By now, most residents on Long Island are aware of the fact that State Farm, Allstate, and other “big name” insurers have been cutting back on their residential property insurance exposure in Nassau and Suffolk counties in southern New York. This was (and still is) due to their management of catastrophic risks on their books. As you know, Long Island is saturated with higher valued homes, and is prone to severe weather events such as hurricanes and nor’easters, both of which are capable of producing mass flooding and extremely high sustained winds…especially the further east you go on the island.

Then, Now, and the Future

State Farm

Random non-renewal letters for State Farm Long Island customers began back in 2008, and continues to this day. CEO Edward Rust, Jr. explained in a letter written to Newsday (at the time) that this endeavor would take place over a 3-6 year period. We are now in year 4 of their “CAT Management” plan. State Farm does still write new policies on Long Island, but their underwriting guidelines are very strict, thus limiting the amount of new policies they take on their books.

Allstate

Another player in the “CAT Management” game is Allstate. In fact, while Allstate continues to non-renew customers with homes near the water, they are currently not writing any new homeowners business on Long Island. One has to wonder why this company continues to advertise in southern NY as a provider of homeowners insurance when they are not writing any new business on the island. Oh well, it’s their money (your premiums) for them to spend as they choose.

Other Insurers

Also on the list of companies that are no longer writing and/or are dropping policies on Long Island include MetLife Auto & Home, Liberty Mutual, Travelers, and Nationwide. Like State Farm, Travelers is still writing policies on Long Island, but they too have very strict underwriting guidelines when it comes to new business.

The Unethical Perception

Many people frown upon CAT Management practices by big name insurers. Repeatedly, I hear stories from these former customers (now our clients) over how they never had a claim ranging from 10-25 years and were dropped. It was as though they felt insulted over what these companies did. In fact, this issue drew so much attention that even Senator Hillary Clinton wrote a letter to the State Farm CEO insisting that they not treat their customers in this manner. The fact is, there’s nothing wrong (or illegal) with what these companies are doing.

Insurance policies are written (and renewed) annually. This means, every homeowners risk is re-evaluated every year against a particular carrier’s underwriting guidelines. If those guidelines change where your risk classification now falls outside of them, you WILL either receive a rate increase, or be non-renewed…even if you’ve never had a claim.

As One Exits, One Enters

We live in a free market society. One of the benefits of this is competition. For every company that is dropping homeowners insurance on Long Island, there is another company that WILL take those customers on. That’s the beauty of the independent insurance market. Unfortunately, most people are not aware of these companies because independent carriers do not advertise on television. Insurance brokers and independent agencies are the sales force for what totals over 100 independent insurance companies that write homeowners insurance in New York State. (calm down Hillary)

As of this writing, numerous financially-stable insurance companies are writing homeowners policies on Long Island…AND near the water in many cases. Among this list includes (but is not limited to):

-Narragansett Bay
-New York Central Mutual
-Interboro
-Occidental
-Ocean Harbor
-Kensington
-Ostego Mutual
-Foremost
-Adirondack

Sometimes It’s a Good Thing

Many of our clients that were dropped from other companies due to CAT Management were actually done a favor. In many cases (not all of course), we have actually written homeowners policies at lower rates with better coverage than what they previously had before being non-renewed. Had they never been cancelled, they would have never realized their premium savings potential.

Perhaps these companies are being “good neighbors” after all. :)