The New York State Department of Financial Services has confirmed to Big I New York that the moratorium on premium finance companies (PFCs) cancelling policies applies separately to each installment payment. Each installment is also eligible for alternative payment arrangements.
An emergency regulation issued by the DFS in late March, on orders from the governor, requires PFCs to delaty cancelling policies when a policyholder misses an installment payment because of financial hardship resulting from the COVID-19 pandemic. It also requires them to permit these policyholders to make up the missed payment over a twelve-month period. Big I New York members have reported that PFCs have interpreted the regulation in different ways, with some saying that a policyholder is entitled to one premium deferment only.
Last week, Big I New York asked the DFS for clarification. We received the following response:
For a property/casualty insurance policy, any payment due while the emergency regulation is in effect is eligible for a single 60-day moratorium (i.e., once the moratorium applicable to any one payment expires, the policyholder is not entitled to a second moratorium for that same payment), provided that COVID-19-related financial hardship is demonstrated at the time of the payment due date, and subject to the safety and soundness of the premium finance agency. For the avoidance of doubt, individual (and periodic) payments due on a policy or premium finance contract are considered individual payments that qualify for independent moratoriums. The emergency regulation applies to finance agreements for covered property/casualty insurance policies in effect on or after March 30, 2020.
This implies that a policyholder who can demonstrate financial hardship because of the pandemic may request cancellation deferrals and alternative payment arrangements for multiple installments - one for May 1, one for June 1, another for July 1, and so on. This will continue until the emergency regulation expires and is not re-issued. The regulation is currently slated to expire on June 27, 2020; the executive order that mandated it has been extended to expire on July 6.
Big I New York members and their clients who have financed their premiums should keep in mind:
- The regulation requires a PFC to delay cancellation, but it does not stop the PFC from eventually cancelling a policy. If the insured misses an installment due July 1, the PFC may cancel the policy on August 31 or later.
- The regulation is temporary. At some point, PFCs will have the right to cancel policies as stated in the finance agreement, rather than having to delay and make alternate arrangements.
- The policyholder's obligation to pay overdue installments is separate from the issue of cancelling the policy. If the PFC cancels a policy at the end of the deferral period or after the regulation expires, the policyholder will still owe the past-due amounts, and the PFC will have the legal right to collect those amounts, even though the policy has been cancelled.
- The regulation's requirements are "subject to the safety and soundness of the premium finance agency." If a PFC can show to the DFS that its solvency would be jeopardize by making these allowances, the PFC may be excused from having to make them.
More information is available from the Coronavirus Resource Page on this website.