New York Governor David Paterson has signed into law industry-sought legislation that brings back flex rating for auto insurance and makes permanent New York’s homeowners insurer of last resort.
The flex-rating legislation — which had been sought by agents and insurers alike — allows insurers to vary their rates up or down by five percent without prior approval from the state’s insurance department, although insurance superintendent can still reject rates he feels are unjustified. The state last used a flex-rating system in 2001. Flex rating will take effect Jan 1, 2009.
The legislation also makes permanent the New York Property Insurance Underwriting Association (NYPIUA) — the so-called FAIR Plan for homeowners insurance — which has become one of the major coverage providers for much of the coastal property in New York. That change is effective immediately.
NYPIUA has operated on three-year cycles without permanent status for decades, and that has been a frequent source of problems for those insured through the association and the homeowners insurance market generally.
“It simply doesn’t make sense for such a vital association to be subject to periodic ‘sunsets,'” said Martin Koles, president of the Professional Insurance Agents of New York. “Could any organization or company function to its fullest potential with the knowledge that every year brought the possibility of extinction? The new legislation rectified this issue, making it possible for NYPIUA to better serve New York state homeowners.”
In addition to having a permanent residual market, agents will also be able to offer broader coverage forms to policyholders throughout the state.
The bill also reinstates a special advisory panel on homeowners’ insurance and catastrophe coverage which will report back to the legislature next year on ways to improve the homeowners’ insurance market.
Gary Henning, assistant vice president for the American Insurance Association, said “increasing the availability of homeowners’ insurance along the coast and encouraging greater competition in the private passenger auto insurance market will ultimately provide better products and more choices for New York State consumers.”
The Independent Insurance Agents and Brokers of New York (IIABNY) praised the heads of the Assembly and Senate insurance committees — Assemblyman Joseph E. Morelle (D-Irondequoit) and Sen. James L. Seward (R-Chenango) — for their work in getting the bills passed.
Added IIABNY Chairman Neal L. Sullivan: “We’re confident that this will have a positive impact on the insurance industry and consumers.”
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