New Jersey Insurance Companies Directed to Provide Premium Reductions

May 14, 2020

The New Jersey Department of Banking and Insurance has directed insurance companies in the state to provide premium reductions to consumers and businesses during the COVID-19 emergency, citing reduced risk of loss due to the pandemic.

The department issued a bulletin directing insurance companies that offer personal and commercial lines of insurance, including personal and commercial auto insurance, to provide premium refunds or similar forms of relief to policyholders. The bulletin covers premiums paid during the public health emergency that began March 9, 2020, and applies to property and casualty insurance providers.

“The reality is that we have seen a dramatic reduction in driving and other activities as a result of the pandemic, which has a direct impact on the risk associated with specific lines of insurance,” said New Jersey Insurance Commissioner Marlene Caride in a press release issued by her office. “While various insurers have provided premium reductions to their policyholders, this action provides consistent direction to the insurance industry for the period the public health emergency is in effect.”

Under the bulletin, insurers must make an initial premium refund or other adjustment to all adversely-impacted New Jersey policyholders and additional refunds or adjustments for each month that the state’s public health emergency is in effect. Insurers are required to provide a premium credit, reduction, return of premium, dividend or other appropriate premium adjustment as quickly as possible, but no later than June 15, 2020.

The bulletin applies to private passenger automobile insurance, commercial automobile insurance, workers’ compensation insurance and commercial multiple-peril insurance, as well as commercial liability insurance, medical malpractice insurance and any other line of coverage where the measures of risk have become substantially overstated as a result of the COVID-19 pandemic.

Insurers can begin refunding premiums without prior approval from the department if they apply a uniform premium reduction for all policyholders in an individual line of insurance for recent, current and upcoming policy periods.

However, insurers are required to submit to the department all components of their refund program for policyholders no more than 15 days after implementing the program. The department could require changes if the plans do not adhere to the guidance in the bulletin, if the refund program inappropriately benefits the insurer over the policyholder or if the refund is not actuarily justified to ensure an appropriate refund to the policyholder.

Any insurer that can demonstrate its rates are not excessive, inadequate, unfairly discriminatory or otherwise should not be subject to the terms of the bulletin must submit its basis for such contention and supporting documentation by June 1, 2020, according to the press release.

Source: New Jersey Department of Banking and Insurance

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