On June 24, 2024, the New York Division of Monetary Providers (“DFS”) issued Insurance Circular Letter No. 6 (2024),[1] informing property and casualty insurers writing and delivering business property and legal responsibility insurance coverage insurance policies in New York, together with extra/surplus traces insurers, that the newly enacted N.Y. Insurance Law § 3462 prohibits insurers from inquiring about or making underwriting and ranking choices based mostly on a property’s standing as an inexpensive housing growth or containing inexpensive housing items. If an insurer used this knowledge previously as a part of their utility, underwriting course of, or rate-setting course of, they have to revise such purposes, underwriting pointers, and charges accordingly.[2]
Part 3462 supplies that insurers might not “cancel, refuse to concern, refuse to resume or improve the premium of a coverage, or exclude, restrict, limit, or scale back protection below a coverage” [3] based mostly on the truth that the true property being insured is an inexpensive housing growth. Insurers likewise are additionally prohibited from inquiring upon utility whether or not a property is an inexpensive housing growth or accommodates inexpensive housing items.[4] The statute outlines the next components and bars insurers from asking about them on purposes and from contemplating them throughout underwriting and ranking.[5]
These components embrace:
- Any affordability requirement imposed on residents of specified earnings ranges;
- Participation in government-run rental help applications (e.g., Part 8 vouchers);
- The extent or supply of earnings of tenants, house owners, or shareholders; and
- Publicly-supported possession construction (e.g., possession by a public housing entity or cooperative housing company).[6]
New York property and casualty insurers might not embrace these components on an utility nor use them in making an underwriting or ranking resolution, together with “to find out if additional underwriting is important.”[7] DFS instructs insurers—together with extra/surplus traces and the New York Property Insurance coverage Underwriting Affiliation—to finish the observe of accumulating this info and stop its use in underwriting and ranking. DFS additional encourages insurers to evaluate their charges, utility types, and underwriting pointers, and revise them if mandatory[8].
Part 3462(b) reiterates that insurers might cancel, refuse to concern, refuse to resume, improve premiums on a coverage, or restrict, limit, or scale back protection below such coverage, as a consequence of “different components which might be permitted or not prohibited by every other part” of the Insurance coverage Code,[9] i.e., nonpayment of premium or different components not deemed discriminatory.
Background
In November 2022, DFS collaborated with New York State Houses and Neighborhood Renewal to concern a report[10] on “will increase in insurance coverage premiums and unavailability of insurance coverage protection for inexpensive housing developments.”[11] DFS investigated additional through direct inquiries to insurers working in New York State and found that some property and casualty insurers inquire about government-funded items or tenants’ use of presidency rental help as a part of their underwriting course of. DFS subsequently lobbied for Half BB of the education, labor, housing, and family assistance budget, which added part 3462 to the Insurance coverage Legislation, was signed by Governor Hochul on April 20, 2024, and took impact instantly.[12]
A full copy of Round Letter No. 6 (2024) is on the market here.
New Jersey
Earlier this week, the New Jersey Division of Banking and Insurance coverage (“DOBI”) concurrently issued Bulletin No. 24-10[13] and Order No. A24-06,[14] informing property and casualty insurers admitted in New Jersey that DOBI “has grow to be conscious of potential points regarding the availability and value of insurance coverage protection for inexpensive housing developments,” and thus requires admitted property and casualty insurers to submit survey outcomes by August 22, 2024 to [email protected]. The Bulletin and Order each specify property and casualty sublines, corresponding to boiler & equipment, hearth, business a number of peril, householders a number of peril, inland marine, and employees’ compensation, amongst others. The survey primarily pertains to “government-regulated housing” and “government-subsidized housing,” together with Low Earnings Housing Tax Credit (“LIHTC”). In distinction to New York, the DOBI Bulletin and Order solely apply to admitted carriers.
Locke Lord will proceed to observe developments on this space. When you have any questions or considerations, please contact the writer or your Locke Lord accomplice.
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* With appreciation for the contributions of our summer season affiliate Dani D’Annunzio of the Fordham Legislation College Class of 2025.
[1] N.Y. Dept. of Fin. Serv., Round Letter No. 6 (2024), Re: Inexpensive Housing Underwriting and Score (June 24, 2024) out there here.
[2] If the insurer is admitted, they have to additionally submit their revised charges to DFS. See N.Y. Dept. of Fin. Serv., Round Letter No. 6 (2024).
[3] N.Y. Ins. Legislation § 3462(a) (McKinney 2024)
[4] See id. For instance, in 2022, some insurers disclosed to DFS that their purposes requested about government-subsidized housing items and whether or not tenants paid lease with housing help. DFS asserts that part 3462(a) now prohibits questions of this nature.
[5] Id. § 3462(a)(1)–(4).
[6] Id. § 3462(a)(1)–(4).
[7] N.Y. Dept. of Fin. Serv., Round Letter No. 6 (2024), Re: Inexpensive Housing Underwriting and Score (June 24, 2024).
[8] Admitted insurers should file revised charges with DFS.
[9] Id. § 3462(b).
[10] See Inexpensive Housing & Insurance coverage, N.Y. Dept. of Fin. Serv (2022), out there here.
[11] N.Y. Dept. of Fin. Serv., Round Letter No. 6 (2024), Re: Inexpensive Housing Underwriting and Score (June 24, 2024).
[12] See FY 2025 N.Y. State Government Finances: Training, Labor, & Household Help, Artwork. VII. Legis., out there here.
[13] N.J. Dept. of Banking & Ins., Bulletin No. 2024-10, Re: Inexpensive Housing and Insurance coverage Survey (July 8, 2024), out there here.
[14] N.J. Dept. of Banking & Ins., Order No. A24-06, Re: IN THE MATTER OF THE REQUEST FOR INFORMATION FROM INSURERS AUTHORIZED OR ADMITTED TO TRANSACT PROPERTY AND CASUALTY INSURANCE IN NEW JERSEY, (July 8, 2024), out there here.
