Relates to expenses incurred during the modernization of mutual and cooperative insurance companies' information systems technology.
Ayes (62): Adams, Addabbo, Alesi, Avella, Ball, Bonacic, Breslin, Carlucci, DeFrancisco, Diaz, Dilan, Duane, Espaillat, Farley, Flanagan, Fuschillo, Gallivan, Gianaris, Golden, Griffo, Grisanti, Hannon, Hassell-Thomps, Huntley, Johnson, Kennedy, Klein, Krueger, Kruger, Lanza, Larkin, LaValle, Libous, Little, Marcellino, Martins, Maziarz, McDonald, Montgomery, Nozzolio, O'Mara, Oppenheimer, Parker, Peralta, Perkins, Ranzenhofer, Ritchie, Rivera, Robach, Saland, Sampson, Savino, Serrano, Seward, Skelos, Smith, Squadron, Stavisky, Stewart-Cousin, Valesky, Young, Zeldin
TITLE OF BILL: An act to amend the insurance law, in relation to encouraging modernization of mutual and cooperative insurance companies' information systems technology
PURPOSE: Domestic mutual and co-operative property/casualty insurance companies are bound by New York law to hold their management expenses below a certain percentage of their net written premium income. These caps can inhibit companies from making necessary upgrades and improvements to their computer systems and software. This bill is designed to permit both mutuals and cooperative property/casualty insurers to make such important expenditures by temporarily raising the management expenses cap when computer upgrade expenses result in exceeding such cap. An additional protection against excessive costs being incurred for such upgrades is contained in the bill by providing that in no event shall the cap be raised by more than 5 percentage points.
SUMMARY OF PROVISIONS: Section 1. Amend Insurance Law section 4110(a) to temporarily raise the management expenses limit for domestic mutual property/casualty insurance companies if they incur expenses upon making a new system upgrade which places the insurer's total management expenses over the limit. This temporary increase in the limit could not exceed 5 percentage points and would be subject to approval by the superintendent. In essence, this would allow such expenses to be made even if they cause the mutual insurer to exceed the statute's management expenses cap.
Section 2. Amend Insurance Law section 6613(a) to similarly increase the management expenses limit for cooperative property/casualty insurance companies if they incur expenses upon making a new system upgrade which places their total management expenses over the limit. This temporary increase in the limit could not exceed 5 percentage points. In essence, this would allow such expenses to be made even if they cause the cooperative insurer to exceed the statute's management expenses cap.
Section 3. Effective date is immediately upon enactment.
JUSTIFICATION: Domestic mutual property/casualty insurance companies are important drivers of the New York state economy, employing well over 2,000 New Yorkers. In addition, they provide important property/casualty coverage to numerous New York businesses and individuals as well as businesses and individuals in other states. This legislation would assist mutual insurers by encouraging these companies to acquire state of the art, modem computer and information technology systems for purposes of maximizing customer service. In today's world, insurance consumers increasingly want "24/1" access to their insurer and its services, whether reporting a claim or filling
out a renewal for their policy. Since the vast majority of these mutual insurance companies are providing services to residents and businesses in other states, this measure helps keep these insurers thriving in New York as they engage in competition with non-New York domiciled property/casualty insurers to keep those other states' residents and businesses using insurance products created, sold and managed by New York domestic companies employing New Yorkers.
In a similar vein, this bill would also help cooperative insurance companies to continue to serve their vital role in the New York property/casualty insurance market. Cooperatives are the major insurance writers of farm owners' coverage and agricultural-related small businesses, small contractors' liability insurance, seasonal businesses, as well as small diners and taverns. Co-ops also provide employment for over 2,200 professional and clerical staff in New York State, with the vast bulk of these jobs spread throughout Upstate New York. Furthermore, New York cooperative insurance companies provide necessary property/casualty coverage to over 70,000 New York State small businesses.
In sum, this proposed legislation would help both domestic mutual insurance companies and cooperative insurance companies to upgrade their computer hardware and software in order to provide their customers with the most efficient and effective means of doing business.
LEGISLATIVE HISTORY: New bill.
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: Immediately.
STATE OF NEW YORK ________________________________________________________________________ 4043--A 2011-2012 Regular Sessions IN SENATE March 15, 2011 ___________Introduced by Sen. SEWARD -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the insurance law, in relation to encouraging moderniza- tion of mutual and cooperative insurance companies' information systems technology THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subsection (a) of section 4110 of the insurance law, as amended by chapter 527 of the laws of 2006, is amended to read as follows: (a) No domestic mutual property/casualty insurance company licensed to write a kind of insurance specified in paragraph seven, eight, nine, ten, eleven, thirteen, fourteen, fifteen, sixteen or seventeen of subsection (a) of section one thousand one hundred thirteen of this chapter shall expend in any one calendar year for management expenses a greater amount than thirty percent of the sum of its net premium income and seventy-five percent of its investment income for such year; provided that any insurer whose principal line of business is medical malpractice liability insurance or any insurer who is the subject of a proceeding pursuant to article seventy-four of this chapter shall not expend in any one calendar year for management expenses, a greater amount than thirty percent of its net premium income for such year. Management expenses shall be held to include all expenses of the company except expenses incurred in the investigation, adjustment and settlement of claims, taxes, fees and expenses of examination, and taxes, repairs and expenses on real estate. In applying the provisions of this section the net premium income of, and expenses of, boiler and machinery insur- ance or elevator insurance shall not be included. IN THE EVENT EXPENSES INCURRED IN MAKING A NEW SYSTEM UPGRADE RESULT IN THIS SUBSECTION'SEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD10052-02-1 S. 4043--A 2
MANAGEMENT EXPENSES LIMIT BEING EXCEEDED, THEN THE INSURER SHALL INFORM THE SUPERINTENDENT SIXTY DAYS IN ADVANCE OF THE EXPENSE LIMIT BEING EXCEEDED. SUBJECT TO APPROVAL BY THE SUPERINTENDENT, THE LIMIT SHALL BE TEMPORARILY RAISED TO THE AMOUNT NECESSARY TO ENCOMPASS THE AFORESTATED NEW SYSTEM UPGRADE, PROVIDED THAT IN NO EVENT SHALL THE LIMIT BE RAISED MORE THAN FIVE PERCENTAGE POINTS AND SHALL NOT BE IN EFFECT FOR MORE THAN SIX YEARS. FOR PURPOSES OF THIS SUBSECTION, A NEW SYSTEM UPGRADE IS DEFINED AS THE ACQUISITION OF ELECTRONIC DATA PROCESSING APPARATUS AND RELATED EQUIPMENT CONSTITUTING A DATA PROCESSING, RECORD KEEPING OR ACCOUNTING SYSTEM AND OPERATING AND NON-OPERATING SOFTWARE. S 2. Subsection (a) of section 6613 of the insurance law, as amended by chapter 284 of the laws of 1989, is amended to read as follows: (a) The expenses of management of any co-operative property/casualty insurance company shall not exceed in any one calendar year forty-two and one-half percent of its net premiums written for such year. The term "net premiums written" means direct premiums written plus reinsurance assumed less return premiums and reinsurance ceded. IN THE EVENT EXPENSES INCURRED IN MAKING A NEW SYSTEM UPGRADE RESULT IN THIS SUBSECTION'S MANAGEMENT EXPENSES LIMIT BEING EXCEEDED, THEN THE INSURER SHALL INFORM THE SUPERINTENDENT SIXTY DAYS IN ADVANCE OF THE EXPENSE LIMIT BEING EXCEEDED. THE LIMIT SHALL BE TEMPORARILY RAISED TO THE AMOUNT NECESSARY TO ENCOMPASS THE AFORESTATED NEW SYSTEM UPGRADE, PROVIDED THAT IN NO EVENT SHALL THE LIMIT BE RAISED MORE THAN FIVE PERCENTAGE POINTS AND SHALL NOT BE IN EFFECT FOR MORE THAN SIX YEARS. FOR PURPOSES OF THIS SUBSECTION, A NEW SYSTEM UPGRADE IS DEFINED AS THE ACQUISITION OF ELECTRONIC DATA PROCESSING APPARATUS AND RELATED EQUIP- MENT CONSTITUTING A DATA PROCESSING, RECORD KEEPING OR ACCOUNTING SYSTEM AND OPERATING AND NON-OPERATING SOFTWARE. S 3. This act shall take effect immediately.