The New York state Legislature has passed A.10344 that would amend the Insurance Law to incorporate parametric insurance. This bill, introduced by Sen. Skoufis, D-42, and Assemblywoman Gina Sillitti, D-16, at the request of the New York State Department of Financial Services, marks a significant shift in how insurance for weather-related events will be defined and regulated.
PIANY strongly supports the bill and it recognizes its potential to modernize and improve the insurance landscape.
What is parametric insurance?
Parametric insurance is a type of coverage that provides payouts based on the occurrence and measurement of specific events rather than assessing the actual losses incurred. Unlike traditional property/casualty insurance, which requires detailed damage assessments and claims adjustments, parametric insurance relies on predefined parameters such as the intensity and location of a natural event (e.g., a windstorm, earthquake or flood) as recorded by official agencies. When these parameters are met, the policyholder receives a predetermined payout, ensuring quicker and more predictable compensation.
The key difference between parametric and traditional p/c insurance lies in the claims process. Traditional p/c insurance involves a thorough examination of the damage to determine the extent of the loss and the appropriate payout, which can be time-consuming and contentious.
In contrast, parametric insurance eliminates the need for a loss assessment by triggering payments based solely on objective event data. This results in faster payouts and reduces administrative burden, providing policyholders with immediate financial relief following a qualifying event.
What would the legislation do?
The bill introduces a precise definition of parametric insurance and would establish its inclusion in the list of insurance types that can be sold by retail agents and brokers, as well as by excess-line brokers. This inclusion ensures that insurers providing parametric insurance comply with specific regulations and standards.
Importantly, the bill would amend Section 3425 of the Insurnace Law to classify parametric insurance under personal-lines insurance. This classification includes contracts covering losses or damage to residential properties and personal properties where individuals have an insurable interest, excluding business property.
Benefits to consumers
Including parametric insurance in Section 3425 means that consumers who purchase parametric insurance products will have the same legal protections as someone who purchases an admitted homeowners or personal auto policies. The same cancellation and nonrenewal rules that apply to personal-lines policies, also will apply to parametric policies.
This would ensure that policyholders have the same rights to notification, as well as a time period to address any issues. Just as critically, by including parametric policies under the Insurance Law it ensures that the product would only be sold by licensed insurance professionals. This would ensure insurance consumers have access to the knowledge and experience that only an independent insurance agent can offer.
Consumer protection
While parametric insurance products provide agents and consumers with an innovative new insurance product, parametric policies are not a substitute for traditional p/c policies. Only purchasing a parametric policy leaves a policyholder exposed, leading to huge losses. To better inform consumers about the limitations of parametric insurance products, the bill would require insurers to issue parametric policies to provide prominent written disclosures at the application, issuance and renewal stages. These disclosures would emphasize that parametric insurance does not replace traditional property or flood insurance and highlight its limitations concerning mortgagees or loss payees.
Celebrating another win
The passage of this bill received robust backing from PIANY. Your association has been a vocal advocate for modernizing insurance regulations to better address the needs of policyholders in an era marked by increasing environmental unpredictability. Support for S.9420/A10344 underscores the importance of innovative insurance solutions like parametric insurance in providing more responsive and effective coverage.
The end
With the state Legislature’s passage of S.9420/A.10344, New York state has taken a pioneering step in modernizing its insurance regulations to include parametric insurance, but the bill still has one more step to go before it becomes a law.
The legislation now will be sent to Gov. Kathy Hochul for her consideration.
Learn more about parametric insurance here.
Bradford J. Lachut, Esq.
Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.
