New York regulator encourages property insurers to offer free loss mitigation

The New York Department of Financial Services (NYDFS) announced on Thursday the publication of a policy recommendation that encourages property insurers to offer free loss-mitigation options for policyholders that would ultimately reduce premium costs.

NYDFS Superintendent Adrienne Harris cited the acceleration of climate-related disasters and property damage that has stressed the property insurance industry and marketplace, pushing some insurers out of areas they deem to carry too much risk and making premiums unwieldy for consumers.

“The increasing severity and frequency of climate-related events is increasing losses and raising insurance rates across the country,” Harris said. “In light of these challenges, DFS is focused every day on ensuring New York homeowners have access to affordable insurance.

“Adoption of loss mitigation tools and services supports both individuals and insurers by lowering homeowner costs, protecting homes, and reducing insurer risk, helping to create a more stable and resilient insurance market,” she added.

The guidance states that “when including these tools and services in a policy, the policy should specify what is being offered, who is paying for the tools and services, and how much a policyholder must pay,” according to an announcement from NYDFS. “An insurer should offer the tools and services in a fair and nondiscriminatory manner to like insureds.”

Overly broad or vague language that could open the door to potential discrimination among policy holders with similar risk profiles will not be accepted by NYDFS, the department said, and insurers are “encouraged to file […] actuarially appropriate discounts for the installation of devices or systems that mitigate or prevent losses.”

The circular from NYDFS comes as the property insurance industry is reckoning with a “perfect storm” of rising costs for providers, paired with higher premiums and more limited coverage for consumers, according to a recent survey from Deloitte.

Gathering input from a sample of 2,000 homeowners across 21 states in January, the survey targeted “respondents who said their coverage is inadequate” in states at “high risk of climate-related disasters.”

Researchers found that rising home repair costs and more frequent claims are driving up the costs for insurers to provide coverage, which has led some insurers to pull back entirely from areas they classify as “high risk.” This makes it more challenging for residents in these areas to find coverage, particularly adequate coverage at what they would consider a reasonable price.