2012-11-14 / Features

Insurance Companies Push For Higher Deductibles For Sandy

On November 12, U.S. Senator Charles E. Schumer warned insurance companies not to try to skirt their obligations to their policyholders. Already, reports indicate that these companies are pushing to have the storm reclassified as a Hurricane, rather than a “post tropical cyclone” – a move that, if successful, will increase deductibles for homeowners by tens of thousands of dollars. Schumer said that homeowners across the New York region have each paid thousands of dollars in premiums and that they should be receiving world-class service from the companies in this time of crisis.

“Superstorm Sandy left many homeowners’ lives in shambles, and private insurance companies – who have collected thousands and thousands of dollars in premiums – should be doing everything possible to help them clean up the mess and rebuild, not trying to skirt their obligations,” Schumer said. “The state and federal government both classified this storm as a post tropical cyclone, not a hurricane, and insurance companies shouldn’t try to alter reality to save money on the backs of homeowners.”

Homeowners’ insurance policies frequently have special deductibles for storms classified as “hurricanes”. In almost all cases, these deductibles are far higher than those for other types of storms. A typical hurricane deductible is between one percent and five percent of the value of a home, amounts that easily run into the tens of thousands of dollars in expensive real estate markets such as the New York region. Non-hurricane deductibles, on the other hand, are usually a fixed amount, oftentimes less than $1,000.

The National Oceanic and Atmospheric Administration’s (NOAA) National Weather Service (NWS) has declared the storm a “post tropical cyclone”, meaning that insurance companies cannot trigger the higher hurricane deductibles. The New York state Department of Financial Services, based on that determination, also told insurance companies operating in New York state that they cannot use the higher hurricane deductibles.

Despite the rulings to the contrary, published reports indicate that insurance companies plan to challenge the determination directly with NOAA, through the courts, or simply by disregarding the ruling and charging homeowners the higher deductible. Schumer warned insurance companies not to go down that road, saying that elected officials and regulators at all level of government were watching. Schumer also told NOAA that they should stand firm in their determination, and said that if NOAA continued to classify the storm as a non-hurricane, it would make it more challenging for insurance companies to challenge the designation at both the state level and in the courts.

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