The Office of General Counsel issued the following opinion on August 20, 2003, representing the position of the New York State Insurance Department.
Re: Rate Changes
If an insurer issues a non-commercial motor vehicle insurance policy with a six-month term, may the insurer renew the policy with a premium change even though there is a statutorily required policy period of one year or three years, depending on when the policy was written?
Yes. There is no statutory prohibition against an insurer renewing a non-commercial motor vehicle policy with a premium change within the applicable statutorily required policy period of renewal.
The inquirer wants to know when an insurer may increase premiums on a non-commercial motor vehicle policy when the term of the policy has been changed in the following way. Initially, the insurer issued an annual policy. At the expiration of this annual policy, the insurer issued a six month policy. At the expiration of this six month policy, the inquirer anticipates that the insurer will increase the premium upon renewal of the six month policy, and at every six month renewal thereafter. The inquirer wants to know whether New York Insurance Law allows these premium increases every six months, or must the insurer wait until the annual anniversary of the original annual policy. The inquirers question is premised on the assumption that the increased rate has been approved by the Department.
There has been a recent amendment to N.Y. Ins. Law § 3425 regarding the required policy period. Please review the enclosed Circular Letter 12 (2003) for an explanation.
N.Y. Ins. Law § 3425(a)(6) (McKinneys Supp. 2003) provides that any policy with a policy period or term of less than one year shall, for the purpose of this section, be considered as if written for a policy period of one year and a policy with no fixed expiration date shall be considered as if written for successive policy periods or terms of one year. Therefore, under N.Y. Ins. Law § 3425(a)(6) (McKinneys Supp. 2003), a policy written for a period of six months, must be renewed for another six months and continue to be renewed for the entire duration of the applicable required policy period. Only after the required policy period has elapsed may an insurer elect to non-renew the insured.
New York Insurance Law has no prohibition against an insurer renewing a non-commercial motor vehicle policy with a premium change within the applicable statutorily required policy period of renewal. The required policy renewal periods for non-commercial motor vehicle policies do not have any effect upon the ability of the insurer to renew policies with a premium change, provided that the premium change conforms to its rate filing with the New York State Insurance Department. If the term change causes a change in the policy form, pursuant to N.Y. Ins. Law § 3425(d)(3) (McKinneys Supp. 2003), the revised policy form must be approved by the Department. Also, pursuant to N.Y. Ins. Law § 2310 (McKinneys Supp. 2003), the insurer must file with the Department the new rating rules that result from any premium change. Finally, pursuant to N.Y. Ins. Law § 2314 (McKinneys 2000), "[n]o authorized insurer shall, . . . charge or demand a rate . . . which departs from rates, . . . in effect on behalf of the insurer, . . .".
For further information one may contact Senior Attorney Susan Dess at the New York City Office.