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Insurer to limit policies
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October 10, 1996: 11:15 a.m. ET
Citing costly disasters, Nationwide decides to scale back policies
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NEW YORK (CNNfn) -- Nationwide Insurance Co. is scaling back the sale of new homeowner policies in areas along the Eastern Seaboard and the Gulf of Mexico that are vulnerable to hurricanes.
On Thursday Nationwide, the fifth-largest U.S. insurer of homes, has joined a growing number of insurers that have limited sales in areas such as North Carolina, South Carolina, Florida and California where claims from natural disasters have cost billions of dollars.
Since 1992, hurricanes and tornadoes from Texas to Maine have caused about $21 billion in damages and left insurers reeling from the staggering expenses.
"Prudence requires us to diligently manage our exposure to catastrophic losses," Nationwide's president, Richard D. Crabtree, said in a statement.
The New York Times said Nationwide's decision will lead to higher costs and limited coverage for residents of coastal communities from Florida to Maine. In Florida, for example, insurance costs have soared by as much as 80 percent in the last three years as insurance companies flee the state.
Several states have already reported that the number of people forced to join insurance pools of last resort has increased up to 17 percent. The pools generally cost 20 percent to 25 percent more for policies and provide only limited coverage.
Nationwide joins a list that includes Allstate and State Farm, companies that have found the risks of insuring coastal areas to far exceed the benefits of doing business in those states. Experts said the rash of natural disasters in recent years has shocked insurance companies and convinced them to limit their sales in the highest risk areas.
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