Removes the state insurance funds exemption from licensing and other requirements of the insurance law

Section 2. Replaces the Commissioner of Labor with the Superintendent of DFS as the person who must approve the rules adopted by SIF for the conduct of its business. It also deletes the provision allowing for rules to be adopted if not approved by the Commissioner of Labor within 30 days.

Section 3. Deletes the requirement of policyholders of SIF to provide 30 days notice of their intent to withdraw from the Fund. Instead, policyholders would have to provide written notice of the effective date of cancellation.

Justification

New York Insurance Law section 1108 exempts certain insurers, including SIF from licensing and other requirements of the Insurance Law. SIF is a non-profit agency of the State of New York established in 1914 to provide a guaranteed source of workers' compensation insurance coverage for employers in New York State. SIF is the largest single carrier of workers' compensation insurance in the State, with approximately 37 percent of the market. SIF is administered by nine Commissioners, including the Commissioner of Labor and eight members who are appointed by the Governor with the consent of the Senate. The Commissioners appoint an executive director who is responsible for the direction and operation of SIF. SIF is completely self sustaining, acquiring all of its operating and reserve funds from the premiums it collects from its policyholders and its investment income. Although a quasi-public agency, SIF was intended by the Legislature to be treated the same as a private insurance company. See Commissioners of State insurance Fund v. Low, 285 App. Div. 525, 138 N.Y.S.2d 437 (3rd Dept 1955). It is more closely equated to an insurance company than to a typical state agency. Martin Minkiowtiz, PRACTICE COMMENTARIES, N.Y. Work. Comp. Section 76 (McKinney 1994) Despite the fact that SIF was intended to be treated a s a private insurance company, it is not licensed by the New York State DFS, not is it subject to the Department's oversight and regulation. As a result, SIF policyholders are put at a disadvantage when compared to policyholders of private workers' compensation insurers. If a SIF policyholder has a dispute with SIF regarding an unfair insurance practice, they have no recourse other than to bring the matter up with SIF. In contract, policyholders of private carriers may appeal to the DFS if they have a dispute with their insurer. SIF policyholders have reported various unfair practices which have gone unchecked. One common complaint is that SIF takes retaliatory actions against policyholders who seek to move their business from SIP to another coverage provider. Policyholders have reported aggressive and unfair tactics, such as SIF suddenly revising audits and questioning classifications in an effort to charge a departing customer a higher premium. Additionally, private insurance carriers who must be licensed by the DFS and subject to insurance law, are also placed at a competitive disadvantage compared to the SIF which is not subject to the same rules and regulations. To rectify these inequities, the bill would place SIF on an even footing with other insurers providing workers' compensation insurance by removing SIFs exemption from licensing and other insurance requirements. The bill would also insert the Superintendent of DFS, as opposed to the Commissioner of Labor, as the appropriate person to approve the rules adopted by the commissioners of SIF for the conduct of its business. These rules of conduct include those pertaining to the issuance of policies and their terms and conditions, the fixing of premium rates, record keep, payroll audits, billing and collection of premiums, inspection of risks and setting standards of safety and the adjustment and payment of claims and awards.

Lastly, the bill would remove a requirement placed upon policyholders of SIF that does not apply to policyholders of private insurers. Currently, SIF policyholders that want to cancel their policy with SIF because they have found other coverage must provide SIF with 30 days advance written notice. During this notice period, policyholders report that SIF employs aggressive and retaliatory tactics in an effort to retain the business. It is simply unfair to require policyholders of the SIF to provide more notice than is required of policyholders of private carriers.

Legislative history

2014 S.6755/A.9797; 2012 S.3836; 2009-10 S.1662; 2007-08 S.7673;

Fiscal implications

EFFECTIVE DATE : This act shall take effect on the ninetieth day after it shall have become law.