Relates to encouraging modernization of mutual and cooperative insurance companies' information systems technology

Summary of provisions

Section 1. Amend Insurance Law section 4110(a) to temporarily raise the management expenses limit for domestic mutual property/casualty insur- ance companies if they incur expenses upon making a new system upgrade which places the insurer's total management expenses over the limit. This temporary increase in the limit could not exceed 5 percentage points and would be subject to approval by the superintendent. In essence, this would allow such expenses to be made even if they cause the mutual insurer to exceed the statute's management expenses cap. Additionally, insurers are prohibited from increasing premiums solely as a result of the management expenses cap being exceeded.

Section 2. Amend Insurance Law section 6613(a) to similarly increase the management expenses limit for cooperative property/casualty insurance companies if they incur expenses upon making a new system upgrade which places their total management expenses over the limit. This temporary increase in the limit could not exceed 5 percentage points. In essence, this would allow such expenses to be made even if they cause the cooper- ative insurer to exceed the statute's management expenses cap. Addi- tionally, insurers are prohibited from increasing premiums solely as a result of the management expenses cap being exceeded.

Section 3. Effective date is immediately upon enactment.

Justification

Domestic mutual property/casualty insurance companies are important drivers of the New York state economy, employing well over 2,000 New Yorkers. In addition, they provide important property/casualty coverage

to numerous New York businesses and individuals as well as businesses and individuals in other states. This legislation would assist mutual insurers by encouraging these companies to acquire state of the art, modern computer and information technology systems for purposes of maxi- mizing customer service. In today's world, insurance consumers increas- ingly want "24/7" access to their insurer and its services, whether reporting a claim or filling out a renewal for their policy. Since the vast majority of these mutual insurance companies are providing services to residents and businesses in other states, this measure helps keep these insurers thriving in New York as they engage in competition with non-New York domiciled property/casualty insurers to keep those other states' residents and businesses using insurance products created, sold and managed by New York domestic companies employing New Yorkers.

In a similar vein, this bill would also help cooperative insurance companies to continue to serve their vital role in the New York property/casualty insurance market. Cooperatives are the major insurance writers of farm owners' coverage and agricultural-related small busi- nesses, small contractors' liability insurance, seasonal businesses, as well as small diners and taverns. Co-ops also provide employment for over 2,200 professional and clerical staff in New York State, with the vast bulk of these jobs spread throughout Upstate New York. Furthermore, New York cooperative insurance companies provide necessary property/casualty coverage to over 70,000 New York State small busi- nesses.

Importantly, the legislation ensures that there will be no undue harm to consumers by prohibiting insurers from raising premiums solely as a result of the management expenses cap being exceeded.

In sum, this proposed legislation would help both domestic mutual insur- ance companies and cooperative insurance companies to upgrade their computer hardware and software in order to provide their customers with the most efficient and effective means of doing business.

Legislative history

S.4043-A of 2011-12.

Fiscal implications

None.

Effective date

Immediately.