Insurance Companies Directed to Provide Premium Reductions

On May 13, 2020

The New Jersey Department of Banking and Insurance directed insurance companies in the state to provide premium reductions to consumers and businesses during the COVID-19 emergency. The bulletin issued by the department covers premiums that are paid during the public health emergency that began March 9th and applies to property and casualty insurance providers.

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 department’s directive reflects the reduced risk of loss due to COVID-19 and the state’s response to protect the public against it.

“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. It is only fair and appropriate given the circumstances to provide consumers with premium relief during this time period,” said Commissioner Marlene Caride. “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. I appreciate the industry adhering to the directives issued by the department to assist residents and businesses during this extraordinary time.”

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

• Private passenger automobile insurance
• Commercial automobile insurance
• Workers’ compensation insurance
• Commercial multiple-peril insurance
• Commercial liability insurance
• Medical malpractice insurance
• Any other line of coverage where the measures of risk have become substantially overstated as a result of the COVID-19 pandemic.

The department recognizes that the COVID-19 pandemic has severely curtailed the activities of policyholders in both personal and commercial lines of insurance, and caused the projected loss exposures of many insurance policies to become overstated or misclassified. This is especially true for policies where premiums are based partly on measures of risk such as number of miles driven, revenue, and payrolls, which have all been reduced significantly as a result of the COVID-19 crisis.

Insurers may 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 or any portion thereof.

Insurers must submit to the Department all components of their refund program for policyholders no more than 15 days after implementing the program. The Department may 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 the refund is not actuarily justified to ensure appropriate refund to the policyholder.

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

The department will continue to monitor the situation, and may issue a subsequent bulletin or other guidance to insurers to provide additional instructions, if necessary.

The bulletin builds on other actions taken by the department to mitigate the impact of the COVID-19 pandemic on residents and businesses:

• Working with regulated entities to expand payment relief for student loan borrowers
• Directing insurers to provide emergency grace periods for payment of insurance premiums for residents and businesses
• Working with regulated entities to provide mortgage payment relief
• Expanding access to telehealth and tele-mental health services
• Encouraging regulated entities to assist residents and businesses affected by disruptions due to COVID-19
• Requiring regulated entities to cover and waive cost-sharing for COVID-19 testing
• Implementing a temporary license process for insurance producers during COVID-19

For helpful information about COVID-19 or for more on the department’s response to the pandemic, visit the department’s COVID-19 Information page.

To access more business news, visit NJB News Now.

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