March 20, 2020

COVID-19 US: Insurance regulators grapple with the Coronavirus pandemic

As the COVID-19 pandemic continues to spread across the US, state insurance regulators are undertaking various measures to understand and respond to the potential effects of the pandemic on the insurance industry and policyholders.

As the COVID-19 pandemic continues to spread across the US, state insurance regulators are undertaking various measures to understand and respond to the potential effects of the pandemic on the insurance industry and policyholders.  One, state insurance regulators have been making data calls and information requests to the insurance industry to gather information regarding what kind of insurance coverages exist for and how the insurance industry is responding to the pandemic. Two, state insurance regulators — as well as legislators — have been mandating and expanding certain types of coverages for both consumers and businesses. Three, the insurance industry is being called upon to submit plans for responding to various aspects of the pandemic for review by the regulators.  Set forth below is a brief discussion of each of these developments.

  • The insurance industry has faced data calls and information requests in connection with the pandemic from various regulators.  For example, the New York Department of Financial Services (“NY DFS”) has been active on multiple fronts.  On March 10, 2020, the DFS issued two separate Section 308 letters to insurers relating to business interruption coverages and travel insurance, which required recipients to provide certain data to the NY DFS and to provide their policyholders with an explanation of benefits under their business interruption coverages for commercial policyholders and travel insurance policies, respectively, for claims relating to COVID-19.  Beyond state insurance regulators, the insurance industry is also facing such demands from other sources; for instance, the US House Oversight Subcommittee on Economic and Consumer Policy has asked certain travel insurance companies to provide data regarding travel insurance policies including certain types of claims for the COVID-19 pandemic.
  • At the same time, state insurance regulators have been mandating and expanding coverages under existing insurance policies and seeking to have more coverages offered. For instance, the NY DFS has promulgated an emergency regulation which requires health insurers to waive co-payments, coinsurance and annual deductibles for in-network services delivered by telemedicine if such services would have been covered under the policy had it been provided in-person.  Several other states, such as Texas and Washington, have also mandated such requirements.  On the legislative side, the New Jersey legislature is considering a bill (Bill A-3844) that would require that every insurance policy for property loss or damage which includes business interruption coverage be understood and required to cover business interruption from a pandemic or global virus transmission notwithstanding any pandemic or virus exclusion under the actual policy; if enacted, it would apply retroactively to any policy in force on and after March 9, 2020 (and would last for the duration of New Jersey's declared State of Emergency for the pandemic) for any claims by businesses with less than one hundred (100) full-time employees.  
  • Finally, state insurance regulators are also concerned about how the insurance industry will continue to operate and service the marketplace through the pandemic. For example, on March 16, 2020, the Florida Office of Insurance Regulation (“FL OIR”) issued guidance relating to business continuity planning which requires an insurer to notify the FL OIR if it activates its business continuity plan and to provide subsequent notice if its business operations are impaired as a result of COVID-19 to the extent that it is unable to provide essential insurance services to policyholders.  Similarly, on March 11, 2020, the NY DFS issued guidance to the insurance industry and request for assurances regarding preparedness for responding to the pandemic.  The NY DFS is requiring that each licensed insurance entity in New York submit to the NY DFS a response describing its plans of preparedness to manage the risk of disruption to operations as well as the financial risk that may arise from the pandemic; responses are due no later than thirty (30) days from the date of the NY DFS letter.

The National Association of Insurance Commissioners (“NAIC”) is hosting a special session regarding COVID-19 on March 20, 2020.  We anticipate further actions by state insurance regulators as the needs of the industry and consumers evolve in response to the COVID-19 pandemic

Our team continues to track and analyze the US insurance regulatory developments in response to the pandemic. We will provide regular updates, and we are also available to provide further guidance on any issues.