INSURANCE

DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF INSURANCE

Senior Citizen Insureds to Designate Third Parties to Receive Certain Notices

Proposed New Rules: N.J.A.C. 11:2-19

Authorized By: Donald Bryan, Acting Commissioner, Department of Banking and Insurance.

Authority: N.J.S.A. 17:1-8.1, 17:1-15e and 17:29C-1.1 and 1.2.

Calendar Reference: See Summary below for explanation of exception to calendar requirement.

Proposal Number: PRN 2002- 46

Submit comments by March 23, 2002 to:

Karen Garfing
Assistant Commissioner
Regulatory Affairs
New Jersey Department of Banking and Insurance
20 West State Street
PO Box 325
Trenton, NJ 08625-0325

Fax No.: (609) 292-0896

E-mail: legsregs@dobi.state.nj.us

The agency proposal follows:

Summary

The purpose of these proposed new rules is to implement N.J.S.A. 17:29C-1.1 and 1.2, effective February 14, 2000. This statute requires every insurer to permit its senior citizen insureds to designate a third party to whom the insurer must transmit copies of notices of cancellation, nonrenewal and conditional renewal. Original notices continue to be sent to the insured.

Although these statutory provisions were placed in a chapter that generally governs matters relating to property/casualty insurance, it is clear from the definition of "insurer" appearing in the Act that the Legislature intended to apply these provisions to life and health insurance as well. Since life insurance policies are not cancelled or nonrenewed but may "lapse," the word "lapse" has been added in these proposed new rules where applicable.

The Act defines "senior citizen insured" to mean "any named insured pursuant to a policy of personal lines insurance who is an individual and is at least 62 years of age." "Policy of personal lines insurance" is defined to mean "any policy or contract of insurance issued or issued for delivery in this State for personal, family or household purposes, as determined by the Commissioner, by an insurer on a risk located or resident in this State for which the premiums are paid directly to the insurer by the senior citizen insured."

The statutory definitions noted above, as well as other provisions of the Act, are included in these proposed new rules for purposes of regulatory completeness. But most important is the proposed definition of "personal lines insurance" that appears here for the first time. The Department of Banking and Insurance ("Department") is proposing to define this term so as to include specific reference to the kinds of insurance policies, both property/casualty and life and health, that are identified as "insurance policies issued for personal, family or household purposes." For property/casualty insurance, the definition incorporates by reference the definition at N.J.A.C. 11:13-1.2(a)2i, and also includes policies of automobile insurance for automobiles leased for over six months. The references under the life and health heading include all individual life, health and credit insurance policies; annuity contracts; health maintenance organization contracts; Medicare + Choice plans as defined at N.J.A.C. 11:4-23.3; and any group policy of life, health or credit insurance, group annuity contracts and group health maintenance organization contracts where the individual insured pays premiums directly to the insurer. Individual and group health insurance would include Medicare Supplement and long term care coverages.

Proposed N.J.A.C. 11:2-19.1 sets forth the purpose and scope of the proposed new rules.

Proposed N.J.A.C. 11:2-19.2 sets forth the definitions of terms used throughout the subchapter.

Proposed N.J.A.C. 11:2-19.3 sets forth the requirements for the designation by a senior citizen insured of a third party to receive notices of cancellation, nonrenewal, conditional renewal, or lapse.

Proposed N.J.A.C. 11:2-19.4 sets forth the penalties for violations of the subchapter.

A 60-day comment period is provided for this notice of proposal and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, the proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

Social Impact

Except for the addition of the word "lapse" where applicable as stated above, the definition of "personal lines insurance" is the only provision in these new rules that does not already appear in the underlying statute. By adding this definition, the Department is assisting insurers and senior citizen insureds alike by specifically identifying the kinds of insurance to which the statutory and regulatory provisions apply.

Economic Impact

Identification by the Commissioner of the kinds of insurance that are issued for personal, family or household purposes, and thus included under "personal lines insurance" and subject to these provisions, will lend uniformity to this effort initiated by the Legislature on behalf of senior citizen insureds. This will generally result in broader compliance by insurers and, therefore, may increase, to varying degrees, the costs incurred by insurers in assuring that all of their senior citizen insureds who are eligible to participate in this program are given the opportunity to do so.

Correspondingly, a greater number of senior citizen insureds will enjoy the added protection afforded to them by these provisions through designation of third parties to receive important insurance notices on their behalf. This will have a positive economic impact on senior citizen insureds who will undoubtedly benefit from the reduced incidence of policy cancellation and nonrenewal.

The Department is not expected to incur any costs as a result of the proposed new rules.

Federal Standards Statement

A Federal standards analysis is not required because proposed new rules are not subject to any Federal requirements or standards.

Jobs Impact

The Department does not anticipate that any jobs will be generated or lost as a result of adding a definition of "personal lines insurance" to statutory provisions that are already in place.

The Department invites commenters to submit any data or studies concerning the jobs impact of the proposal together with their comments on other aspects of the proposal.

Agriculture Industry Impact

Neither the statutory provisions nor the proposed definition of "personal lines insurance" will have any impact on the agriculture industry in New Jersey.

Regulatory Flexibility Statement

The proposed definition of "personal lines insurance" and the addition of the word "lapse" where appropriate, do not impose any new reporting, recordkeeping or other compliance requirements on insurers doing business in New Jersey that may be "small businesses" as defined under the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq. Such requirements are already in place as a result of the statutory provisions that, for purposes of completeness, are included in these new rules. Therefore, a regulatory flexibility analysis is not required. The definition of "personal lines insurance" specifically identifies the kinds of insurance that are subject to the statutory requirements.

Full text of the proposed new rules follows:

SUBCHAPTER 19. DESIGNATION OF THIRD PARTY FOR CERTAIN NOTIFICATIONS BY SENIOR CITIZEN INSUREDS

11:2-19.1 Purpose and scope

(a) N.J.S.A. 17:29C-1.1 and 1.2 allow senior citizen insureds of policies of personal lines insurance to designate a third party to whom the insurer must transmit a copy of important notices affecting insurance coverage. This subchapter provides rules for the implementation of those provisions.

(b) This subchapter applies to all insurance policies or contracts of insurance that are issued or issued for delivery in this State for personal, family or household purposes, as determined by the Commissioner, by an insurer on a risk located or resident in this State for which the premiums are paid directly to the insurer by the senior citizen insured.

11:2-19.2 Definitions

The following words and terms, as used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise:

"Commissioner" means the Commissioner of the Department of Banking and Insurance.

"Insurer" means those entities defined at N.J.S.A. 17:29C-1.1.

"Lapse" means default in premium or any other required payment, and the termination of insurance for any reason, including, but not limited to, nonpayment of premium, excessive debt, and expiration of policy term.

"Personal lines insurance" means insurance policies issued for personal, family or household purposes, and includes:

1. Under property/casualty coverage:

i. The policies set forth at N.J.A.C. 11:13-1.2(a)2i; and

ii. Policies principally used to provide primary insurance on private passenger automobiles that are individually owned or leased for over six months and used for personal or family needs; and

2. Under life and health coverage:

i. All individual life, health and credit insurance policies;

ii. Annuity contracts;

iii. Health maintenance organization contracts;

iv. Medicare + Choice plans as defined at N.J.A.C. 11:4-23.3; and

v. Any group policies of life, health or credit insurance, group annuity contracts and group health maintenance organization contracts where the individual insured pays premiums directly to the insurer.

"Policy of personal lines insurance" means any policy or contract of insurance issued or issued for delivery in this State for personal, family or household purposes, as defined in this subchapter, by an insurer on a risk located or resident in this State for which the premiums are paid directly to the insurer by the senior citizen insured.

"Senior citizen insured" means any named insured, or certificate holder, pursuant to a policy of personal lines insurance who is an individual and is at least 62 years of age.

11:2-19.3 Designation third party to receive copies of certain notices

(a) Every insurer shall permit its senior citizen insureds to designate a third party to whom the insurer shall transmit a copy of notices of cancellation, lapse, nonrenewal and conditional renewal with respect to a policy of personal lines insurance. The senior citizen insured shall notify the insurer that a third party has been so designated. Such notification shall be delivered to the insurer by certified mail, return receipt requested, and shall be effective not later than 10 business days from the date of receipt by the insurer. The notification shall contain, in writing, an acceptance by the third party designee to receive copies of notices of cancellation, lapse, nonrenewal and conditional renewal from the insurer.

(b) Designation as a third party shall not constitute acceptance of any liability on the part of the third party for services provided to the senior citizen insured, nor on the part of the insurer.

    1. The transmission to the third party designee of a copy of any notice of cancellation, lapse, nonrenewal or conditional renewal shall be in addition to the original document transmitted to the senior citizen insured. When a third party is so designated, all such notices and copies shall be mailed in an envelope clearly marked on its face with the following: "IMPORTANT INSURANCE POLICY INFORMATION: OPEN IMMEDIATELY."

(d) The copy of the notice of cancellation, lapse, nonrenewal or conditional renewal transmitted to the third party shall be governed by the same law and policy provisions which govern the notice being transmitted to the senior citizen insured.

(e) The insurer shall notify its senior citizen insureds annually in writing, except in cases in which the age of the senior citizen insured is unknown to the insurer, of the availability of the third party designee notice procedures and provide information on how the insured can commence this procedure, except that notice need not be provided once a senior citizen insured has made a designation. An insurer may provide this required annual notice to its senior citizen insureds in any manner that it determines.

(f) Should the third party designee desire to terminate the status as a third party designee, the designee shall provide written notice to both the insurer and the senior citizen insured. Should the senior citizen insured desire to terminate the third party designation, the insured shall provide written notice to the insurer.

11:2-19.4 Penalties

Failure to comply with this subchapter shall result in the imposition of penalties as set forth in N.J.S.A. 17:33-2 and 17B:21-2.