New Jersey Order – Premium Refunds, Credits and Reductions in Response to COVID-19

On May 12, 2020, the New Jersey Department of Banking and Insurance (“DOBI”) issued Bulletin 20-22 ordering insurers to make an initial premium refund or other adjustment to all New Jersey policyholders adversely impacted due to overstatement or misclassification of  risk resulting from the COVID-19 pandemic. Insurers are directed to provide each affected policyholder with a notification or the amount of the refund or adjustments by June 15, 2020. Insurers who can demonstrate that its rates are not excessive, inadequate, or unfairly discriminatory, or otherwise contends it should not be subject to the terms of this Bulletin, are to provide information to the DOBI by June 1, 2020.

In addition, Order No: A 20-03 requiring various data reports was issued on the same date and is referenced in the bulletin. For insurer groups with more than $20,000,000 in 2019 written premiums, the order requires bi-weekly data reports, with the first report due by May 19, 2020. All insurer groups must provide to the Department a report containing all actions taken, and contemplated future actions, to reduce premium in response to or consistent with Bulletin No. 20-22 on a monthly basis, with the first report due by June 1, 2020.

Perr&Knight submits more filings to the DOBI than any other consulting firm. We are available to discuss any questions or unique situations with the DOBI on your behalf. We can also provide information on what other companies have done, to the extent this information is publicly available in New Jersey or other states. Finally, we can prepare and submit your required filing and reports to the New Jersey DOBI.

As we stated when the California Department of Insurance (“CDI”) Bulletin was released in April, we expected that other states may issue similar bulletins in the future. Those familiar with the CDI bulletin will see some similarities in the New Jersey bulletin. New Jersey’s Bulletin 20-22 requires the action of all companies who write the following lines of business in New Jersey:

  • Private passenger automobile insurance;
  • Commercial automobile insurance;
  • Workers’ compensation insurance;
  • Commercial multiple peril insurance;
  • Commercial liability insurance;
  • Medical malpractice insurance; and
  • Any other line of coverage where the measures of risk have become substantially overstated as a result of the COVID-19 pandemic.

These are the same seven lines mentioned in the CDI bulletin. The DOBI bulletin is also consistent with the CDI bulletin in that it allows insurers to apply a uniform premium reduction for all policyholders in an individual line of insurance or reclassify risks in accordance with existing rating plans without prior approval. There are some key differences in the DOBI bulletin compared to the CDI bulletin:

  • The CDI bulletin does not require any rate, rule or form filings to be submitted, while the DOBI bulletin requires all licensed and admitted insures to submit all components of their refund program via the System for Electronic Rates and Forms Filing (“SERFF”) no more than 15 days after implementation.
  • The CDI bulletin specifies that initial premium refunds are to be made for the months of March and April while the DOBI bulletin orders the refunds “for each month that the public health emergency is in effect.”

In summary, based on Bulletin 20-22 as well as Order No: A 20-03, the following are the key dates for information required of insurers writing the lines listed above in New Jersey:

A. By May 19, 2020, insurer groups writing any of the enumerated lines with more than $20,000,000 in 2019 written premium for all property/casualty lines combined, must report the following information to the DOBI:

    1. New Jersey Claim data including measures of claim frequency and claim severity, and
    2. Premium collection activity including measures of premium billed or due and actual premiums collected.

This data is needed for the following three time periods:

      • January 1, 2020 to March 21, 2020;
      • March 22, 2020 to the date of the report; and
      • the same time period as provided in b, however for 2019.

In addition to May 19, these data reports are to be provided bi-weekly on the following dates: June 2, June 16, June 30, July 14, July 28, August 4, August 18, September 1 and September 15; the data provided in each report shall be the most current available through the preceding week’s end.  For the report due May 19, 2020, the data should be through May 15, 2020.

B. By June 1, 2020, all insurer groups writing any of the enumerated lines are to submit a report containing all actions taken, and contemplated future actions, to reduce premium in response to or consistent with the bulletin. The report is to include New Jersey-specific information and an explanation and justification for the amount and duration of any premium reductions based on the company’s claim and premium data.

The report shall also provide monthly and overall totals for the following:

      1. Aggregate premium prior to, and subject to, application of refunds or adjustments;
      2. Aggregate premium refunds and adjustments;
      3. The number of in-force policies, and
      4. Number of policyholders receiving refunds or adjustments.

In addition to June 1, the same reports are due on July 1, August 1 and September 1.  The  information provided in each report is to reflect activity through the preceding month’s end.

C. By June 1, 2020 any insurer, writing the enumerated lines, that can demonstrate its rates are not excessive, inadequate, or unfairly discriminatory, or otherwise contends it should not be subject to the terms of the bulletin, it shall submit its basis for such contention and supporting documentation to the DOBI.

D. By June 15, 2020, the following is to be provided to each affected policyholder:

      1. A notification of the amount of the refund or adjustment.
      2. An explanation of the basis for the adjustment, including a description of the policy period that was the basis of the premium refund and any changes to the classification or exposure basis of the affected policyholder.
      3. An opportunity to provide their individual actual or estimated experience.

E. No later than 15 days after implementation, licensed and admitted insurers must submit all components of their refund program, including but not limited to, a rate, rule, and/or form filing via the SERFF documenting the refund program.

If there is anything that Perr&Knight can do to assist your company to comply with the requirements in New Jersey or any other state, please complete our contact form.