Professional Insurance Association of New Jersey president John D’Agostino, Jr., CIC, has addressed a letter to Douglas A. Wheeler, Assistant Commissioner of Legislative and Regulatory Affairs for the New Jersey Department of Banking and Insurance concerning the proposed regulations, PRN 2003-277, governing the renewal and non-renewal of automobile insurance policies, tier-rating plans and underwriting rules.
The following is the text of that letter:
Dear Assistant Commissioner Wheeler:
PIANJ appreciates the opportunity to comment upon the department’s proposal amending the rules regarding renewal and nonrenewal of automobile insurance policies. PIANJ supports the department’s goal to make it easier for insureds to maintain coverage with their current insurer. Many of the changes, such as changing the due date on the billing notice to indicate 11:59 p.m. of the due date, will certainly help to accomplish this goal.
Receipt of Renewal Premiums — 11:3-19A.7
PIANJ has concerns, however, with proposed Section 11:3-19A.7. Proposed subsection (g) provides that insurers must file for approval underwriting rules that state that where acceptance of the policy renewal is made by payment of the renewal premium, the premium shall be deemed to have been received timely if it was mailed prior to the due date and received by the insurer within three business days after the due date.
Instead of adopting this criteria for determining timely receipt of renewal premiums, PIANJ suggests the department adopt the “mailbox rule.” In the 1999 case of Okasa v. Hall, the New Jersey Appellate Division adopted this rule. The court held that when an insurer sends an offer by mail, the reply accepting the offer may be sent through the same medium and the contract will be complete when the acceptance is mailed. The theory is that if someone makes an offer through the mail, he has authorized the acceptance to be made by mail as well. Therefore, an insurer is deemed to have received a renewal payment when the insured places the payment in the mail.
The department has adopted a similar rule as the one PIANJ proposes with respect to health claims payments (See 11:22-1.5(c)). Therefore, it’s logical to use the same rule for auto premium payments. Adopting the mailbox rule would certainly make it much easier for insurance consumers to determine whether their payment is timely. Under the current proposal, even if the insured mails the payment before the due date, he will still be left wondering whether the insurer received his payment within three business days. PIANJ also suggests that if the department adopts the mailbox rule, that the burden of establishing the postmark date be placed upon insurance companies.
PIANJ suggests the following alternatives to subsection (g).
All affiliated insurers shall file for approval underwriting rules that state that where acceptance of the policy renewal is made by payment of the renewal premium, payment of the renewal premium shall be considered to have been made on the date payment was placed in the United States mail in a properly addressed, post paid envelope. An insurer which contends that a renewal payment was not timely paid shall have the burden of establishing the postmark date.
Alternatively, if the department chooses not to adopt the mailbox rule, PIANJ suggests that the three business day timeframe in the proposal be extended to seven business days. This will allow sufficient delivery time by the postal service and will recognize the realities of the payment processing capabilities of insurance companies. Many companies do not process incoming payments for several days, sometimes up to ten days. Therefore, most insurance companies will be unable to ascertain whether a payment has been received within three business days of the due date.
Additionally, PIANJ suggests that the rules concerning timely receipt of premiums be expanded to cover not just policy renewal payments, but also any premium installment payments. If the department’s goal is to reduce the number of insureds entering the market, then the rule should cover all payments which, if not made timely, could result in a loss of coverage.
Subsection (g) 2 allows insurers to charge a late fee of not more than $25.00 when the renewal premium is received after the due date, but is deemed timely as provided in proposed subsection (g). PIANJ suggests that insurance companies be allowed to charge a late fee even when the renewal premium is not deemed timely, but the insurer opts to accept the late payment anyway. This would provide an incentive to companies to accept untimely payments and benefit consumers who would otherwise lose coverage. Additionally, this subsection should be expended to allow late fees not just on renewal premiums, but also on installment payments.
Notice of coverage lapse
Lastly, PIANJ suggests that in the event the insured’s payment is not timely received, insurance companies be required to send the insured and producer a notice that renewal coverage is not in effect. Under the current proposal it will be difficult for an insured to know whether his payment has been received within three business days after the due date. In the event the payment does not make it to the company in time, and the policy does not renew, the insured should receive some type of notice of this fact. To complicate matters, insurance companies often deposit renewal premiums, even if they are late and will not be accepted. Therefore, many insureds assume that because their payment check has been cashed, they have renewal coverage when this is not the case. Requiring insurance companies to provide notices to the insured and producer that the renewal did not take effect will ensure that uninsured motorists do not take to the highways assuming they have coverage.
PIANJ suggests the following addition to the proposal:
If a renewal premium payment is not timely received by the insurer and the policy does not renew, the insurer shall send a notice by a
1) Certified mail or
2) Regular mail, provided the insurer has obtained from the post office:
a) Rate-stamped proof of mailing showing the name and address of the insured and
b) The insurer retains a duplicate copy of the mailed notice, which is certified to be a true copy.
the insured and the producer within five days indicating that the payment was not timely, the policy did not renew, and the last date coverage was effective.
PIANJ appreciates the opportunity to provide comments. If you have any questions, please do not hesitate to call me or our counsel, Jill Muratori.
John D’Agostino, Jr., CIC
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