Relates to the applicability of property and casualty insurance rates

Summary of provisions

This bill amends Article 23 of the Insurance Law, specifically sections 2307 and 2311. Section 1 of the bill makes technical amendments to Section 2307 of the Insurance Law and also gives the superintendent the authority to order a company to cease the use of a certain policy for if the superintendent finds that forms is violative of public policy.

Section 2 of the bill adds new subdivisions (c), (d), (e), (f) and (g) to Section 2311. The new subdivision (c) lists various types of commercial insurance that would be exempt from rate and form filing requirements. This new subdivision also adds language whereby a policy for a large commercial insured, as defined by criteria set forth in the bill, would be exempt from these filing requirements as well. In order for a policyholder to be eligible for the large policyholder exemption, the policy being purchased would have to generate at least $25,000 in premium annually. Additionally, the policyholder would have to retain a risk manager and meet other financial criteria or statistical benchmarks. This subdivision also give the superintendent the authority to add lines of insurance to the list of lines that are exempt from the rate and form filing requirements. Subdivision (d) defines "risk manager." Subdivision (e) defines "highly protected risk." Subdivision (f) clarifies that policies exempted from the filing requirements under Section 2311 still must comply with all the other standards set forth in the Insurance Law. Subdivision (g) would allow the superintendent to reinstate prior approval, file and use or flex rating for any of the lines of insurance listed in subdivision (c) of Section 2311.

Justification

Certain lines of commercial insurance, by their very nature, are sold to policyholders who have the necessary level of financial sophistication so as to make regulatory oversight unnecessary. Other lines of insurance, such as surety and fidelity, are uncomplicated and straightforward enough so as to make regulatory oversight unnecessary as well. In other cases, the commercial policyholders are large enough and have the necessary resources to be able to determine independently whether a policy is appropriate for their insurance needs. Commercial policyholders do not require the same level of regulatory protection as is warranted for personal lines insurance. Commercial policyholders often have risk management professionals on staff and possess a higher level of knowledge and

sophistication relative to insurance options. Rather, commercial insureds need flexibility so that policies can be tailored to their particular needs. Commercial insureds also need to be able to respond rapidly to competitive forces, economic conditions and the needs of their customers. The current system in New York can hinder the ability of insurers to respond to the needs of their commercial customers, which has led many commercial insureds to utilize alternate insurance mechanisms to satisfy their insurance needs. These alternate insurance mechanisms are often unregulated or subject to minimal regulation, leaving commercial insureds utilizing such mechanisms without the protection of the guaranty funds, adequate solvency regulation or other valuable regulatory protections.

The attached legislation would modernize the regulation of commercial insurance in New York and would help to make New York a more attractive place for insurers to do business. This legislation would also facilitate operations and reduce costs for commercial policyholders because it would promote competition among carriers which would drive down premiums. In addition, this legislation would allow the Department of Financial Services to focus its resources on solvency and personal lines regulation which will, in turn, speed approvals in those areas.

Legislative history

New bill.

Fiscal implications

None.

Effective date

Immediately.