Permits a waiver of the diligent effort requirement in limited circumstances for certain insurance coverage to be placed by licensed excess line brokers with…

Showing the cosponsors who are on Agora, A to Z. The official record may list more.

• Republican4
• Democratic1

This bill has cosponsors from more than one party.

Shown in neutral colors by design; Agora is non-partisan.

◆ The sponsor's argument

Why Jamaal Bailey says this is needed

The excess line market exists as a matter of public policy to insure risks which New York admitted insurers choose not to underwrite because the risks are distressed, unique, volatile, or involve new businesses or coverages without loss history. The legislature reasoned that New York businesses could not operate without a secondary market to insure risks that are rejected by licensed insurers. The excess line market is of vital importance to New York and nimble processing is essential to effectively serve consumer needs. The law requires that brokers make a good faith attempt to seek coverage from a licensed insurer before turning to the excess line market. This is called a diligent effort. The law considers a diligent effort to be complete when three licensed insurers have considered and then rejected a risk. The bill would exempt commercial insurance policies placed by retail insurance brokers through unaffiliated wholesale excess line brokers from the diligent effort requirement. Diligent effort would still apply to all personal lines policies as well as commercial lines policies that are not placed through an unaffiliated wholesale excess line broker. A substantial portion of excess line risks are placed by small main street retail insurance brokers who turn to wholesale excess line brokers when they have exhausted their own licensed insurer options. It is inherent to the insurance industry that retail brokers will exhaust all licensed market options before seeking excess line coverage through a wholesale broker. Retail brokers will not choose to split their commissions with wholesale excess line brokers unless that is the only way to obtain coverage for an insured. Retail brokers know the under- writers at the licensed insurers with whom they deal regularly and are familiar with their policy forms, their licensed companies often direct- ly bill insureds and therefore eliminate collection risks, and policies issued by licensed insurers are covered by state security funds that also de facto protect retail brokers by supporting their clients. A retail broker loses these benefits in excess line transactions. Therefore, diligent effort is unneeded to ensure that commercial risks are placed with licensed insurers when feasible where retail brokers place risks with unaffiliated wholesale excess line brokers. The process and data reporting under these circumstances places an unnecessary delay and cost on placing insurance policies that is detrimental to consumers.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.