The Star-Ledger

NJ Insurance Industry Performed Well Post-Irene, State Says

The Star-Ledger — Sunday, September 25, 2011

Ed Beeson / The Star-Ledger

Nearly a month after Hurricane Irene struck New Jersey, the state's Department of Banking and Insurance has given the insurance industry mostly clean marks for its response to the storm.

The agency, which monitors the insurance industry's compliance with state regulations, has found that carriers have abided by its orders to mobilize disaster response plans ahead of the storm and suspend so-called hurricane deductibles after it passed. So far, DOBI has fielded fewer than 50 written complaints about insurance claims related to the storm, mostly due to delayed or denied claims, said Marshall McKnight, a spokesman for the department. "The relatively few complaints we've seen so far seems to reflect that [insurance carriers and agents] are doing their jobs," he said.

Investigations into the complaints are ongoing, while DOBI continues to monitor carriers' performance, McKnight said.

Consumer advocates and insurance industry watchers said they too have heard little complaint about how insurance providers have handled the response to the disaster. But bigger headaches could be looming, they warn.

"In cases like Irene, [insurance companies] are very aggressive about making a response," such as bringing in claims adjusters to handle customer calls, said Jay Feinman, a professor of law at Rutgers-Camden who's written about the claims process. "It's somewhat less clear what happens once those claims are filed."

For one, many homeowners may discover too late that their homeowner's policy does not extend to flooding. The federal government's National Flood Insurance Program underwrites the vast majority of flood policies, yet there were only 230,000 policies in the state as of last year, according to insurance risk modeling consultancy EQECAT. By comparison, the Property & Casualty Insurance Association estimates there are 2.4 million policies for homeowners, condominum owners and renters in the state.

Consumers also could face losses if their homeowner's policies contain "anticoncurrent causation" clauses, said J. Robert Hunter, director of insurance for the Consumer Federation of America and a former federal insurance administrator. These limit a carrier's liability for damage that has been determined to have two concurrent causes, such as wind and flooding, where one is covered and the other is not, he said.

Some homeowners who have refinanced in recent years also may have let their flood coverage lapse if their new mortgage holder no longer required them to hold such a policy, said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action. Those living in foreclosed properties also could be facing uncertainty as it may not be clear if the bank taking over the property has also taken over making insurance payments, she added.

One thing working in favor of consumers who have flood policies is that insurance carriers have little incentive to deny flood claims, Hunter of CFA said. Unlike homeowner's policies, the federal government backs the policies and the carriers that sell them earn a commission for adjusting the claims, he said.

The total impact of the storm on insurers in the state is far from known. Spokesmen for carriers such as Chubb, Allstate and New Jersey Manufacturers Insurance Co. could not provide state-specific data about the number of claims they have handled or anticipated costs. Chuck Leitgeb, vice president of the Insurance Council of New Jersey, said the trade group has yet to receive data from its members, but plans to tally the cost eventually.

An early estimate from EQECAT pegged the state's insurable storm damage at between $400 million to $600 million, while nationwide the toll to insurers was expected to run between $1.5 to $2.8 billion. Neither figure includes damages covered by NFIP.

The firm did not have a total for overall damage to New Jersey, but nationwide it's expected to top $10 billion, excluding the billions spent to respond to the disaster, Tom Larsen, senior v.p. and product achitect for EQECAT, said in an e-mail.

Meanwhile, the Federal Emergency Management Agency, which adminsters NFIP, has set aside $260 million to handle the roughly 17,000 claims it has received so far. Comparatively, FEMA has paid out just over $1 billion in flood insurance claims to New Jersey since 1978, according to data from the agency.

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