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 selections based mostly on a property’s standing as an inexpensive housing growth or containing inexpensive housing items. If an insurer used this knowledge up to now as a part of their software, underwriting course of, or rate-setting course of, they have to revise such functions, underwriting tips, and charges accordingly.[2]
Part 3462 offers that insurers might not “cancel, refuse to situation, refuse to resume or enhance the premium of a coverage, or exclude, restrict, prohibit, or cut back protection below a coverage” [3] based mostly on the truth that the actual property being insured is an inexpensive housing growth. Insurers likewise are additionally prohibited from inquiring upon software whether or not a property is an inexpensive housing growth or incorporates inexpensive housing items.[4] The statute outlines the next components and bars insurers from asking about them on functions and from contemplating them throughout underwriting and ranking.[5]
These components embody:
- 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 embody these components on an software nor use them in making an underwriting or ranking choice, 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 amassing this data and stop its use in underwriting and ranking. DFS additional encourages insurers to assessment their charges, software types, and underwriting tips, and revise them if obligatory[8].
Part 3462(b) reiterates that insurers might cancel, refuse to situation, refuse to resume, enhance premiums on a coverage, or restrict, prohibit, or cut back protection below such coverage, attributable to “different components which are permitted or not prohibited by another 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 situation 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 obtainable 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 turn into conscious of attainable points in regards to the availability and price 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, resembling 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. You probably have any questions or issues, please contact the creator or your Locke Lord accomplice.
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* With appreciation for the contributions of our summer time affiliate Dani D’Annunzio of the Fordham Legislation Faculty Class of 2025.
[1] N.Y. Dept. of Fin. Serv., Round Letter No. 6 (2024), Re: Inexpensive Housing Underwriting and Ranking (June 24, 2024) obtainable 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 functions requested about government-subsidized housing items and whether or not tenants paid hire 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 Ranking (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), obtainable here.
[11] N.Y. Dept. of Fin. Serv., Round Letter No. 6 (2024), Re: Inexpensive Housing Underwriting and Ranking (June 24, 2024).
[12] See FY 2025 N.Y. State Government Price range: Training, Labor, & Household Help, Artwork. VII. Legis., obtainable here.
[13] N.J. Dept. of Banking & Ins., Bulletin No. 2024-10, Re: Inexpensive Housing and Insurance coverage Survey (July 8, 2024), obtainable 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), obtainable here.
