Morelle promised more intensive work in small group settings to ensure these programs are working as intended.