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COVID-19 Insurance Laws and Regulations Part II: New Rules on Licensing, Notice, Premiums and Cancellations

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COVID-19 Insurance Laws and Regulations Part II: New Rules on Licensing, Notice, Premiums and Cancellations COVID-19 Insurance Laws and Regulations Part II: New Rules on Licensing, Notice, Premiums and Cancellations Go to: Impacts to Licensing | Issuance and Renewals | Testing and Fingerprinting | Licensing of Insured Drivers | Rules for Documents | Cancellation and Non-renewal for Unpaid Premiums | Premium Payments | Premium Audits | Voluntary Premium Reductions | Cancellation and Non-Renewal for Other Reasons | Looking Ahead | Related Content Current as of: 05/14/2020 COVID-19 is altering traditional insurance concepts and rules in compelling ways. Lawmakers and regulators are issuing a slew of virus-related guidance, bulletins, regulations, and proposed legislation that are repositioning products, sales and delivery systems, coverage, and claims handling into an extra-contractual purgatory of sorts. In a series of four articles, noteworthy COVID-19 provisions directed to the insurance industry are identified and evaluated so practitioners can assess their scope and advise clients on how to satisfy this unexpected layer of compliance responsibility. Part I discusses impacts to the entire operations continuum. This Part II examines changes to licensing requirements for insurance intermediaries and for insureds plus new rules about premiums, notice, and cancellations. Part III explores developments relating to life/health insurance and workers’ compensation. Part IV addresses regulations and proposed laws on business interruption insurance. See COVID-19 Insurance Laws and Regulations Part I: Insurance Operations Mandates, COVID-19 Insurance Laws and Regulations Part III: Life / Health and Workers' Compensation Insurance and Liability Protections, and COVID-19 Insurance Laws and Regulations Part IV: Business Interruption Coverage Mandates. The nation’s legislative and regulatory mandates are both about increasing access to coverage and about circumscribing what insurers must and must not do in relation to the pandemic. As this regulatory activity continues its disruption, general themes are emerging that can help insurers and policyholders realize the elemental nature of the changes and understand the necessity of creating new approaches to relations with intermediaries and policyholders, especially with respect to licensing and claims handling. Of immediate concern are the following: • New requirements that restrict the entire operations continuum, including underwriting, sales, and claims practices • The relaxation of licensing requirements • Wide-ranging changes to traditional rules on premiums, notice, proof of loss, and cancellation • The unanticipated insolvency concerns that this regulatory activity is generating, especially in the areas of life insurance, health insurance, and workers’ compensation • Proposed legislation in eight states that would force COVID-19 business interruption coverage –and– • The potentially permanent aspects of these collective changes How these regulatory trends are currently affecting the licensing of insurance intermediaries and of policyholders— especially insureds under personal automobile policies—as well as the claims handling process, and how these provisions may impact the industry going forward, is explored more fully below. Impacts to Licensing Many states are easing licensing restrictions because of the coronavirus epidemic. This is occurring with insurance intermediaries in large part because third-party testing centers and fingerprinting locations are generally closed as COVID-19 Insurance Laws and Regulations Part II: New Rules on Licensing, Notice, Premiums and Cancellations non-essential businesses under various states’ Shelter in Place orders. These relaxed licensing rules specifically apply across the board to most insurance intermediaries, including agents, adjusters, producers, surplus lines and life settlement brokers, title agents, escrow officers, and bail bondsmen. Issuance and Renewals Current insurance intermediary licenses will remain active in many jurisdictions (including TX, SC, LA, IN, NE, NC, CT, AR, NH, MA, and NY) for periods that vary from late May 2020, to the end of the pandemic, or even until further notice. Renewal periods on existing licenses are being treated in a similar fashion. Many states are also permitting temporary licenses to remain active, although a few states, such as North Carolina, have stopped issuing temporary licenses altogether. Testing and Fingerprinting Pre-licensing testing, continuing education and fingerprinting—which are important public safety components of licensing—are impacted by the coronavirus because third party testing centers and fingerprinting facilities are not considered essential businesses according to state Shelter in Place orders and are therefore closed. As a result, many states, including OK, RI, SD, IA, MI (Bulletin 2020-20-INS), OR, OH, ME, WV, MN (Regulatory Guidance 20- 20), and PA, are either permitting temporary authority to remain active past expiration or issuing new temporary licenses without the benefit of education, testing, or fingerprinting. Some jurisdictions have entirely waived the public safety component of fingerprinting for insurance intermediary licensees until further notice. A few states, such as NC, have stopped issuing temporary licenses altogether because of closing test centers and the inability to comply with fingerprinting rules. Scattered provisions have come in since March which provide for virtual testing and remotely proctored exams in various states including ND, IA, NE, MA, GA, TX, and WI. And while Florida has suspended licensing examinations entirely during the pandemic, Minnesota has started to allow conversion of previously approved in-person continuing education courses into webinars. Licensing of Insured Drivers Because of the difficulties states are experiencing with providing adequate staffing and supplying customary levels of administrative and operational service, the trend involving relaxed licensing is also occurring in the context of commercial and personal automobile drivers’ licenses. For example, Washington has temporarily waived or suspended laws on the expiration and renewal of drivers’ licenses, while Arizona has ordered insurers to refrain from cancelling auto policies because of the deferred expiration of an insured’s driver’s license. In addition, Georgia has extended deadlines and requirements on drivers’ licenses, and Wyoming has suspended non-commercial driving tests in addition to providing a grace period for expired drivers licenses. In Pennsylvania, auto insurers have been directed to apply their policy provisions by encouraging flexibility consistent with the Commonwealth’s suspension of license expiration dates. Rules for Documents Due in part to reduced staffing, but mostly as a result of both business closures and social distancing requirements, regulators have relaxed many of the requirements imposed upon hard-copy documentation for licensing. Provisions have appeared across most jurisdictions that have dispensed with documentary requirements including: • New forms • Post office mailing • Wet signatures –and– Page 2 of 6 COVID-19 Insurance Laws and Regulations Part II: New Rules on Licensing, Notice, Premiums and Cancellations • Notary requirements Some states are even accepting surety bonds with electronic signatures. While regulatory easing of licensing and documentation requirements does not appear to be as extensive or as drastic as the developments taking place around the life / health / workers’ compensation or business interruption sectors of the insurance industry (discussed in Parts III and IV of this article series), less stringent licensing requirements nevertheless put significant consumer protection issues at play. Deterioration of the licensing processes that ensure compliance with qualifications and standards for the operation of motor vehicles is particularly problematic. The potential for more serious repercussions is very real if the relaxion of licensing rules continues for the long term. Cancellation and Non-renewal for Unpaid Premiums Regulators in most jurisdictions have implemented additional protective measures for consumers by altering existing provisions on cancellation and non-renewal of policies. Some states have issued mere recommendations (Montana) or requests for insurers to consider implementation (Illinois) of these measures, while in Delaware an initial recommendation was later amended into a mandatory requirement. The majority of jurisdictions have taken a direct approach and issued blanket prohibitions against anything that will separate a policyholder from its coverage during the coronavirus pandemic. Jurisdictions including AR, DE, GA, NY, WV, IN, LA, NJ, MA (Bulletin 20-05), VT, HI (Memorandum 2020-31), and MI have put executive orders or bulletins in place that preclude policies from being cancelled or not renewed. These cancellation and nonrenewal provisions apply generally to any authorized insurer in a state regardless of line of coverage, although some states specify the application of these rules to life, property and casualty, workers’ compensation and surplus lines insurers. However, in New York, non-cancellation provisions do not apply to personal and commercial excess line policies. There are some variations to the general prohibitions against policy cancellation during the pandemic. A few jurisdictions (like Arkansas) limit these protections to insureds who are diagnosed with or positively test for COVID- 19. Oregon includes an additional compliance wrinkle by prohibiting commercial liability insurers
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