New York State’s largest provider of homeowners insurance should reconsider its decision to stop writing new policies in the metropolitan area over concerns about hurricane damage, according to Sen. Charles Schumer.
“The chances of a Katrina-type hurricane hitting our area is one in every 500 years,” Schumer said. “Allstate has to have a greater sense of responsibility.”
The Northbrook, Ill.-based company announced that as of Jan. 1, it would no longer sell new homeowners insurance in New York City, Long Island and Westchester County. The company made a similar decision to stop writing policies in Florida following the 2004 hurricane season, said Brian Pozzi, Allstate’s regional counsel based in Hauppauge.
The decision does not affect current Allstate customers.
Although the New York area was the first outside of the Gulf region to be affected by Allstate’s decision, the company is studying whether to stop writing new policies in other parts of the country, particularly vulnerable shorefront areas, Pozzi said.
“We have learned from the 2004 and 2005 hurricane seasons that hurricanes are becoming more frequent and more severe,” Pozzi said. “There’s widespread agreement among scientists that we’ve entered into a cycle of more active hurricanes.”
Allstate is currently the largest provider of homeowner insurance policies in downstate New York, with 26 percent of the market, or about 450,000 customers.
“We feel we have to manage our exposure here,” Pozzi said. “All we have done is stop writing new business.”
Schumer contends that Allstate’s decision will result in higher premiums for all homeowners because of reduced competition.
He called the company’s hurricane fears a “bogus scare tactic.”
Earlier this week, Allstate announced its earnings had dropped 9 percent in the fourth-quarter, citing payouts from Hurricane Wilma in south Florida last October. Net income at Allstate totaled $1.04 billion, or $1.59 a share, down from $1.14 billion, or $1.63 a share, a year earlier.
Losses from Hurricanes Katrina and Rita contributed to a third-quarter loss of $1.55 billion, the largest quarterly loss for Allstate as a publicly traded company.
A major hurricane barrels into New York City about once every 90 years; the last was the deadly 1938 “Long Island Express.”
“If it happened before, it will happen again,” hurricane expert Nicholas Coch, a Queens College professor of coastal geology told The Associated Press in an interview last fall. “And if it hasn’t happened in a long time, it’s going to happen soon.”
Last week, Howard Mills, the state superintendent of insurance, announced his department would conduct a hearing on Allstate’s decision on Feb. 27 at the department’s New York City office. Mills, a former state assemblyman, became the head of the insurance department after losing a bid to unseat Schumer in the 2004 election.
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