An insurance industry association testified about insurers’ response to Superstorm Sandy and the lessons learned at a hearing Tuesday before the New York Assembly Standing Committee on Insurance.
The American Insurance Association said the insurance industry’s performance in handling a record number of claims post-Sandy has been “remarkable.” AIA also said that many consumers remain unaware of the differences between homeowners insurance and flood coverage. The association also cautioned the legislature against mandating “unrealistic and counterproductive” claims adjusting requirements.
“Insurers promptly responded to what was an unprecedented weather-related insurance event in New York’s history,” said Gary Henning, Northeast region vice president for AIA. “Insurers have rightfully been expected to play a major role in the recovery effort and AIA is proud that our industry as a whole has fulfilled its obligations with distinction.”
He said that insurers have responded to more than 500,000 filed claims and paid out over $5 billion to New York customers, with another $1 billion more in expected payments to be made. Henning said that, to date, 92 percent of received homeowners claims have been successfully closed with a claims complaint ratio of well under 1 percent according to the New York Department of Financial Services.
AIA: Many Remain Unaware That Homeowners Policy Doesn’t Cover Flood Damage
Henning testified at the hearing that many people remain unaware that a homeowners policy does not cover flood damage. This is despite the fact that there is already a notice required in every homeowners policy stating that the policy does not cover flood damage and that if the person wants flood coverage, he or she can obtain it separately, Henning said.
“A major issue continues to be a lack of consumer awareness of what exactly is covered in a homeowners insurance policy,” he said. “Many people were not, and are not, aware that a homeowners policy does not cover flood damage. AIA has begun discussions with stakeholders on how to better educate consumers”
He also cautioned the legislature against enacting legislation mandating “unrealistic claims adjusting requirements” on the insurers. One legislative proposal would require all claims inspections to be conducted within six business days of the opening of a claim.
“Mandating that all claims must be inspected in six business days, if they are going to be inspected at all, would almost certainly divert resources from the most serious claims,” Henning said. “Unrealistic claims adjusting requirements could have unintended negative consequences for consumers. Insurers must be allowed to continue to use their years of experience in determining how to best serve all of their policyholders.”
Legislators Criticize Insurers’ Claims Process
Some of the legislators at the hearing said they were frustrated by insurers’ claims process. “After a disaster like Sandy, families and businesses are at the mercy of insurance companies to recover and rebuild,” said Assemblyman Phil Goldfeder (D – Rockaway). “The slow response time of insurance companies after a catastrophic event like Hurricane Sandy is negligent and utterly unacceptable…I look forward to working with the Department of Financial Services and my colleagues to hold companies accountable and provide residents the essential resources they need to recover from this disaster and any future event.”
Assemblyman Matthew Titone (D – Staten Island) said at the hearing that “we cannot allow the insurance industry to delay or stifle our efforts. People who have lost everything should not now be forced to fight insurance carriers for their fair share of something that they paid for.”
Assemblyman Steven Cymbrowitz (D – Brooklyn) said that in Manhattan Beach, Brighton Beach and Sheepshead Bay, “neighborhoods in my district that were severely impacted by Sandy, residents and business owners are still trying to recover from the devastation.” Nearly four months after the fact, people are still struggling to rebuild their homes and reopen their businesses — and, for many of them, issues with insurance claims are the reason this process is taking so long, Assemblyman Cymbrowitz said.
Another legislator, Assemblyman Francisco Moya (D – Jackson Heights), said, “It is important that we understand and streamline the types of coverage and claims processes with insurance companies to ensure that our families can rebuild quickly and our businesses can be operational keeping our thriving small businesses profitable. This storm will not be the last, and we must ensure that New Yorkers are prepared in the future with the right coverage and quick responses.”
“When families pay their insurance premiums they deserve a claims process that is fair and timely,” said Assemblyman James Skoufis (D – Woodbury). “That is why I have introduced legislation (A.1092) that would streamline the claims process once a natural disaster has been declared and expediently get victims the relief they need and deserve. Insurance companies need to be held accountable so that families are not fighting for settlements, months or even years, after a storm hits.”
Assemblyman Rafael Espinal (D – Brooklyn) said at the hearing that it’s “evidently clear” that home and small business owners received the raw end of the deal from insurance companies after Sandy. “They were left in the dark for too long. I will join my colleagues in bringing light to this predicament by pushing for transparent storm policies, and finding relief for all of those affected by Sandy,” Espinal said.
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