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Insurance producers required to provide notice to policyholders by April 13, 2020

Following Gov. Andrew M. Cuomo’s issuance of Executive Order 202.13, the New York State Department of Financial Services issued several amendments to the Insurance Law.

Included in the amendments was a requirement that insurance producers notify their clients by Monday, April 13, 2020, of new nonpayment rules related to nonpayment of premiums. Producers may notify their clients either by mail or electronically, including email.

The requirement applies to all insurance producers who service an in-force life insurance policy, annuity contract, or fraternal benefit society certificate or who procured the property/casualty insurance policy for the property policyholder (i.e., the individual or small business to whom a p/c insurance policy is issued, including a certificate holder under a group insurance policy).

On excess/surplus policies, PIANY has interpreted the amendments as requiring the retail producer to send notice to the policyholder.

In order to assist our members in complying with this new requirement PIANY has created a sample letter that can be sent to clients here.

Changes in nonpayment rules

The relevant amendments make the following changes regarding nonpayment:

Insurers must permit policyholders who already have missed or do miss a payment due to financial hardship as a result of the COVID-19 pandemic, and who still can demonstrate financial hardship as a result of the COVID-19 pandemic, to be allowed to pay the missed payment over a 12-month period. Policyholders, who received a nonpayment cancellation notice prior to the March 29, 2020, effective date of the executive order, will be given a similar extension provided they can demonstrate financial hardship due to COVID-19.

Policies financed by premium-finance agencies

A separate amendment applies to policies financed by premium-finance agencies. In the case of insureds who have policies financed by premium-finance agencies, who miss a payment due to financial hardship as a result of the COVID-19 pandemic and who still can demonstrate financial hardship as a result of the pandemic, they will be given at least 60 days for a property/casualty insurance policy or at least 90 days for a life insurance policy to pay the missed payment. The premium-finance agency cannot impose any late fees related to the missed payment nor can it report the insured to a credit-reporting agency, or refer the insured to a debt-collection agency with respect to the missed payment. Note that the 60/90-day extension does not apply to policyholders who received a nonpayment cancellation notice prior to the March 29, 2020, effective date of the executive order.

Premium-finance companies also must permit policyholders who missed or may miss an installment due to financial hardship as a result of the COVID-19 pandemic, and who still can demonstrate financial hardship as a result of the COVID-19 pandemic to pay the missed payment over a 12-month period. This requirement does apply to policyholders who were issued a nonpayment cancellation notice prior to the March 29, 2020, effective date of the executive order.

Insurers and premium-finance agencies are permitted to request a written attestation from the insured as proof of financial hardship as a result of the COVID-19 pandemic.

The text of all the amendments can be found here.

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