COVID 19: Forced retrospective payments in US ‘risk industry stability’

‘It will be increasingly important that insurers are allowed to deploy new technologies such as drones, mobile applications, and telemedicine for workers’ compensation claims without running afoul of regulatory barriers.’ David Sampson, president and CEO of the American Property Casualty Insurance Association (APCIA).

· Forced retrospective payments could threaten stability of insurance sector
· Requests for flexibility around premium due dates flow in as crisis deepens
· Regulators urged to revisit rules on drones and other tech for workers comp
· Call to relax communications requirements to aid information dispersal

The insurance industry must be allowed to play its part as an essential service to the nation as APCIA calls on US legislators to be aware of “several important issues that warrant immediate consideration”.

An influential insurance body has warned American legislators not to impose retroactive insurance payments as it risks the stability of the sector, as US President Donald Trump faces ongoing criticism over his response to COVID 19 and cases of the virus pass 33,000 within US borders.

At a special COVID 19 session at the National Association of Insurance Commissioners (NAIC), David Sampson, president and CEO of the American Property Casualty Insurance Association (APCIA), urged legislators to be aware of “several important issues that warrant immediate consideration” by the NAIC and state regulators in these unprecedented times.

He said: “As one of the nation’s essential services, the insurance industry has vast experience with crisis management, and this enables property casualty insurers to respond to the increased demands presented by the national and global implications of COVID 19.

“We recognise that all of us - regulators, carriers, and the trades - are going through tremendous change as we revamp our operations, transition to remote working arrangements, and implement contingency and continuity plans to protect our employees from potential pandemic exposure.”

This work is happening as insurers respond to COVID 19 themselves, which is creating many system “stress points”, he said, adding that APCIA was committed to working with the NAIC and state regulators to ensure a smooth, successful and coordinated response.

However, he said: “With these unprecedented conditions, there are several important issues that warrant immediate consideration by the NAIC and state regulators.

“It is vitally important to discourage efforts to impose retroactive coverage on insurance policies. If policymakers force insurers to cover losses that do not exist under current insurance contracts, the stability of the sector could be impacted.”

Sampson also urged the NAIC to help “coordinate data calls” to make them uniform, limited in scope, and reasonable in timing. This will enable insurers to focus more on their customer service obligations.

Flexibility around premium due dates, cancellation and non-renewal requirements, and other deadlines that can be disrupted in a catastrophe situation are another issue he flagged up, saying the industry had received such requests from US states in the past and was starting to see similar requests now. Sampson called for consistency in such requests and urged the NAIC to support processes in line with prudent insurance principles and for those to be similar across states and across insurance lines.

For policyholders, he said: “Following many past disasters, where insurers have given policyholders forbearance to make late payments, the NAIC helped coordinate states to provide parallel accounting relief for insurers. Regulatory flexibility is needed for the accounting treatment for overdue premium receivables.”

To make the most of new technologies as the crisis deepens, he said: “It will be increasingly important that insurers are allowed to deploy new technologies such as drones, mobile applications, and telemedicine for workers’ compensation claims without running afoul of regulatory barriers.”

Sampson called for requirements for first-class mail delivery to be relaxed to aid better communications, touting greater use of electronic delivery for all communications to customers, the NAIC, and state insurance departments. “We encourage regulators to avoid implementing demands on the content of consumer communications. If there are necessary communications mandates, they must be uniform and flexible.

“We are urging states to be flexible in administering and enforcing statutory time restrictions related to claims handling, notification obligations, third-party administrator audits, and regulatory filings, for example.”

His comments follow now defunct efforts by the New Jersey legislature to propose a new law to force some insurers to payout on business interruption losses from COVID 19 even if virus disruption was not covered in the policy.

The New Jersey Assembly reading of and vote on Bill A-3844 was scheduled for last week but it was not passed into law.