Small Empire State life insurers should not plan on sharing claim processing systems with other insurers during a severe crisis.
New York State Insurance Superintendent Howard Mills has included that warning in Circular Letter Number 4 (2006), which spells out disaster planning rules for life insurers, retirement systems and fraternal benefit societies doing business there.
The new circular letter replaces instructions given to life insurers, retirement systems and fraternal benefit societies in Circular Letter Number 7 (2004).
The current New York disaster planning rules for property-casualty insurers are in Circular Letter Number 7 (2004), and the current rules for health insurers are in Circular Letter Number 23.
The new letter reminds life insurers that the New York department will set up a New York State Insurance Disaster Coalition and the Insurance Emergency Operations Center if a major disaster strikes.
Large insurers may have to send disaster liaisons to center offices in New York or Albany, N.Y., and all insurers will be responsible for trying to help the center assess damage caused by the disaster, Mills writes in the circular letter.
Life insurers, retirement systems and fraternal benefit societies also are supposed to file disaster response and business continuity plans with state regulators, and to respond to a disaster response questionnaire.
Mills says parent companies should develop disaster plans for life subsidiaries, and those plans should kick in even if the disasters affect only the life subsidiaries.
If parent companies fail to develop disaster plans for life subsidiaries, the subsidiaries should develop their own plans, Mills writes.
“Smaller companies located in one geographic area of the state may find it cost-effective to pool their resources in establishing shared plan facilities, such as communications equipment, and alternate worksites,” Mills writes.
The New York department would encourage that kind of cooperation, but only if companies keep their management, data and claim operations separate, Mills writes.
“Sharing of administrative or processing systems is not contemplated by this paragraph,” Mills writes.
Mills notes that life insurers and retirement systems also should come with alternative means for communicating with producers in the event of a disaster.
A copy of the circular letter is on the Web at Document Link