INS-50-07-00002-P Mandatory Underwriting Inspection Requirements for Private Passenger Automobiles

12/12/07 N.Y. St. Reg. INS-50-07-00002-P

NEW YORK STATE REGISTER

VOLUME XXIX, ISSUE 50

December 12, 2007

RULE MAKING ACTIVITIES

INSURANCE DEPARTMENT

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. INS-50-07-00002-P

Mandatory Underwriting Inspection Requirements for Private Passenger Automobiles

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed action:

Amendment of Part 67 (Regulation 79) of Title 11 NYCRR.

Statutory authority:

Insurance Law, sections 201, 301, 3411, 5303 and art. 53

Subject:

Mandatory underwriting inspection requirements for private passenger automobiles.

Purpose:

To modify the requirements placed on insurers with respect to the inspection of private passenger automobiles for physical damage coverage, with respect to the deferral of the inspection of private passenger automobiles and the issuance of suspension notices. The proposed rule revises and adds definitions, clarifies that the use of digital photography is permitted and permits electronic and digital storage and retrieval of inspection reports and requisite photographs.

Substance of proposed rule (Full text is posted at the following State website: http://www.ins.state.ny.us):

Section 67.0 is amended by deleting obsolete language and making editorial changes.

Section 67.1 is amended by modifying the definition of private passenger automobile, and by creating five new definitions.

Section 67.3 is amended by reducing from, four to two years, the time frame for an additional and/or replacement vehicle to be continuously insured with the same insurer or affiliate for consideration of a waiver of the mandatory inspection, adding two additional voluntary waivers where an insurer may waive or dispense with a mandatory inspection, modifying the requirements of subdivision 67.3(c) to reflect the addition of one of the new voluntary waivers, and making other minor editorial and/or grammatical changes.

Section 67.4 is amended by increasing the permissible period to defer a mandatory inspection from 5 calendar days to 5 business days, and making other minor editorial an/or grammatical changes.

Section 67.5 is amended by clarifying the requirements for inspection photographs, allowing for use of different mediums for maintaining the inspection reports and photographs, requiring the maintenance of a secure system of internal controls over the storage and retrieval of the inspection reports and photographs, and making other minor editorial and/or grammatical changes.

Section 67.6 is amended by modifying the Standards for Suspensions to reflect the increased permissible period to defer mandatory inspection from 5 calendar days to 5 business days and clarifying the time period for the insurer to mail the confirmation of suspension of physical damage coverage and making other minor editorial and/or grammatical changes.

Section 67.7 is amended by modifying Renewal Inspection Standards to reflect the increased permissible period to defer mandatory inspections from 5 calendar days to 5 business days, and making other minor editorial changes.

Section 67.8 is amended by stating the statutory requirement that NYAIP adopt rules approved by the Superintendent, increasing the permissible period to defer a mandatory inspection from 5 calendar days to 5 business days and making other minor editorial and/or grammatical changes.

Section 67.11 is renumbered to be Section 67.12 and a new Section 67.11 is promulgated, allowing an insurer to use a separate entity to maintain a central repository of its physical damage inspection reports, provided, however, that an insurer may utilize only one central repository at a time. The new section also permits more than one insurer to use the same central repository.

Section 67.12 is amended by allowing the Superintendent to approve substantially equivalent forms, and amending the Acknowledgment of Requirement for Photo Inspection form to reflect the increased permissible period to defer mandatory inspections from 5 calendar days to 5 business days.

Text of proposed rule and any required statements and analyses may be obtained from:

Andrew Mais, Insurance Department, 25 Beaver St., New York, NY 10004, [phone], e-mail: [e-mail]

Data, views or arguments may be submitted to:

Buffy Cheung, Insurance Department, 25 Beaver St., New York, NY 10004, [phone], e-mail: [e-mail]

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

1. Statutory authority: Sections 201, 301, 3411, 5303, and Article 53 of the Insurance Law.

These sections establish the superintendent's authority to promulgate regulations governing requirements placed on insurers with respect to the inspection of private passenger automobiles for physical damage coverage. Sections 201 and 301 of the Insurance Law authorize the superintendent to effectuate any power accorded to him under the Insurance Law, and to prescribe regulations interpreting the Insurance Law.

Section 3411 requires insurers to inspect private passenger automobiles insured for physical damage coverage except as provided for in a regulation prescribed by the superintendent.

Article 53 authorizes the Superintendent to approve a plan or plans for providing motor vehicle insurance coverage to persons who are unable to obtain coverage in the voluntary insurance market. The “New York Automobile Insurance Plan”, also commonly known as the Assigned Risk Plan, is the mechanism for providing such coverage. Section 5303 specifies coverages that are available through the New York Automobile Insurance Plan, and subjects such coverages to the requirements of section 3411 thereof, among other sections.

2. Legislative objectives: Section 3411 of the Insurance Law directs the superintendent to promulgate regulations implementing the section, which includes requirements placed on insurers with respect to the inspection of private passenger automobiles for physical damage coverage.

3. Needs and benefits: Section 3411 of the Insurance Law is intended to set forth a framework for providing physical damage coverage to private passenger automobiles. Inspections of such vehicles have been required since 1977 in order to combat insurance fraud (as where, for instance, coverage is purchased for a non-existent vehicle, or for a damaged vehicle). The existing rule allows insurers to waive the mandatory inspection only under limited circumstances. The proposed rule is necessary to alleviate the cost and burden to insurers, as well as consumers, where circumstances obviate or minimize the need for applicability of the provisions of this section. The proposed rule allows insurers to waive the mandatory inspection in additional circumstances, as follows:

a. For an additional and/or replacement vehicle, where the named insured has been continuously insured for automobile insurance, with the same insurer or affiliate, for two or more policy years. Previously this threshold was 4 or more policy years;

b. Where the insured under a new policy had the motor vehicle continuously insured for physical damage coverage by a previous insurer, and the previous insurer had inspected the motor vehicle within the prior two years, and the new insurer has obtained a copy of the previous inspection report and photographs from the previous insurer within 10 business days of the effective date of coverage; and

c. When requiring an inspection would cause a serious hardship to the insurer or the insured. The proposed rule modifies some of the requirements placed on insurers with respect to the deferral of the inspection of private passenger automobiles and the issuance of suspension notices. The proposed rule clarifies that the use of digital or video photography is permitted, revises one existing definition, adds five new definitions, permits electronic and digital storage for retrieval of inspection reports and requisite photographs, and provides an option to the insurer to submit forms to the Superintendent for approval if it chooses not to use the forms specified in the regulation.

4. Costs: The proposed rule imposes no compliance costs on state or local governments. There will be no additional costs incurred by the Insurance Department.

The insurer is required to maintain a secure system of internal controls over both the storage and retrieval of the inspection reports. The costs related to this should be minimal as the insurer will also incur savings related to the elimination of paper copies and storage related to the paper copies.

Insurers that choose not to use the forms specified in the regulation may incur costs related to the filing of substitute forms with the Superintendent.

The proposed rule modifies some of the current requirements, which will result in an overall reduction of costs to insurers in the areas of administration, processing of paperwork normally associated with governmental compliance, operations and underwriting.

5. Local government mandates: None.

6. Paperwork: Paperwork associated with the submission of the forms by an insurer should already be in place. The filing of the forms is an additional option provided to the insurer if it does not want to use the forms specified in the regulation. The proposed rule reduces the paperwork requirements of insurers by permitting electronic and digital storage for retrieval of inspection reports and requisite photographs.

7. Duplication: None.

8. Alternatives: The Department previously received inquiries from the insurance community regarding increasing the deferral period for inspection of private passenger automobiles. The Department considered increasing the deferral period from 5 calendar days to 10 calendar days but deemed 10 days too long and instead increased the deferral period to 5 business days. The Department previously received inquiries from the insurance community regarding the permissible use of digital photography. The proposed rule clarifies that the use of digital photography is permitted. The Department previously received comments and suggestions from the insurance community concerning various provisions of the regulation currently in effect, including requests for clarification of the definition of what constitutes a new, unused automobile, as well as various methods to increase efficiency, including the electronic storage and retrieval of inspection reports and photographs. After evaluating the comments, the Department decided that various additional revisions to the current regulation were necessary, which resulted in the proposed rule.

9. Federal standards: None.

10. Compliance schedule: It is anticipated that the regulated entities will be able to operate under the amendment's provisions immediately upon their taking effect.

Regulatory Flexibility Analysis

Small businesses:

The Insurance Department finds that this rule will not impose any adverse economic impact on small businesses and will not impose any reporting, recordkeeping or other compliance requirements on small businesses. The basis for this finding is that this rule is directed at all property/casualty insurance companies licensed to do business in New York State and the New York Automobile Insurance Plan (NYAIP), none of which fall within the definition of “small business” as found in section 102(8) of the State Administrative Procedure Act. The Insurance Department has reviewed filed Reports on Examination and Annual Statements of authorized property/casualty insurance companies licensed to do business in New York State, and believes that none of them fall within the definition of “small business”, because there are none that are both independently owned and have under one hundred employees.

Local governments:

The regulation does not impose any impacts, including any adverse impacts, or reporting, recordkeeping, or other compliance requirements on any local governments.

Rural Area Flexibility Analysis

The Insurance Department finds that this rule does not impose any additional burden on persons located in rural areas, and the Insurance Department finds that it will not have an adverse impact on rural areas.

The entities covered by this regulation, authorized property/casualty insurance companies licensed to do business in New York State, and the New York Automobile Insurance Plan (NYAIP), do business in every county in this state, including rural areas as defined under SAPA 102(10).

Job Impact Statement

Nature of Impact:

The Insurance Department finds that this rule will have little or no impact on jobs and employment opportunities. This regulation modifies some of the requirements placed on insurers with respect to the inspection of private passenger automobiles for physical damage coverage, with respect to the deferral of the inspection of private passenger automobiles and the issuance of suspension notices.

Categories and number affected:

No categories of jobs or number of jobs will be affected.

Regions of adverse impact:

This rule applies to all property/casualty insurance companies licensed to do business in New York State and the New York Automobile Insurance Plan (NYAIP). There would be no region in New York which would experience an adverse impact on jobs and employment opportunities.

Minimizing adverse impact:

No measures would need to be taken by the Department to minimize adverse impacts.

Self-employment opportunities:

This rule would not have a measurable impact on self-employment opportunities.