Homeowners insurance market on Long Island is 'worst' in years, brokers say
Members of the Brentwood Fire Department responded to a house fire in August. It is getting more difficult for Long Islanders to obtain home insurance. Credit: Paul Mazza
Long Islanders are facing rising home insurance premiums, and local insurance brokers say policyholders will soon have fewer options after several insurers recently announced their exits from the New York market.
Meanwhile, other homeowners on the market for coverage, particularly those living near the water, will likely be disappointed in the prices and options they find, brokers said.
"It’s the worst market I’ve ever seen," said Aaron Stein, president of insurance agency Norton & Siegel in Babylon, who’s been working in insurance for 47 years.
The major drivers of higher premiums include the rising cost of reinsurance — the insurance policies insurers themselves take out to protect against catastrophic losses — extreme weather events driven by climate change and the prevalence of older homes on Long Island, Stein said.
"Rates are going up by leaps and bounds," Stein said. "In our office, we’re telling people, if they’re not being canceled, you have a good company, and you shouldn’t leave."
The average cost of home insurance in the U.S. is $2,285 per year for a policy with a $300,000 dwelling limit, according to Bankrate and Quadrant Information Services. The average in New York for that same policy is $1,735 a year. Local brokers have noted that many Long Island homes need a higher coverage limit.
In July, insurer Mountain Valley Indemnity Company wrote to policyholders to "strongly recommend you work with your independent agent to secure a replacement policy immediately" because of the deteriorating financial position of its parent company, Adirondack Insurance Exchange. The companies plan to wind down by Dec. 31 and will offer prorated refunds for any premiums paid that cover the period after cancellation.
The insurer said Adirondack had been hurt by increasing claims payments and a recent downgrade by its rating agency.
Another insurer, Berkshire Hathaway’s AmGuard, announced in July it would stop offering personal lines insurance, such as home and umbrella policies, nationwide. The company is seeking approval for its withdrawal from the New York State Department of Financial Services, which regulates insurers, according to the trade group Professional Insurance Agents of New York State.
Adirondack "policyholders have to find coverage in a matter of three or four months — that’s a shortened timeline," said Bradford Lachut, an attorney and director of government and industry affairs at Professional Insurance Agents in Glenmont, near Albany. “ ... I think you will see a lot of sticker shock, unfortunately, for people going into the marketplace. Everyone will have to get coverage right now, and Adirondack was below what other people were charging."
In April, local insurance brokers told Newsday their clients were paying 10% to 30% more in premiums at renewal time compared with the previous year. Lachut said he’d heard of premium increases typically within the range of 10% to 40% in conversation with agents around New York, and Long Island is the toughest market statewide.
As opposed to Mountain Valley, AmGuard’s withdrawal is a more conventional exit and its policyholders will have a longer runway before they have to change plans, if DFS approves the company’s plan, Lachut said.
Allstate had acquired Adirondack’s management company through the $4 billion purchase of National General Holdings Corp. in 2021.
David W. Clausen, CEO of Coastal Insurance Solutions in Rocky Point, said he had clients who used Mountain Valley and must now find a new carrier. Even Long Islanders who weren’t covered by those insurers exiting the market should take notice, he said.
"What this tells you is that rate is going to go up moving forward as capacity dries up," he said. "If there’s less supply and higher demand, the cost is going to go up."
There are restrictions placed on insurers who want to walk away from high-risk policyholders. In New York, insurers may cancel a homeowners or tenants policy during the first 60 days it is in effect if they state specific reasons for the cancellation.
But after that 60-day period, insurers cannot cancel or decline to renew a policy for three years, except for certain reasons, including nonpayment of premium, fraud or physical changes to the property.
If insurers opt not to offer a renewal after that three-year period, state law requires they provide 45 to 60 days’ notice of the decision.
To some extent, homeowners still face the effects of pandemic-era inflation, Clausen said. When building costs rose during the pandemic because of supply chain issues and rising labor costs, insurers were hit with higher expenses to rebuild homes.
Insurers regulated by DFS must get their proposed premiums approved, so it can take over a year before they are able to document to the state their need to raise prices to cover claims, Clausen said. Now, insurers are finally catching up.
"As you get closer and closer to the South Shore, and near tidal water, you’re going to see your premiums will go up due to the increased exposure for a wind loss," he said.
That’s not because of the risk of floods. Flood insurance is a separate insurance product. Households in high-risk areas are required by their mortgage lenders to buy flood coverage.
Homeowners don’t need to worry about the availability of flood coverage, Clausen said. That’s because the National Flood Insurance Program backs coverage in all communities that participate in the program, including the vast majority, if not all, of Long Island’s towns, villages and cities. Flood insurance through the NFIP is sold through private companies but backed by the federal government. Private carriers can also compete with the government's rates.
In the home insurance market, rates could rise to the extent that issuing coverage to Long Islanders is more attractive, or some might try to pick up new customers with lower rates. Clausen said he hoped that time wasn’t far off.
"Hopefully, we’re at the peak of it," he said. "If I had a guess, I would say we’re at or approaching the peak of it. Hopefully, this is the worst of the worst."
Long Islanders are facing rising home insurance premiums, and local insurance brokers say policyholders will soon have fewer options after several insurers recently announced their exits from the New York market.
Meanwhile, other homeowners on the market for coverage, particularly those living near the water, will likely be disappointed in the prices and options they find, brokers said.
"It’s the worst market I’ve ever seen," said Aaron Stein, president of insurance agency Norton & Siegel in Babylon, who’s been working in insurance for 47 years.
The major drivers of higher premiums include the rising cost of reinsurance — the insurance policies insurers themselves take out to protect against catastrophic losses — extreme weather events driven by climate change and the prevalence of older homes on Long Island, Stein said.
Tips to save on home insurance
There are several ways policyholders can look to lower their premiums, said David W. Clausen, CEO of Coastal Insurance Solutions in Rocky Point.
- Bundle home insurance with other policies, such as umbrella and auto coverage.
- Review the "dwelling amount" covered under the insurance policy to ensure coverage is sufficient but that replacement cost isn't higher than necessary.
- Consider raising your deductible — the amount a person must pay out of pocket before an insurer will pay — if you have enough savings to cover repairs.
- Check to ensure you are receiving credits for home features such as an alarm system or an automatic water shut-off valve.
A lawn clings to the roots of a large downed tree in East Northport in 2019 after a storm. Credit: James Carbone
"Rates are going up by leaps and bounds," Stein said. "In our office, we’re telling people, if they’re not being canceled, you have a good company, and you shouldn’t leave."
The average cost of home insurance in the U.S. is $2,285 per year for a policy with a $300,000 dwelling limit, according to Bankrate and Quadrant Information Services. The average in New York for that same policy is $1,735 a year. Local brokers have noted that many Long Island homes need a higher coverage limit.
In July, insurer Mountain Valley Indemnity Company wrote to policyholders to "strongly recommend you work with your independent agent to secure a replacement policy immediately" because of the deteriorating financial position of its parent company, Adirondack Insurance Exchange. The companies plan to wind down by Dec. 31 and will offer prorated refunds for any premiums paid that cover the period after cancellation.
The insurer said Adirondack had been hurt by increasing claims payments and a recent downgrade by its rating agency.
Another insurer, Berkshire Hathaway’s AmGuard, announced in July it would stop offering personal lines insurance, such as home and umbrella policies, nationwide. The company is seeking approval for its withdrawal from the New York State Department of Financial Services, which regulates insurers, according to the trade group Professional Insurance Agents of New York State.
Adirondack "policyholders have to find coverage in a matter of three or four months — that’s a shortened timeline," said Bradford Lachut, an attorney and director of government and industry affairs at Professional Insurance Agents in Glenmont, near Albany. “ ... I think you will see a lot of sticker shock, unfortunately, for people going into the marketplace. Everyone will have to get coverage right now, and Adirondack was below what other people were charging."
In April, local insurance brokers told Newsday their clients were paying 10% to 30% more in premiums at renewal time compared with the previous year. Lachut said he’d heard of premium increases typically within the range of 10% to 40% in conversation with agents around New York, and Long Island is the toughest market statewide.
As opposed to Mountain Valley, AmGuard’s withdrawal is a more conventional exit and its policyholders will have a longer runway before they have to change plans, if DFS approves the company’s plan, Lachut said.
Allstate had acquired Adirondack’s management company through the $4 billion purchase of National General Holdings Corp. in 2021.
David W. Clausen, CEO of Coastal Insurance Solutions in Rocky Point, said he had clients who used Mountain Valley and must now find a new carrier. Even Long Islanders who weren’t covered by those insurers exiting the market should take notice, he said.
"What this tells you is that rate is going to go up moving forward as capacity dries up," he said. "If there’s less supply and higher demand, the cost is going to go up."
There are restrictions placed on insurers who want to walk away from high-risk policyholders. In New York, insurers may cancel a homeowners or tenants policy during the first 60 days it is in effect if they state specific reasons for the cancellation.
But after that 60-day period, insurers cannot cancel or decline to renew a policy for three years, except for certain reasons, including nonpayment of premium, fraud or physical changes to the property.
If insurers opt not to offer a renewal after that three-year period, state law requires they provide 45 to 60 days’ notice of the decision.
To some extent, homeowners still face the effects of pandemic-era inflation, Clausen said. When building costs rose during the pandemic because of supply chain issues and rising labor costs, insurers were hit with higher expenses to rebuild homes.
Insurers regulated by DFS must get their proposed premiums approved, so it can take over a year before they are able to document to the state their need to raise prices to cover claims, Clausen said. Now, insurers are finally catching up.
"As you get closer and closer to the South Shore, and near tidal water, you’re going to see your premiums will go up due to the increased exposure for a wind loss," he said.
That’s not because of the risk of floods. Flood insurance is a separate insurance product. Households in high-risk areas are required by their mortgage lenders to buy flood coverage.
Homeowners don’t need to worry about the availability of flood coverage, Clausen said. That’s because the National Flood Insurance Program backs coverage in all communities that participate in the program, including the vast majority, if not all, of Long Island’s towns, villages and cities. Flood insurance through the NFIP is sold through private companies but backed by the federal government. Private carriers can also compete with the government's rates.
In the home insurance market, rates could rise to the extent that issuing coverage to Long Islanders is more attractive, or some might try to pick up new customers with lower rates. Clausen said he hoped that time wasn’t far off.
"Hopefully, we’re at the peak of it," he said. "If I had a guess, I would say we’re at or approaching the peak of it. Hopefully, this is the worst of the worst."
Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.
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