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Aug 30

What is a Carrier Required To Do When It's Pulling Out of a Market?

Timothy Dodge on 8/30/2024 10:26 AM

A national insurance carrier announced yesterday afternoon that it is exiting the personal lines insurance markets countrywide. To find out what the carrier's legal obligations are under New York law, download our Carrier Market Action Questions & Answers document.

This and other helpful resources are available for download at any time from the Frequently Asked Questions page in the Answer Center of our website.

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Aug 28

NYSIR's A.M. Best Rating Withdrawn

Timothy Dodge on 8/28/2024 1:38 PM

[UPDATE: Since we posted this news item, we have learned that NYSIR is a "municipal reciprocal insurer," as New York Insurance Law Section 6102 defines that term. That same section of the law permits a municipal reciprocal insurer to opt out of having its policies covered by the New York Property Casualty Insurance Security Fund (also known as "the guaranty fund.") According to NYSIR's website, they have chosen not to participate in the NYPCISF. Therefore, should the carrier run into difficulty paying claims, they may assess each one of their policyholders (referred to as "subscribers") for the shortfall. It is possible that some school districts may attempt to hold their insurance agents liable for the amounts of these assessments.

It is important to know that many insurance agents' Errors and Omissions Liability Insurance policies exclude coverage for losses resulting from the insolvency of an insurance carrier that had an A.M. Best rating of worse than "B+" at the time the agent placed the coverage and if the policy in question was not protected by a state guaranty fund. NYSIR's A.M. Best rating was downgraded to "B" on July 12. As reported below, it was downgraded again on August 23 and subsequently withdrawn.

Any agents who placed coverage with NYSIR on or after July12 may be uninsured for losses resulting from a subsequent insolvency, should that happen.]

The financial strength rating of the New York Schools Insurance Reciprocal (NYSIR) has been downgraded and withdrawn. A.M. Best, a company that evaluates insurance carriers' financial strength and creditworthiness, announced the actions on Aug. 28.

The actions conclude a rapid series of events. On July 12, A.M. Best downgraded the carrier's financial strength rating (FSR) from "A minus" (Excellent) to "B" (Fair.) Just six weeks later, the FSR was downgraded again to "C++" (Marginal).) The same day, the carrier asked A.M. Best to withdraw the rating as they wish "to no longer participate in AM Best’s interactive rating process."

Big I New York members who insure educational institutions through NYSIR may want to contact their clients for two purposes:

To advise them of the rating actions.
To discuss what the clients want to do with their insurance programs.

There is a form letter for this type of situation in our ebook The Big I NY Big Book of Form Letters & Other E&O Tools. This valuable resource is free for members and available for $99.00 to non-members.

We will report further developments regarding this situation as we learn of them.

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Aug 28

Do You Have To Report A Wholesaler's Cyber Incident?

Timothy Dodge on 8/28/2024 11:58 AM

A South Carolina based wholesale insurance brokerage reported last week that they had suffered an undescribed cybersecurity incident. It closed the wholesaler for a substantial part of the week.

Some Big I New York members have asked whether the New York financial services cybersecurity regulation obligates them to notify the state Department of Financial Services (DFS) about this incident. If your agency does business with that wholesaler, you may have the same question.

Based on the information we have received and what the wholesaler has said on its website, we do not believe New York agencies have an obligation under the regulation to report this incident to the DFS. The wholesaler does, but the retail agency does not.

Section 500.17 of the regulation states:

(a) Notice of cybersecurity incident.

(1) Each covered entity shall notify the superintendent electronically in the form set forth on the department's website as promptly as possible but in no event later than 72 hours after determining that a cybersecurity incident has occurred at the covered entity, its affiliates, or a third-party service provider.

(2) Each covered entity shall promptly provide to the superintendent any information requested regarding such incident. Covered entities shall have a continuing obligation to update the superintendent with material changes or new information previously unavailable.

The definitions in Section 500.1 state:

For purposes of this Part only, the following definitions shall apply:

(a) Affiliate means any person that controls, is controlled by or is under common control with another person. For purposes of this subdivision, control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of stock of such person or otherwise. …

(f) Cybersecurity event means any act or attempt, successful or unsuccessful, to gain unauthorized access to, disrupt or misuse an information system or information stored on such information system.

(g) Cybersecurity incident means a cybersecurity event that has occurred at the covered entity, its affiliates, or a third-party service provider that:

(1) impacts the covered entity and requires the covered entity to notify any government body, self-regulatory agency or any other supervisory body;

(2) has a reasonable likelihood of materially harming any material part of the normal operation(s) of the covered entity; or

(3) results in the deployment of ransomware within a material part of the covered entity's information systems.

(m) Person means any individual or entity, including but not limited to any partnership, corporation, branch, agency or association. …

(s) Third-party service provider(s) means a person that:

(1) is not an affiliate of the covered entity;

(2) is not a governmental entity;

(3) provides services to the covered entity; and

(4) maintains, processes or otherwise is permitted access to nonpublic information through its provision of services to the covered entity.

The incident at this wholesaler was clearly a “cybersecurity event" because it was a successful act to disrupt an information system. Mission accomplished. In addition, it was a cybersecurity event that occurred at a “third-party service provider" because the wholesaler does not have an ownership relationship with retail agencies, isn't a governmental entity, provides services to the retailers, and (I assume) has access to the retailer's non-public information. That meets the first part of the definition of “cybersecurity incident."

However, the incident does not fit the three other parts of the definition:

It impacts the retail agency but there is no indication (yet) that a report to law enforcement is necessary – the wholesaler said, “To date, there is no evidence that any data has been misused in any way." If the retailers' clients' private information has not been exposed, no report to law enforcement is necessary.
It does not appear to have a reasonable likelihood of materially harming any material part of the retailer's normal operations, since nothing has been reported about the incident shutting down retailers.
No ransomware has been deployed in retailers' computer systems.

Since the incident does not meet any of those three criteria, it is not a “cybersecurity incident." A cybersecurity event that is not a cybersecurity incident does not require a notice to DFS. That could change, especially if the wholesaler does eventually report that private data was exposed and they had to notify the police. Any future communications from them on this will be important.

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Aug 23

Advocating for Our Insurance Community: Addressing Market Challenges in New York

Timothy Dodge on 8/23/2024 2:43 PM

Big I New York met this morning with leaders from the New York State Department of Financial Services (DFS) about the pressing issues in our state's personal lines insurance markets. This meeting came at a pivotal time. The wind-down of Adirondack Insurance Exchange's and Mountain Valley Indemnity Co.'s operations is having disruptive effects on local consumers and businesses.

Big I New York President and CEO Lisa Lounsbury and Assistant Vice-President of Research and Information Tim Dodge represented our members. Three DFS representatives took part in the video meeting. During the conversation, we explained that independent agents and brokers are facing major hurdles in replacing policies for clients affected by these closures. We stressed how urgent the situation is, especially for agents managing large Adirondack books. They need more time and support to find stable and reliable coverage options for their clients.

We took this opportunity to implore DFS to speed up the carrier rate and form approval process. Carriers have told us of filings pending since early 2023. We told DFS that this is unacceptable and urged them to realize how these delays harm market stability and consumer security.

The DFS representatives said that they are actively seeking solutions for the ongoing capacity issues, particularly on Long Island. This is a step in the right direction. We encouraged them to expedite efforts to improve consumers' access to the coverage they need.

Both groups agreed to hold regular check-ins, reinforcing our commitment to working with DFS and advocating for our members and their clients. We will keep the lines of communication open to press them to prioritize insurance market integrity and our agents' needs.

Our advocacy efforts are vital in shaping a New York personal lines insurance market that functions well for all. Together, we can drive profound changes that help agents and consumers alike.

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Aug 22

Three Reasons Why You Should Use Declination Forms

Kim Keville on 8/22/2024 11:02 AM

A coverage declination form is a document that agencies should use as part of their workflow process for situations when a client declines coverage. The client signs the form to acknowledge that they reviewed the coverage with their agent and that they are declining to purchase coverage.

While it may seem like just another piece of paperwork, the truth is that a coverage declination form can play a crucial role in protecting an insurance agency. Here are three reasons why your agency should use declination forms and make them part of your procedure manual:

1. Legal Protection

When a client refuses a certain type of coverage, having a documented declination form can protect the agency from potential legal disputes. This form can serve as evidence that the client was informed about the coverage options available but chose to decline them, thus mitigating the risk of liability for the agency.

2. New Business and Up/Cross Sell

The form encourages open communication and an opportunity for the agent to explain the available coverage options and for the client to ask questions before making a decision.

3. Relationship

This open dialogue can demonstrate the agency's commitment to addressing the clients' individual needs and providing tailored insurance solutions. As a result, the client may develop a greater sense of trust and satisfaction with the agency, which can lead to long-term loyalty and positive referrals.

Because you document all coverage conversations in your agency management system (if you are not documenting your system, start now) if your client doesn't sign the form or return it, you will have proof in your AMS that it was addressed with your client.

Below is a sample Commercial Umbrella Declination Form. This form as well as many others are available to Swiss Re Policyholders on the E&O Guardian website. Not a Swiss Re policyholder? Not a problem! Members should download our

BIG BOOK OF FORM LETTERS

How can we help your agency? Check out our Operational & Technical Consulting Services.

LEARN MORE

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Aug 19

Big I NY Leadership Academy: Q&A with Jim Lombardo

Kim Keville on 8/19/2024 3:36 PM

Have you always wondered what Leadership Academy is and why you should be there? Jim Lombardo, our AVP of Learning & Development (and one of the amazing instructors for Leadership Academy!) answers some questions for you.

Q: Can you tell me what The Leadership Academy is in 25 words or less?

A: Well, I don't think I can do it in less than 25 words but here goes… It is a program that is sorely needed where the future of our agencies can learn from professionals those skills which will help them develop into the people who will guide your agency, the independent insurance agency system and the industry as a whole over the next generation. How many words was that?

Q: What skills are you talking about?

A: Communication, Goal Management, Motivation, Team Building, Powerful Presentations and The Power of Caring among others

Q: How do you respond when people say that can't afford the $2,900 tuition?

A: I say, you can't afford not to pay it! And I'm not joking. If this is YOUR agency and YOUR future, why wouldn't you invest in that next layer of leadership? If someone is really that good, you would want to keep them happy; Keep them satisfied; Keep them growing; show you value them. Frankly, if you have someone that good, you don't want them to leave you and $2,900 is a very small investment for such a long term value of having that person you and your staff can depend on... I recall something an old CEO stated when someone said, “How can you spend all that time and money training someone and then they leave?" and he answered- “What if I didn't train them and they stayed?"

Q: What if someone said they don't have anybody identified as that next leader?

A: I'd reply- Are you sure? How do you know? What if someone has that potential and is just waiting for the opportunity to show you? Do you have someone in your agency that you tend to lean on? That others go to for guidance and advice? If you have that person then I would suggest he/she is worth the investment. My Father used to say, “You don't know what you don't know."

Q: Any final thoughts?

A: You owe it to your agency (your asset) to invest in the future.. A lot of people (employees, customers, carriers and vendors) depend on your agency surviving, no thriving. If anyone has any individual questions, I would be very happy to talk with them.

Still have some questions? Contact Jim at jlombardo@biginy.org or 315-432-4226. He'd be happy to talk you through the why.

LEARN MORE

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Aug 13

IIABA Committee Appointments

Kim Keville on 8/13/2024 11:15 AM

Big I NY is proud to announce the Big I NY members that have been appointed to serve on key IIABA committees in the upcoming 2024-2025 term.

Steve Zogby of Scalzo, Zogby & Whittig in Utica will be Chair of the Professional Liability Committee and Ron Brunell, CIC of Acrisure in Garden City will serve as a member of that committee.

Ted Walsh, CPCU, CIC of Walsh Duffield Companies in Buffalo will serve as a member of the Large Agents & Brokers Council.

Ashley Engl of Jencap in Buffalo will serve on the Young Agents Committee.

The following Big I NY staff will also serve on IIABA committees:

Kathy Glahn – Cooperative Technology Committee

Tim Dodge - Technical Affairs Committee

Lisa Lounsbury on the Diversity Council

This is strong representation from New York. Please join us in congratulating those that have been appointed for the upcoming term.

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Aug 02

Adirondack, Mountain Valley Withdrawal From the Market: Your Questions Answered

Timothy Dodge on 8/2/2024 9:39 AM

[This post has been updated to include a link to a form letter for agents to use.}

Adirondack Insurance Exchange (AIE) and Mountain Valley Indemnity Co. (Mountain Valley) will withdraw from the New York personal insurance markets by the end of this year under a plan approved by state insurance regulators. The plan will permit an orderly wind down of the carriers' operations.

Under the plan's terms, the two carriers will begin non-renewing homeowners, watercraft, umbrella liability, identity theft, and auto insurance policies as they expire. Any policies that are up for renewal in 2025 will be cancelled effective December 31, 2024. While it is believed that the carriers have sufficient reserves to pay their policyholders' claims, an Allstate company has agreed to provide AIE and Mountain Valley with a line of credit to pay for claims that may exceed their reserves.

The carriers have agreed to notify policyholders and agents of the plan. Policyholders will be notified of the non-renewals and cancellations and advised to find alternate coverage as soon as possible. They will also receive monthly communications through the end of the year.

Here are answers to questions some Big I New York members may have:

Do my clients have insurance right now?

Yes. Until the effective date set forth in their non-renewal or cancellation notices, their policies remain in force.

Do AIE and Mountain Valley have to send legal cancellation and non-renewal notices?

Yes. Section 3425 of the New York Insurance Law requires them to do that.

How much notice will policyholders receive?

Section 3425 requires an insurer to provide 45 to 60 days' advance notice of non-renewal. However, the minimum amount of advance notice required for a cancellation varies by line of insurance. AIE and Mountain Valley have committed to providing at least 60 days' notice of cancellation for all lines.

Non-auto personal lines policies have a three-year required policy period. How can AIE and Mountain Valley cancel and non-renew them?

A carrier that surrenders its licenses pursuant to an approved plan under Insurance Law Section 1105 (titled "Voluntarily ceasing to maintain license") and New York Insurance Regulation 109 (titled "Requirements Of Or Plan Of Authorized Insurer Proposing To Cease To Maintain Or Change Its Existing Licensing Status In This State") may cancel and non-renew outstanding policies during the required policy period. In addition, Section 3425(c) permits a carrier to cancel policies during the three-year period pursuant to a program approved by regulators as necessary because a continuation of the present premium volume would be hazardous to the interests of policyholders of the carrier, its creditors, or the public.

Will my clients have the option of keeping their coverage with AIE or Mountain Valley?

No. All policies that have not been replaced or non-renewed will be cancelled effective December 31.

Will my clients have to pay higher premiums for replacement policies?

Unfortunately, that seems likely.

If my clients voluntarily replace their AIE or Mountain Valley policies before they expire, will they have to pay short rate penalties?

No. The New York special provisions endorsements that both carriers attach to their policies explicitly state that cancellations will be on a pro rata basis.

Will my clients have to get claims and unearned premium refunds covered by the New York Property Casualty Insurance Security Fund (also known as the “guaranty fund")?

No. It is believed that their remaining assets combined with the Allstate line of credit will make that unnecessary. That will be necessary only if the carriers are unable to meet all of their obligations with the funds they have available. In that unlikely case, policyholders' claims would still be paid.

Will the carriers be liquidated?

There is no plan to liquidate the companies at this time. The Department is monitoring the wind down process to protect policy holders.

What are the carriers doing in other states where they wrote business?

They are already winding down their books in all other states they were writing in, including a recently approved withdrawal plan in Texas.

What should I tell my clients who have AIE or Mountain Valley policies?

Big I New York has created a form letter for you to send your clients as you see fit.

[Download the letter]

The key thing to tell clients is that their insurance with these two carriers will be going away and they should prepare to make a change as soon as possible.

What has Big I New York been doing to help agencies with this situation?

In addition to communications that we have published since Memorial Day, we met with DFS representatives by video on July 25 and August 1. In fact, DFS requested the August 1 meeting so they could inform us about the withdrawal plan. We have offered to assist the department with communications to the producer community as the situation develops.

In addition, we may schedule a free webinar to address members' questions. Please watch our future newsletters for announcements about this.

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Aug 01

Big I NY, DFS Meet a Second Time About Personal Lines Market

Timothy Dodge on 8/1/2024 4:28 PM

At the request of the New York State Department of Financial Services (DFS,) Big I New York met by video with DFS representatives this morning to discuss the ongoing problems with the state's personal insurance market. Big I New York Chair of the Board David Bodenstein, President and CEO Lisa Lounsbury, and AVP of Research and Information Tim Dodge met with the DFS representatives for a little more than a half hour.

DFS asked for the meeting to continue discussions that began on July 25. The meeting was productive. Further conversations between Big I New York and DFS on how they can work together to improve the market are expected.

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