Agent survey: Rates up, coverage down

CNY Business Journal (1996+), Dec 20, 2002 by Dickinson, Casey J

SYRACUSE - Market conditions are driving a tide of rising insurance rates and a shortage of coverage for New Yorkers, according to a survey conducted by the Independent Insurance Agents Association of New York, Inc. (IIAANY). The association invited its 1,900 member agencies to fill out a survey form on its Web site from Oct. 14 to Oct. 28. The unscientific poll attracted 182 respondents.

The online-poll results mirror ongoing concerns in the, insurance business, says J.B. McCampbell, director of communications for IIAANY.

"Our members are seeing availability problems and high premiums across all lines," McCampbell says.

The vast majority of members who responded to the survey reported feeling the effects of New York's strict contractorliability law. Many insurers do not write policies for contractors in New York because of state Labor Law. section 240, known as-the "Scaffold Law" that imposes strict liability on employers for workers' falls and other height-related mishaps. More than 90 percent of agents responded that companies they represent refuse to write contractor-liability policies.

"Contractors have been seriously impacted by the law," says Edmund Miccio, senior marketer for the Young Agency, a division of Brown and Brown.

Earlier this year, the building industry took matters into its own hands, opting to create its own insurance company. In October, the 3,500-member New York State Builders Association (NYSBA) applied to the state insurance department to create a reciprocal-liability insurance company. NYSBA is working with Marsh, Inc. to set up its insurance company.

The New York Insurance Association (NYIA) has lobbied for changes in the law, as has the Builders Association. The groups would like to see strict liability eliminated, or at least replaced with a comparative-liability system that takes workers' negligence into account, says Ellen Melchionni, vice president of NYIA. Companies aren't writing contractor-liability policies in New York because the state's liability standard makes the business unprofitable, she adds, and the NYSBA insurance company will find the same market conditions as other insurers.

"If an insurance company could write the policies and still make a profit," says Melchionni, "you can be sure the company would write the policies."

The industry plans to pursue its annual drive for liability reform in the coming year, says Schuyler Hellings, president of the Independent Insurance Agents of Central New York.

Hellings plans to lead a number of agents to Albany in February 2003 to lobby the state legislature during the insurance industry's annual legislative day in the capital. The issue affects not only the insurance business, but also the state's overall economic health.

"The industry isn't opposed to legitimate claims," he says, "but coverage is ridiculously expensive and that ultimately gets passed on to the consumer." Philip LaRocque, NYSBA executive vice president, cites premium increases of more than 100 percent for those members lucky enough to find any insurer.

More than 80 percent of agents responding to the IIAANY survey said at least one of their represented carriers had refused to renew contractors' policies this year. General liability rates rose from 25 to 50 percent on most policies this year, according to the survey respondents. More than two-thirds of respondents also reported insurers adding new policy restrictions forbidding coverage of height work, terror, and mold.

Last month, the federal government passed new laws regarding insurance against acts of terror. A federal program now backs insurers against terror losses, making coverage available, says Miccio. The coverage will likely add 7 percent to the cost of a policy, he adds. Many building projects across the nation hit insurance roadblocks after Sept. 11 losses caused widespread terror-risk restrictions.

IIAANY is sending out kits to its members this month, explaining the effect of the new federal terror-insurance law on the industry.

"This isn't just a New York or Virginia issue," says McCampbell, "terror is a nationwide issue for insurers."

Other IIAANY survey findings include an increase in autoinsurance premiums of 11 to 25 percent. No survey respondents reported a decrease. Nearly all respondents reported a carrier exiting the state's automobile, commercial liability, or workers'-compensation market in the past year.