Tuesday, October 29, 2013

New York Issues Post-Disaster and Natural Catastrophe Regulatory Guidance

On October 28, 2013, the New York State Department of Financial Services issued Insurance Circular Letter No. 8 (2013).  This regulatory guidance apprises insurers of the the various post-disaster regulatory measures they should anticipate in the future.  Of course, the listing is only an example of regulatory measures that might be employed, with others available via statute and emergency powers of the Superintendent (e.g., suspending provisions of statutes or regulations).

The Circular Letter lists five categories of possible post-disaster regulatory action.  First is a moratorium on policy cancellation or non-renewal for non-payment of premium.  Essentially, the DFS is asking carriers post-disaster to work with insureds and not go by the strict terms of the insurance contract when an insured may have trouble making premium payments post-disaster.  After Sandy, the DFS prevented cancellation or non-renewal for any reason, which had the unintended effect of precluding carriers from ridding themselves of policies they no longer wished to write having nothing to do with the affects of the storm.  If limited to non-payment of premium issues because of a disaster, there is less likelihood that normal commercial behavior will be affected.

Second, the processing of claims should be done promptly and efficiently.  This goes without saying, but you may recall that the DFS required adjusters to act on claims within very short time periods and put up a "report card" on the DFS website to show those who were not complying.  The suggested actions in this section of the Circular Letter are obvious, but use the word promptly, which goes undefined.  Related to claims is the third item, which is expediting the process for adjuster licensing.  This allows for adjusters to come into New York and begin working when a large disaster like Sandy strikes. 

The forth area discussed is claim data reporting.  This goes back to re report card concept.  Essentially, the DFS is saying that the sun will shine on post-disaster claim activity for all to see.  The last area discussed is mediation.  Establishing a mediation program to resolve claims post-disaster is a concept that was used after Sandy and has been used after many disasters. 

By this Circular Letter, the DFS is telling insurers that these and other measures are likely to be seen again when disaster strikes.  Thus, insurance company compliance and readiness to address each of these features and similar programs should probably become part of a carrier's internal disaster plan.

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