NEW YORK – Homeowners on the East Coast shopping for insurance ahead of Hurricane Isabel (search) are finding themselves out of luck.
Several of the biggest home and auto insurance companies, including State Farm, Allstate Corp. (ALL) and Nationwide Financial Services Inc. (NFS), have stopped issuing insurance to those in the direct path of Isabel, according to company spokesmen.
As of Tuesday, the hurricane was still hundreds of miles out in the Atlantic Ocean but moving steadily on a path that would bring it ashore on Thursday on North Carolina's Outer Banks, then north through Virginia, and the state capital Richmond.
But even though a weakened Isabel is unlikely to cause damage on the scale of Hurricane Andrew, it still could be a multibillion dollar event for the insurance industry, according to analysts. Andrew cost insurers nearly $20 billion, making it the most costly storm ever, according to the Insurance Information Institute.
Halting insurance policy issuance ahead of an imminent catastrophe is standard industry practice and a way for insurers to avoid unnecessary risk.
"You don't want to insure a burning house," Insurance Information Institute spokeswoman Loretta Worters said.
Allstate's moratorium, which went into effect Tuesday, halts new policies or changes to existing policies throughout North Carolina, along coastal South Carolina and potential impacted areas of Virginia, according to company spokesman Mike Trevino. It also applies to boat and maritime insurance in Connecticut, Pennsylvania and New York, he said.
State Farm's halt affects all of the areas where the hurricane watch is in affect, spokesman Kip Biggs said.
But auto insurer Progressive Corp. (PGR) had no restrictions on new polices and spokesman Tom King said that, in general, cars suffer less damage in a hurricane than homes.
"When hurricanes hit, people tend to get in their cars and drive away from the coast," said Progressive spokesman Tom King. "You can't move your house."
Elizabeth Benton at the Lewis Insurance Agency in Wilmington, North Carolina said on Tuesday she had to turn down many customers seeking to change their policies to include wind damage as the storm approached.
"They will be calling right up until the last minute," Benton said.