INS-21-07-00001-P Homeowners Insurance Disclosure Information and other Notices

5/23/07 N.Y. St. Reg. INS-21-07-00001-P

NEW YORK STATE REGISTER

VOLUME XXIX, ISSUE 21

May 23, 2007

RULE MAKING ACTIVITIES

INSURANCE DEPARTMENT

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. INS-21-07-00001-P

Homeowners Insurance Disclosure Information and other Notices

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

Proposed action:

Amendment of Part 74 (Regulation 159) of Title 11 NYCRR.

Statutory authority:

Insurance Law, sections 201, 301, 3425, 3445 and 5403

Subject:

Homeowners insurance disclosure information and other notices.

Purpose:

To set forth the minimum notification requirements pertaining to the notices required by sections 3425(e) and 5403(d).

Text of proposed rule:

The Title of Part 74 is hereby amended as follows:

[HOMEOWNER'S] HOMEOWNERS INSURANCE DISCLOSURE INFORMATION AND OTHER NOTICES

Section 74.0 is amended to read as follows:

Section 74.0 Introduction and purpose.

(a)(1) Chapter 44 of the Laws of 1998 enacted a new section 3445 of the Insurance Law, requiring the Superintendent to establish by regulation disclosure requirements with respect to the operation of any deductible in a [homeowner's] homeowners insurance policy or dwelling fire personal lines policy [which] that applies as the result of a windstorm. Further, section 3445 requires such regulation to prescribe the form of a notice to be provided by an insurer to an insured and provides that the notice shall explain in clear and plain language the amount of the deductible, the circumstances under which the deductible applies and any other matters which the Superintendent, in his or her discretion, shall deem necessary or appropriate.

[(b)] (2) [The purpose of this] This Part [is to set] sets standards for the uniform display of windstorm deductibles, which consist of hurricane and non-hurricane deductibles, in the policy declarations; and [to provide] provides the minimum provisions to be contained in the policyholder disclosure notice, which will explain the purpose and operation of the hurricane deductible, and must accompany new and renewal policies containing such deductibles.

(b)(1) Chapter 162 of the Laws of 2006 amended section 3425(e) of the Insurance Law to direct the Superintendent to establish by regulation standards for notices of cancellation, nonrenewal, and conditional renewal for certain homeowners policies as defined in section 2351(a) of the Insurance Law where the property is located in an area served by a market assistance program established by the Superintendent for the purpose of facilitating placement of homeowners insurance. Chapter 162 also added a new section 5403(d), which directs the New York Property Insurance Underwriting Association (NYPIUA) to notify policyholders that may be eligible for coverage in the market assistance program of the availability of coverage.

(2) This Part establishes the minimum requirements pertaining to the notices required by Chapter 162.

New Sections 74.2 and 74.3 are added to read as follows:

Section 74.2 Insurer cancellation, nonrenewal and conditional renewal notices.

Every notice of cancellation, nonrenewal or conditional renewal issued on or after November 23, 2006 for a homeowners insurance policy as defined in section 2351(a) of the Insurance Law insuring property that may be eligible for participation in a market assistance program established by the Superintendent for the purpose of facilitating placement of homeowners insurance shall advise the insured of the availability of the market assistance program and the availability of coverage through NYPIUA for insurance. The notice shall be conspicuous and provide sufficient information on how to apply to the market assistance program and to NYPIUA, including the name, address, telephone number and Web site address of the administrator of the market assistance program and of NYPIUA.

Section 74.3 NYPIUA notices.

On and after November 23, 2006, with respect to a NYPIUA policyholder whose insured property is located in an area served by a market assistance program established by the Superintendent for the purposes of facilitating placement of homeowners insurance, upon issuance or renewal of the policy, NYPIUA shall provide the notice required by section 5403(d) of the Insurance Law and this section. The notice shall be conspicuous and provide sufficient information on how to apply to the market assistance program including the name, address, telephone number and Web site address of the administrator of the market assistance program.

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.

This action was not under consideration at the time this agency's regulatory agenda was submitted.

Regulatory Impact Statement

1. Statutory authority: Sections 201, 301, 3425, 3445, and 5403 of the Insurance Law.

Sections 201 and 301 authorize the Superintendent to prescribe regulations interpreting the Insurance Law as well as effectuating any power granted to the Superintendent under the Insurance Law and to prescribe forms or otherwise make regulations.

Section 3425 governs cancellation and renewal provisions of certain property/casualty insurance policies.

Section 3445 authorizes the Superintendent to prescribe regulations regarding disclosure requirements for windstorm insurance.

Section 5403 provides the procedures for the New York Property Insurance Underwriting Association (NYPIUA).

2. Legislative objectives: The Legislature, in enacting Chapter 162 of the Laws of 2006, intended to improve public awareness of market assistance programs, such as the Coastal Market Assistance Program (CMAP), that may be available to homeowners in New York, and of NYPIUA. Chapter 162 requires that when a policyholder receives a notice of cancellation, nonrenewal or conditional renewal for a homeowners insurance policy as specified in Section 3425(e) of the Insurance Law, on property located in an area served by a market assistance program established by the Superintendent for the purpose of facilitating placement of homeowners insurance, that the policyholder is also notified by the insurer of possible eligibility for coverage through the market assistance program or through NYPIUA. In addition, Chapter 162 requires NYPIUA to notify its policyholders whose properties are located in an area served by a market assistance program to be notified of their possible eligibility for coverage through the market assistance program. In the Senate bill memorandum in support of Chapter 162, it was stated that many consumers who were eligible for CMAP were unaware of its existence. By ensuring that consumers who may be eligible for CMAP or other market assistance programs that may be established are made aware of the availability of the program, CMAP or other programs would be used to their fullest potential and more insureds would have access to more complete coverage than that offered by NYPIUA. In order to implement Chapter 162, the Legislature required the Superintendent to promulgate regulations governing the notices required by Chapter 162.

3. Needs and benefits: The rule, which is required by Chapter 162, is necessary to set forth certain minimum notification requirements to assure that policyholders that may be eligible for a market assistance program or NYPIUA are notified of this including information necessary to apply for coverage. This notification would make information on how to apply for an insurance policy from a market assistance program or from NYPIUA more readily available to the policyholders.

4. Costs: This rule imposes no compliance costs on state or local governments. There will be no additional costs incurred by the Insurance Department. The rule requires specific information to be included in notices of cancellation, nonrenewal or conditional renewal issued for a homeowners insurance policy as defined in Section 2351 of the Insurance Law. There will be costs associated with the insurers adding the specific information onto the homeowners notices specified in Section 3425(e) of the Insurance Law. However, the notice requirement is mandated by Section 3425 and not by this regulation, which implements the statutory requirement. These costs should be minimal as the insurers are already issuing the cancellation, nonrenewal or conditional renewal notices and the rule only requires that the insurance companies add the specific information to the notices. Insurers are not required to, nor should they need to, hire new personnel to comply with the new notification requirements.

In addition, NYPIUA is required to notify policyholders who may be eligible, of the availability of coverage in a market assistance program. There will be costs associated with NYPIUA issuing these new notices. However, the notice is required by Section 5403(d) and not by this regulation, which implements the statutory requirement.

5. Local government mandates: None.

6. Paperwork: Insurers will incur additional paperwork associated with adding the specific information required by the rule to the cancellation, nonrenewal, and conditional renewal notices specified in Section 3425(e) of the Insurance Law. However, the paperwork should be minimal as the insurers are adding the required language to notices already being issued by the company. Moreover, this notice is required by Section 3425 and not by this regulation.

NYPIUA will incur additional paperwork in notifying policyholders that may be eligible of the availability of coverage in a market assistance program. However, this notice is required by Section 5403(d) and not by this regulation.

7. Duplication: None.

8. Alternatives: The Department considered requiring the names and contact information of the insurers participating in market assistance programs to be included in the notice. However, because a market assistance program is voluntary, there could be additional market assistance programs established, and the list of participating insurers could change frequently, it was determined that this requirement should not be included in the rule.

The Department did outreach with various trade organizations. One of the trade organizations expressed concern that insurers may have problems complying with the November 23, 2006 effective date. The Department has no discretion in setting the date as it was set forth by Chapter 162 of the Laws of 2006. In addition, as long as the information required by the rule is part of the cancellation, nonrenewal, or conditional renewal notice and the information is conspicuous, the information required by the rule may be on a separate page of the notice.

The trade organization requested that the Department consider exempting, from the market assistance plan notice requirement, cancellation notices issued for non payment of premium or issued at the request of the insured. Chapter 162 does not provide exceptions to the notice requirements.

9. Federal standards: None.

10. Compliance schedule: The effective date of the enabling legislation, Chapter 162 of the Laws of 2006, was November 23, 2006. The rule provided that every notice of cancellation, nonrenewal or conditional renewal issued on or after November 23, 2006 for a homeowners policy as specified in Section 3425(e) of the Insurance Law to be in compliance. On or after November 23, 2006, NYPIUA was required to provide the notice required by Section 5403(d) of the Insurance Law upon issuance or renewal of a policy.

Regulatory Flexibility Analysis

The Insurance Department finds that this rule would not impose reporting, recordkeeping or other requirements on small businesses. The rule is directed at property/casualty insurers. The Insurance Department has reviewed/or monitored Reports on Examination and Annual Statements of property/casualty insurers and believes that none of them fall within the definition of “small business” contained in section 102(8) of the State Administrative Procedure Act, because there are none which are independently owned and have under 100 employees.

The Insurance Department finds that this rule will not impose reporting, recordkeeping or other compliance requirements on local governments. The basis for this finding is that this rule is directed at insurance companies, none of which are 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 rule applies uniformly to parties that do business in both rural and nonrural areas of New York State.

Job Impact Statement

This rule should not have any adverse impact on jobs and employment opportunities in this state since the rule merely sets forth minimum notification requirements pertaining to the notices required by Insurance Law Sections 3425(e) and 5403(d). Insurers are not required to, nor should they need to, hire new personnel to comply with the new notification requirements.