COVID-19-related insurance regulatory developments

To date, California and New Jersey are the only states that have mandated such premium refunds, but many other states have issued bulletins or public statements requesting that insurers take similar steps. And insurers have answered. In an April 23 Press Release[8], the New Hampshire Department of Insurance thanked two dozen insurance groups, representing more than 90% of the written auto insurance premium in New Hampshire, for instituting voluntary premium refund programs that will return approximately $32 million to New Hampshire consumers either as a credit towards future premiums or a cash refund.

Application to Insurers. Insurers seeking to implement policyholder relief measures face a patchwork of state requirements and a myriad of potential regulatory issues. For example, the scope of some state bulletins is explicitly limited to insurers writing certain lines of business, while other bulletins are arguably applicable to all insurers doing business in the state. In states where a bulletin’s scope is unclear, there may be questions as to whether excess and surplus lines policies, which are not subject to rate filing requirements and in some states are not subject to standard cancellation and non-renewal notice requirements, are subject to the mandate. State orders also vary as to whether grace periods must be extended for all policyholders or only policyholders who can demonstrate financial hardship due to COVID-19 (and if the latter, what sort of proof the insurer may require to verify the hardship). For example, the New York emergency regulations referenced above require insurers to accept a sworn statement from the policyholder as proof of financial hardship.

In addition, some state orders provide that policies may be retroactively cancelled to the original premium due date if premium is not paid following the end of the grace period, while other orders are silent or expressly require that coverage be maintained throughout the grace period. Insurers implementing these policyholder relief measures must also ensure that they are implemented fairly and consistently across policyholders, or risk violating state unfair trade practice laws. Some states have issued general guidance to insurers outlining the types of relief measures that will not be considered to violate these laws (if specific conditions are met), while other states are requiring insurers to submit any proposals for policyholder relief for prior review by the state insurance department.

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