Insurance Law Alert

The New Jersey Department of Banking and  Insurance (the “Department”) believes that reduced driving, as a result of COVID-19, and the New Jersey Government’s response  to the Pandemic which imposes various levels of shelter in place restrictions on New Jersey residents, through Executive Orders EO 103 and EO 107 have led to fewer accidents, injuries, and fatalities on public highways and roads.  Therefore, the Commissioner concludes that the overall risk of loss for private passenger automobile insurance has been reduced in recent months.  The Department also asserts that reductions in risk extend beyond automobile lines of insurance.  Moreover, insurance rates shall not be excessive, inadequate, or unfairly discriminatory.  Accordingly,  in Bulletin No. 20-22, the Commissioner requires  premium reductions for the private passenger automobile insurance line as well as for other lines of insurance and, therefore, orders insurers to make an initial premium refund or other adjustment to all adversely impacted New Jersey policyholders, and for each month that the public health emergency is in effect.  The reductions have been ordered in the following lines of insurance, as quickly as practicable, but in no event later than June 15, 2020:

  • Private passenger automobile insurance;
  • Commercial automobile insurance;
  • Workers’ compensation insurance;
  • Commercial multiple-peril insurance;
  • 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 may comply with the mandated premium refund to policyholders by providing a premium credit, reduction, return of premium, dividend or other appropriate premium adjustment, based on:

  • Reclassification of exposures to comport with current exposure, or
  • Reduction of the exposure base (miles driven, payroll, receipts, etc.) to reflect actual or anticipated exposure.  

The Commissioner’s Bulletin applies to "any other line of coverage where the measures of risk have become substantially overstated as a result of the COVID-19 pandemic.” However, if any insurer can demonstrate that “its rates are not excessive, inadequate, or unfairly discriminatory” or otherwise asserts it should not have to adhere to the directives embodied in the Bulletin, the insurer must submit the basis for that contention and supporting documents by June 1

Simultaneously with the issuance of Bulletin No. 20-22, the Commissioner issued Order 20-3 seeking certain information from the property/casualty insurance market premised upon “the reduction in risk of loss for private passenger automobile insurance, as a result of reduced driving, and the overall reduction in risk of loss across other lines of insurance due to the Coronavirus (“COVID-19”) pandemic.” The information referenced by the Commissioner is declared to be “necessary for the Department to monitor current market conditions for property and casualty insurance in this State” and to enable the Department to implement Bulletin No. 20-22. 

The Order broadly requires substantial reporting from the insurers, which may be submitted on an insurer group basis.  Specifically, the Order mandates that all insurers of private passenger automobile insurance; commercial automobile insurance; workers’ compensation insurance; commercial multiple peril insurance; 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, provide information as follows:

1.  Insurer groups with more than $20,000,000 in written premiums for 2019 for all property/casualty lines combined, must provide to the Department data regarding New Jersey claim activity and New Jersey premium collection activity for the following three time periods:

a) January 1, 2020 to March 21, 2020;

b) March 22, 2020 to the date of the report; and

c) the same time period as provided in b) however for 2019.

Insurer groups’ reports should provide data for these time periods, or as close as practicable.  Claim data shall include measures of claim frequency and claim severity.  Premium collection activity shall include measures of premium billed or due and actual premiums collected.

The required reports must be provided bi-weekly on May 19, June 2, June 16, June 30, July 14, July 28, August 4, August 18, September 1 and September 15, and the data provided in each report shall be the most current available through the preceding week’s end.

2.  All insurer groups and the New Jersey Personal Automobile Insurance Plan (PAIP) and Commercial Auto Insurance Plan (CAIP) must provide to the Department a report containing all actions taken, and contemplated future actions, to reduce premium in response to or consistent with Bulletin No. 20-22. The report shall include New Jersey-specific information and an explanation and justification for the amount and duration of any premium reductions based on the company’s claim and premium data.  The report shall also provide monthly and overall totals for:

(i)   aggregate premium prior to, and subject to, application of refunds or adjustments;

(ii)   aggregate premium refunds and adjustments;

(iii)   the number of in-force policies, and

(iv)   number of policyholders receiving refunds or adjustments.  These reports shall be due on June 1, July 1, August 1 and September 1, and the information provided in each report shall reflect activity through the preceding month’s end. 

While data is necessary to allow the Department to monitor the market place in an environment where risk is changing quickly, the burden on the industry of such expedited reporting at significant expense to the industry may not be justified by any benefits which could be gained.  The provision of data on a more controlled and reasonably- paced basis may well benefit the entire market place and may result in more consistent and sustainable rates.   

Jump to Page