2008 Annual Report of the NYS Insurance Department Superintendent

Coming in again at 248 total pages replete with 68 tables and 10 color charts, the 2008 Annual Report of the Superintendent of Insurance to the New York State Legislature was released on May 15, 2009.

With respect to auto insurance, the report advises the following (page 67):

18. Automobile Insurance

a. New York Automobile Insurance Plan

The number of vehicles insured in the Plan has continued to decline for the past few years and remains at an historic low.  Approximately 1.1% of New York private passenger registered vehicles are insured in the Plan as compared to a range of 12% to 17% around two decades ago. Furthermore, at year-end 2008, there were approximately 16% fewer vehicles in-force than year-end 2007 and approximately 42% fewer than year-end 2006. This continual decrease in the Plan population can be attributed, at least in part, to various Department initiatives such as those to combat fraud and incentives to voluntary market insurers that provide coverage to drivers who otherwise would have been placed in the Plan.

b. Legislation

Chapter 136 of the Laws of 2008 extends until June 30, 2011 the provisions of Section 2328 regarding the prior approval of rates for Public Automobile insurance. It also extends until June 30, 2011 the provisions of Section 3425 regarding the cancellation and non-renewal of private passenger automobile policies.

Chapter 136 of the Laws of 2008 also added a new Insurance Law section 2350. Chapter 136 replaced the prior approval system, in effect since 2001 for nonbusiness motor vehicle insurance rates, with a flexible rating (flex-rating) system. The new system, which is a blend of prior approval and competitive rating, became effective on January 1, 2009. Regulation 153 (11 NYCRR 163) was promulgated on an emergency basis to implement the new flex-rating system. The regulation allows periodic overall average rate changes up to 5% on a file-and-use basis. It requires the superintendent’s prior approval of filings that produce overall rate increases above 5% or individual policyholder rate changes above 30% in any twelve-month period.

Chapter 136 also added a new Insurance Law subsection 3425(r), which allows an insurer that has no more than 750 personal automobile insurance policies in-force at last year-end and intends to non-renew all of the policies, to submit a plan for the nonrenewal of those policies to the superintendent for approval. The plan must describe the measures the insurer will take or has taken to minimize market disruption. Prior to this new statute, an insurer could only terminate all of its personal automobile policies under very limited circumstances, such as if it withdrew its license to write the applicable property/casualty lines of business or if continuation of the policies would be hazardous to the interests of policyholders of the insurer, its creditors, or the public pursuant to Section 3425(c).

c. No-Fault Motor Vehicle Insurance Law Activity – 2008

i. Impact of recent case law on the Automobile No-Fault system

Two 1997 Court of Appeals decisions, Central General Hospital v. Chubb, and Presbyterian Hospital v. Maryland Casualty, had an enormous impact on No-Fault adjudication and the number of disputes generated by the No-Fault system. These cases generally established that a No-Fault insurer may not assert a defense when it does not timely deny a claim within 30 days of receipt. In a 2008 decision, Fair Price Medical Supply v. Travelers, the Court of Appeals upheld the application of a preclusion sanction for a late denial where durable medical equipment supplies were billed for and never provided, so that any amount billed by a health provider for non-existent services must be paid by the insurer when there is a late denial. Essentially, the fundamental requirements established by the Legislature in 1973 that all reimbursable No-Fault health care expenses must be necessary and billed in accordance in the fee schedule limits have been frustrated by the decisions mentioned above.  Therefore, the Legislature should enact legislation similar to the bill proposed by the Senate two years ago in S2638 that would restore the fundamental requirements for No-Fault health care expenses to be reimbursable by permitting an insurer to assert a defense when it does not deny a claim within 30 days of receipt.

ii. Mandatory arbitration for all No-fault insurance disputes

The Civil Court of the City of New York and District Courts in Nassau and Suffolk Counties have been inundated with lawsuits filed by medical providers seeking reimbursement of No-Fault benefits for services rendered to injured claimants. This strain on the judiciary’s resources led the Chief Administrative Judge's Local Courts Advisory Committee (Unified Court System) to propose a bill in 2006 that would amend NYIL §5102 to require mandatory arbitration for all No-Fault insurance disputes. Since the improvements in the administration of the No-Fault Arbitration System in the past few years permit it to process substantially more requests for arbitration without compromising the goal of a speedy dispute resolution system, the Legislature should consider legislation that would reduce the strain on the judiciary’s resources by revising NYIL §5102 to require mandatory arbitration for all No-Fault insurance disputes.

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The Superintendent's press release regarding this annual report claims that insurance companies refunded or credited more than $217 million to New Yorkers over the past two years and paid $18 in million in fines during that period and summarizes other aspects of the annual report. 

Private passenger automobile rate filings reviewed and approved in 2008 can be found in Table 41 beginning on page 85 of the report.

A legislative and regulatory recap runs from pages 193 to 207.

Passing percentages for licensing examinations administered in 2008 (Table 60, page 225): public adjusters - 39% (no change from 2007); independent adjusters (overall) - 44% (down from 51% in 2007); agents & brokers (overall) - 45% (up from 44% in 2007).

Table 64 on page 236 reports that for the fiscal year ending March 31, 2008, the Department's total recepits were $717,882,551 and total expenditures were $183,598,083, for an excess of receipts over Department expenditures of $534,284,468.