New York State Insurance Department Office of General Counsel Opinions for October 2008 -- Part I

Just posted to the NYS Insurance Department's website are the Office of General Counsel Opinions from the first half of October. Only 1 of the 5 opinions posted merits mention this time as being relevant to P&C insurers.

Down Payment for Personal Automobile Insurance (October 10, 2008)

Questions presented:

1. May an insurer require an applicant for personal automobile insurance, who has been uninsured in the thirty days immediately preceding the making of the insurance application, to pay a portion of the premium as a down payment to bind the insurance?
2. If permitted, what requirements must an insurer fulfill or what restrictions must it put in place to require these applicants to pay a portion of the premium as a down payment?
3. If permitted, how does requiring these applicants to pay a portion of the premium as a down payment affect guidelines, billing plans, and agency contracts?

Answers:

1. Yes. New York Vehicle and Traffic Law § 311(5)(c) requires an insurer to collect at least ten percent of the annual premium due for all new policies.
2. An insurer must apply Vehicle and Traffic Law § 311(5)(c) in a fair and non-discriminatory manner to all new automobile insurance applicants. Specifically, an insurer may not require applicants to pay different down payments unless the underwriting criteria used to determine the down payments relate to the risks being insured. If use of the underwriting criteria results in discrimination in benefits under Article 23 of the Insurance Law or is otherwise expressly prohibited by law, then the insurer may not use the criteria to determine the down payments.
3. The question the inquirer presents is too broad and general in nature. Without more specific facts, the New York State Insurance Department is unable to answer it at this time.