The proposed cybersecurity regulation recently released by the state Department of Financial Services was among several key issues tackled by IIABNY's board of directors at its Sept. 27 meeting in Syracuse. The proposal, which is scheduled to take effect on Jan. 1, 2017 with implementation by June 1, 2017, was published Sept. 28 in the New York State Register, triggering a 45-day comment period.
The IIABNY board discussion focused on expanding the limited exemption by suggesting additional criteria that would exempt a small business from parts of the regulation, thus relieving the burden of some of the more onerous requirements. The provisions of the proposal relating to third-party providers also raise great concern. In its current form, the regulation would require onerous requirements for agencies to ensure the security of non-public information accessible to or held by third parties, which presumably would include insurance carriers and agency management system vendors.
Among the other concerns with the proposal are the one-state approach rather than a national solution and the approach of requiring special rules applicable only to the financial services industry. IIABNY is preparing comments to submit to the DFS during the 45-day comment period.
The board also discussed the entry of Lemonade in New York, advertised as a peer-to-peer insurance company. Lemonade was approved to write business as a traditional P&C insurance company and the company is using ISO forms for tenants, condos and homeowners insurance. Here's the twist: as a Lemonade policyholder, you have the right to select a "Giveback cause" thereby joining a virtual group of people who made the same selection. Lemonade then uses each group's premiums to pay claims and expenses, including a 20-percent flat fee to the company, a "rainy day fund" and other expenses, such as reinsurance. Remaining funds are to be given to the Giveback cause, according to the insurer's website. A review of the company's Terms of Service reveals that the availability and amount of "leftover" money is subject to Lemonade's discretion, so it remains to be seen if charitable contributions will actually occur.
In a special membership meeting held prior to the board meeting, members voted to amend the association's by-laws to change the membership requirement for an agency to own the "majority" of its business to a "portion" of its business. As more companies mix their distribution methods, there are agencies who own a portion of their business but perhaps less than 51 percent. The bylaw amendment will allow IIABNY's board to adjust the percentage of ownership requirement from time to time to keep pace with the changing industry. However, the expiration ownership is just one of three key criteria, with the other two being the ability to represent more than one carrier and providing insurance to the end user.
On the horizon, the board is watching two national trends that could eventually impact New York. Auto insurance rates are increasing nationally due to socio-economic factors, such as the improving economy and correlating rise in miles driven. There is also a renewed attack by consumer groups on underwriting criteria based on factors other than driving record.