NY lawmaker urges Allstate to rethink its withdrawal from new homeowner policies and some renewals

Sen. Hillary Rodham Clinton has called on Allstate to reconsider its policy adopted earlier this year to stop offering homeowners insurance to consumers living in coastal areas, including Long Island, New York City and Westchester County.

In a news release issued over the weekend, the New York Democrat referred to "flood insurance," which she said Allstate had dropped in coastal areas. Clinton spokeswoman Jennifer Hanley said yesterday the release was actually about homeowners' insurance in coastal areas. "The Senator sent a letter to Allstate's CEO because holders of these policies deserve answers. Allstate owes it to its customers to explain their decision."

Clinton's initial news release highlighted the confusion of many homeowners who mistakenly believe they are covered for flood damage if they have homeowners insurance. But those are two different types of policies, insurance experts said.

Insurance companies including Allstate, MetLife and others do not provide flood insurance. They act as brokers for the Federal Emergency Management Agency, which pays damages in the event of floods. Homeowners are advised to carefully check their policies to determine what kind of coverage they have.

Clinton issued her news release after touring areas of New York's southern tier, which were badly hit last week by heavy rains and floods.

Earlier this year, Allstate, the state's largest provider of homeowners insurance, said it was no longer offering new homeowners insurance policies in an eight-county downstate area - and not renewing many existing policies when they expire - to limit its exposure to damage claims from major storms.

In a letter to Allstate chairman Edward M. Liddy, Clinton called the company's decision "very troubling, especially in light of the recent floods that have ravaged New York State."

Krista Conte, an Allstate spokeswoman on Long Island, said, "In order to preserve our promise for the vast majority of our customers, we must responsibly manage our risk. We welcome the opportunity to meet with Senator Clinton on the topic." Allstate has 18 percent of the state's homeowners insurance market and 25.9 percent in the eight affected counties.

Weather experts have said the United States is in a cycle of severe storms that may strike coastal areas for the next 15 years. They repeatedly cite the Category 3 hurricane of 1938 that hit Long Island, killing 45 people, destroying thousands of buildings and carving out the Shinnecock Canal.

MetLife also has cut back on the number of homeowners policies it will offer, company spokesmen have said.

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BY JAMES BERNSTEIN
Newsday Staff Writer

Copyright 2006 Newsday Inc.