Apr 15, 2020

DOBI issues bulletin on emergency grace period; producers required to permit ‘remote payment’

Gov. Phil Murphy issued Executive Order No. 123 on April 9, 2020. The order prohibits the nonpayment cancellation of property/casualty and life insurance policies, including those that are financed by premium-finance companies.

The Department of Banking and Insurance has issued a bulletin to provide more specifics on how the executive order will be implemented.

Insurance producers who accept premium payments on behalf of insurers/premium-finance companies must:

• take steps to ensure that customers who are able to make payments, have the ability to make payments through methods other than in-person payment. This would include accepting online payments or payments through the mail. 

P/C insurers must:

• grant insureds who are experiencing a financial hardship due to COVID-19 a 90-day grace period to pay insurance premiums;
• permit insureds to opt to apply the 90-day emergency grace period either retroactively to April 1, 2020, or opt for the grace period to begin on May 1, 2020;
• not cancel a policy for nonpayment of premium during the grace period;
• waive late payment fees otherwise due, and not report late payments to credit rating agencies, during the 90-day period;
• allow premiums due, but not paid during the 90-day period, to be paid over the remainder of the current policy term or up to 12 months in up to 12 equal installments, whichever is longer;
• ensure that late payments during the 90-day period are not considered in any future premium calculations at any time; and
• provide notification to each policyholder of the terms of the extended grace period.

The grace period is intended to be applied to all installment payments, including renewal down payments, provided that the insured provides notice to the insurer that the insured wishes to continue coverage. The grace period does not extend the current policy period, it only permits the missed premium to be paid over a longer period of time.

Life insurers must:

• provide their policyholders or certificate holders who may be experiencing a financial hardship due to COVID-19 with at least a 90-day grace period to pay life insurance and annuity contracts premiums;
• permit the policyholder to opt to apply the 90-day emergency grace period either retroactively to April 1, 2020, or opt for the grace period to begin on May 1, 2020;
• not cancel any insurance policy for nonpayment of premium;
• waive late payment fees otherwise due, including any interest, and not report late payments to credit rating agencies, during the 90-day period;
• allow premiums due, but not paid during the 90-day period, to be paid over the course of the following year in up to 12 equal installments;
• extend to 90 days the period to exercise policyholder and contract holder rights and benefits under life insurance and annuity contracts; and
• provide notification to each policyholder of the terms of the extended grace period.

The extended grace periods only apply to policyholders who were in good standing with their insurance carrier on March 1, 2020. This grace period only applies to premiums due after the initial premium has been made to secure coverage. The grace period does not extend the current policy period, it only permits the missed premium to be paid over a longer period of time.

Premium-finance companies must:

• grant clients who are experiencing a financial hardship due to COVID-19 a 90-day grace period to pay insurance premiums;
• permit clients to opt to apply the 90-day emergency grace period either retroactively to April 1, 2020, or opt for the grace period to begin on May 1, 2020;
• not cancel a policy for nonpayment of premium during the grace period;
• waive late payment fees otherwise due, and not report late payments to credit rating agencies, during the 90-day period;
• allow premiums due, but not paid during the 90-day period, to be paid over the remainder of the current policy term or up to 12 months in up to 12 equal installments, whichever is longer;
• ensure that late payments during the 90-day period are not considered in any future premium calculations at any time; and
• provide notification to each policyholder of the terms of the extended grace period.

The extended grace periods only apply to policyholders who were in good standing with their premium-finance company on March 1, 2020. This grace period only applies to premiums due after the initial premium has been made to secure coverage. The grace period does not extend the current policy period only permits the missed premium to be paid over a longer period of time.

PIANJ will report more details as they emerge.