August 20, 2020
Navigating Confusing Insurance Regulations
by Ann Dieleman and Sean Cox
COVID-19 is causing headaches but offers an opportunity to improve business systems and compliance practices.
The COVID-19 pandemic has caused turmoil for insurance. To aid consumers as unemployment and uncertainty spiked, state regulators around the country issued emergency protection measures to extend grace periods for premium nonpayments, prohibit policy cancellations during states of emergency, extend premium repayment timelines and offer leniency to insured individuals hit by COVID-19, among other changes.
These emergency insurance industry regulations are complex — plus, protections vary widely by state and must be implemented rapidly. It’s no wonder insurers are having a tough time navigating insurance laws and regulations during the pandemic.
In late March, for instance, New York Gov. Andrew Cuomo passed Executive Order 202.13 to assist insurance policyholders experiencing coronavirus-related financial difficulties. The order stipulated that life, commercial property, home, auto, liability and other insurers extend grace periods for premium payment and repayment to affected individuals in the state. The order also temporarily prohibited some insurers from canceling, refusing renewal or offering conditional renewal on insurance.
These amendments to New York’s rules and regulations were more complicated than they seemed on the surface, which meant they raised legal issues in insurance businesses. For one, the accommodations only applied to individuals who faced economic hardship due to the pandemic. Individuals were required to provide insurers with written testimony — which added a considerable burden to insurers that had to collect, review and track this data. Some of those rules cast a long shadow. For instance, affected policyholders who were unable to pay their premiums have the option to repay what they owe in 12 monthly installments, which began in June 2020.
The emergency insurance industry regulation that was passed in New York is just one example of such orders. In every state, these changing insurance laws and regulations placed — and continue to place — a considerable burden on insurers.
The Department of Financial Services (DFS) has taken steps to lighten the load and help companies navigate the changes. While the uncertainty surrounding the pandemic persists, the DFS has loosened rules around notice obligations to allow insurers to email notices to policyholders, regardless of policyholder consent to email communication.
This provision, along with the DFS’s requirement that insurers post relevant information on their websites and maintain all records of communications with policyholders, was designed to communicate information to consumers rapidly and ensure records are complete and updated throughout the pandemic. In addition, the DFS provides sample correspondence for insurers to communicate COVID-related measures to policyholders.
How to Be Compliant Amid Changing Rules and Regulations
Emergency insurance laws and regulations to protect consumers during the pandemic are necessary, but they make it difficult for insurers to reach strategic decisions and plan for what’s ahead. The future is cloudier than ever — no one knows how long emergency measures will remain in place or what the regulatory landscape or compliance requirements will look like in the near future.
Put another way, insurers are grappling with a plethora of hard questions. How will the new normal affect product features? How will risk assessment and financial underwriting be affected? What will be the long-term effect of wage loss for affinity customers in certain industries? How do insurers operationalize an increasingly complicated set of rules across multiple product lines, segments and regions? What happens if there is another surge of COVID-19 cases? The answers to these and other questions are neither clear nor simple.
Insurers face considerable questions when it comes to temporary insurance laws and regulations. Adaptation is a matter of survival. Here are a few steps insurance companies can take to handle the rapid changes and remain compliant:
- Dedicate a team focused on staying abreast of coronavirus-related regulatory changes, educating others in the company about these changes and building a strategy for compliance.
- Make business resiliency plans that take into account likely scenarios, including the emergency measures lasting in varying amounts of time.
- Repurpose staff members based on shifting organizational needs.
- Leverage external partnerships and partnerships between carriers and agencies/brokers — how can you support one another during this time?
- Appoint subject matter experts in account management, TPA management, underwriting and actuarial to handle related elements of the emergency regulations.
For many insurers, siloed legacy systems represent the biggest hurdle to meeting new insurance industry regulations while managing the resulting deluge of data. Switching to an integrated, comprehensive governance system that can better manage these changes and keep up with privacy and data management needs will not only help insurers weather the pandemic but will also help them make more informed, data-driven decisions for the future.
See also: How to Lead in the COVID-19 Crisis
COVID-19 has caused and will continue to cause headaches for insurers scrambling to keep up with new rules and regulations. But the pandemic also offers an opportunity to improve business systems and compliance practices. By making smart decisions now, insurers will be prepared for other changes that come.