As insurers continue to monitor the spread and impact of COVID-19, insurance regulators across the East region of the U.S. are issuing guidance on how the industry can respond.
“There is almost no aspect of the insurance business that would not be impacted by a global pandemic,” Wilson Elser Partner Paul White told Insurance Journal in a February audio interview about what the coronavirus outbreak could mean for the industry as it begins to ramp up.
Now that the World Health Organization (WHO) has officially declared the spread of COVID-19 as a pandemic, here is what insurance regulators in some East states are asking of insurers.
New York state has been at the heart of the coronavirus discussion in the U.S., with more than 25,000 confirmed cases and more than 200 deaths as of this week – more than any other U.S. state, according to The New York Times.
With this in mind, the New York Department of Financial Services has established a variety of initiatives urging regulated entities to do what they can to alleviate the impact of COVID-19 on consumers and small businesses in particular.
One of the earliest moves in the state was Governor Andrew Cuomo’s March 6 announcement regarding six global and national insurance companies’ agreement to offer ‘cancel for any reason’ travel policies in New York as the coronavirus pandemic continues to spread.
Allianz, Nationwide, Starr Indemnity, Berkshire, Crum & Forster and Zurich agreed to offer the policies after the New York State Department of Financial Services (DFS) received consumer complaints that these types of polices were not available in the state, according to a DFS press release. Coverage rates for this type of policy are higher than standard travel insurance and typically allow up to a 75 percent refund for traveler expenses.
“…[P]eople are worried about traveling, not just to the countries on the CDC watch list, but just traveling in general because they’re afraid if they make plans, they may be canceled,” Cuomo said in his announcement. “That is constricting travel, constricting business travel. It’s not good for New York. It’s not good for any state, because it can actually slow the economy.”
On March 10, DFS issued a mandate asking all regulated entities to submit confirmation of their business continuity plan to manage any disruption due to COVID-19 within 30 days or sooner. Specifically, the letter called for entities to submit descriptions of both “plans of preparedness to manage the risk of disruption to its operations” and descriptions of plans “to assess and monitor the financial risk that may arise from COVID-19,” Insurance Journal previously reported.
At the same time, DFS asked insurers in particular to submit details of business interruption policies that have been provided to insureds, as well as the coverage each policy offers regarding COVID-19. DFS issued the instructions in an effort to provide both parties to the insurance agreement with a base understanding on coverage issues in the wake of the coronavirus pandemic. This comes as businesses are forced to shut down and are increasingly interested in what coverage might be available to mitigate their losses, regulatory officials familiar with the matter told Insurance Journal.
“Given the potential impact of COVID-19 on business losses, particularly concentrated effects in local communities, DFS considers insurers’ obligations to policyholders a heightened priority,” DFS stated in its March 10 instructions to insurers.
More recently, DFS has instructed insurers to work with consumers to avoid cancellation of insurance policies for failure to pay premiums on time and to avoid non-renewal of insurance policies if a consumer fails to respond to a non-renewal notice. Insurers have also been instructed to increase resources in order to accommodate the growing number of claim submissions and inquiries from consumers about policy coverage benefits.
Nearby in New Jersey, some tension has arisen between small business owners and insurers regarding a proposed bill that aims to create business interruption insurance coverage for COVID-19 related claims despite virus exclusions in many policies.
The bill’s primary sponsors are Assemblyman Roy Frieman, Assembly Majority Leader Louis Greenwald, and Assemblywoman Annette Chaparro. Assemblywoman Chaparro told Insurance Journal there are still some details to work out.
“A-3844 is a work in progress,” Chaparro said. “We are working on finalizing the legislation to ensure it is the fairest and most responsible bill possible.”
The bill has seen pushback from the insurance industry, claiming it sets a dangerous precedent by asking insurers to alter policy provisions and conflicts with The Contracts Clause in the U.S. Constitution. The industry has also expressed concern that it could drive up the cost of business interruption insurance premiums and potentially drive carriers out of the state.
Others, however, have expressed support for the bill, stating that legislation like this is a necessary first-step in supporting policyholders, particularly small business owners who are facing severe threats to their businesses due to COVID-19.
While the bill underwent an initial vote in the New Jersey Assembly Homeland Security and State Preparedness Committee in which it was approved to be considered on an emergency basis, meaning the process of moving it through the Legislature would be expedited, the bill was held in the New Jersey Assembly for a vote on March 16 and was not taken up in the New Jersey Senate for a vote. A spokesperson for Greenwald’s office said it is possible the bill could come back up for a vote in the future.
Additionally, Governor Phil Murphy on March 20 signed New Jersey Bill A-3848, which prohibits an employer from terminating or refusing to reinstate an employee who has or is likely to have an infectious disease requiring the employee to miss time at work during New Jersey’s ongoing public health emergency and state of emergency. New Jersey has been under a state of emergency since March 9.
“Our message in New Jersey has been loud and clear: if you’re sick, stay home,” said Governor Murphy in a press release issued by his office. “No one should fear retribution from their employer for an absence deemed necessary by a medical professional, particularly for an illness as communicable as COVID-19.”
Outside of legislative matters, the New Jersey Department of Banking and Insurance has taken action to combat the effects of COVID-19. On March 20, the department issued a bulletin encouraging regulated entities to assist customers who have been adversely affected by the pandemic.
“We know that as we work to respond to the COVID-19 pandemic, residents are being affected in numerous ways that will undoubtedly impact their ability to make payments for obligations, such as insurance coverage, mortgages, commercial, student or other loans when due,” said Commissioner Marlene Caride in a press release issued by the department. “We encourage entities regulated by the department to take into consideration the difficulties consumers and businesses have endured and will continue to endure due to the effects of the pandemic and to work with them.”
The department specifically encouraged insurers to relax due dates for premium payments and insurance policy-based loan payments, extend grace periods, waive late fees and penalties, allow lenience regarding cancellation and non-renewal of policies, allow payment plans for premiums, extend time frames for property and automobile inspections and work with policyholders to ensure their policies do not lapse.
In Pennsylvania, Insurance Commissioner Jessica Altman has issued guidance for insurers in the state as well, urging carriers to be flexible when assisting individuals and businesses affected by the outbreak and asking them to offer guidance to insureds for continuing operations during the pandemic. Pennsylvania Governor Tom Wolf declared a state of emergency closing all non-essential businesses on Monday, March 16.
“The COVID-19 pandemic is causing challenging situations for all Pennsylvanians,” Altman said in a Pennsylvania Insurance Department press release. “The department is urging all insurers to provide increased flexibility to assist those who may not be able to financially maintain their insurance plans, including through payment plans or extended grace periods. The insurance business is an essential one, and we want our industry community to exercise discretion to ensure that operations continue as normal as possible…”
The department’s notice was issued to regulated insurance companies to encourage flexibility for Pennsylvanians who are no longer receiving regular salaries due to the outbreak mitigation efforts. It suggests that insurers assist struggling consumers by relaxing due dates for premiums payments, extending grace periods, waiving late fees and penalties, allowing payment plans for premiums payments, assisting affected policyholders to ensure that their insurance policies do not lapse, and considering cancellation or non-renewal of policies after exhausting any other efforts to work with policyholders.
Similarly, Delaware Governor John Carney on March 24 issued a mandate requiring insurers to cease cancellations or non-renewals of insurance policies due to nonpayment throughout the duration of Delaware’s state of emergency in order to assist residents and business owners who are experiencing a loss of income.
According to the mandate, an insurance carrier would now be required to seek a court order before they could cancel or non-renew any health, life, disability, property, auto and commercial/business insurance policies in Delaware. The state has been under a state of emergency since Friday, March 13, at 8 a.m.
“Throughout Delaware’s state of emergency, many companies have had to close or reduce their business, and employees have been laid off or fired as a result,” Delaware Insurance Commissioner Trinidad Navarro explained in a Delaware Insurance Department press release. “After hearing from businesses and residents who were concerned about the choices they will have to make with limited finances, we ask insurers to help alleviate some of that stress and ensure that residents and business owners in this difficult situation can have the peace of mind that insurance provides throughout the duration of the emergency.”
Connecticut Insurance Department Commissioner Andrew N. Mais has called on insurers to institute an extension of coverage for personal delivery drivers.
“The emergency social distancing and closing of restaurants under the necessary public health measures have contributed to a loss of income for both employees and businesses,” Mais said in a Connecticut Insurance Department press release. “We all need to support our local businesses, especially restaurants, who have switched to food delivery to keep their kitchens open and employees working.”
In a bulletin, the Connecticut Insurance Department requested that all insurance companies offering auto and motorcycle liability Insurance coverage in Connecticut immediately expand coverage for the personal use of vehicles for certain commercial purposes. This will ensure delivery workers have adequate protection while using their personal vehicle to deliver food and/or medicine.
The department has strongly urged those carriers to consider implementation an endorsement wherever necessary, broadening coverage for those using their personal vehicle for commercial purposes during this coronavirus pandemic. This includes modifying terms, conditions and exclusions that may leave delivery drivers without liability and property coverage. The bulletin is not intended to affect drivers who otherwise have coverage for deliveries or for drivers working for a transportation network company.
The department is also calling on insurers to establish a grace period for premium payments in light of the COVID-19 pandemic.
“The emergency public health measures have contributed to a loss of income for both consumers and businesses,” Mais said in a press release issued by his office. “It is imperative that we all work to maintain the security that insurance provides when consumers need it most.”
In a bulletin released on March 26, the Connecticut Insurance Department has requested that all admitted and non-admitted insurance companies offering any insurance coverage in Connecticut, including, life, health, auto, property, casualty and other types of insurance, provide consumers with at least a 60-day grace period without interest or penalty to pay their insurance premiums. It also encouraged institutions that receive regular payments from insurance companies to offer the same leniency.
“A grace period will allow policyholders who may need help due to circumstances beyond their control additional time to pay and avoid a coverage lapse or cancellation,” Mais added in the release.
The requested grace period is intended to be applied to premiums due after the initial premium has been paid to secure coverage. It is not intended to change the terms of the issued policy or be considered a forgiveness of the premium, the bulletin instructed.
In addition, the Insurance Department asked insurers to take steps to include consumer-friendly and convenient methods of payment, such as online options, to eliminate the need for in-person office visits and better protect the safety of workers and customers, the release stated.
Maryland Insurance Commissioner Al Redmer Jr. has also encouraged all life and health carriers and property and casualty insurers doing business in the state to make reasonable accommodations so that individuals and businesses do not lose coverage due to non-payment of premiums during this pandemic.
These accommodations could include suspension of premiums, extension of billing due dates and premium grace periods, or waiver of installment and late payment fees, according to the commissioner’s bulletin.
Additionally, The Maryland Insurance Administration has requested that insurers issuing travel insurance policies during the COVID-19 emergency provide an option for consumers in the state to purchase a ‘cancel for any reason’ waiver, or offer an option to purchase trip cancellation coverage that will reimburse non-refundable costs if the trip is canceled due to COVID-19.
The administration stated in a bulletin that it is aiming to ensure customers and businesses are treated fairly and will open investigations into virus-related insurance issues as needed. Indeed, as workers and businesses, particularly small businesses, continue to face adverse effects related to the COVID-19 pandemic, Maryland Governor Larry Hogan on March 23 announced a $175 million economic relief package to go into effect. This comes after Governor Hogan declared a state of emergency on March 5.
The Maryland Department of Commerce will offer up to $125 million in loans and grants to small businesses and nonprofits through the Maryland Small Business COVID-19 Emergency Relief Fund. As part of the package, a $75 million loan fund and a $50 million grant fund, with $1 million in grants dedicated to non-profits, will provide working capital to be used for payroll, rent, fixed-debt payments and other mission critical cash operating costs. Businesses and nonprofits with under 50 full- and part-time employees will be eligible, and loans will range up to $50,000 and grants up to $10,000.
“To my fellow Marylanders, let me say that I know how difficult this is on each and every one of you,” Governor Hogan stated in his announcement. “There is a great deal of fear and anxiety, and the truth is, none of us really know how bad this is going to get or how long it’s going to last. But I can promise you that there are a great many dedicated people doing tremendous things, working around the clock, and doing their very best to help keep Marylanders safe.”
Update: Adds information from the Connecticut Insurance Department. This is a developing story and will be updated as the situation progresses.
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