The office of General Counsel issued the following informal opinion on February 21, 2002, representing the position of the New York State Insurance Department.

Re: Tier movement under automobile insurance policy with a three year required policy period.

Question Presented:

In regard to an automobile insurance policy that has a three year required policy period pursuant to N.Y. Ins. Law § 3425 (McKinney 2000 & Supp. 2001-2002), may an insurer uptier the policy on each anniversary date or only at the end of the three year required policy period?


Under N.Y. Comp. Codes R. & Regs. tit. 11 §§ 154.2 and 154.3 (1995) (Regulation 150), the insurer may uptier the policy only at the end of the required policy period and not on the interim anniversary dates.


As of August 2, 2001, new covered policies of "automobile insurance," as such term is defined in § 3425(a)(1), are no longer subject to the so-called "two percent" provisions contained in § 3425(f) and are now subject instead to the requirements of § 3425(m). A covered policy of "automobile insurance" is a policy that covers a motor vehicle primarily used for non-business purposes, other than a policy issued by the New York Assigned Risk Plan (the Plan) pursuant to N.Y. Ins. Law Article 53 (McKinney 2000). Under the two percent provisions, the required policy period for automobile insurance was defined in § 3425(a)(8) to be one year but under § 3425(m), the required policy period is defined in § 3425(a)(7) to be three years for all new policies voluntarily written with an effective date on or after August 2, 2001. For policies issued on or before August 1, 2001, the Department in Circular Letter 21 (2001) stated that § 3425(f) remains applicable.

N.Y. Ins. Law § 2349(b) (McKinney 2000), which was enacted by Chapter 9 of the Laws of 1995, and amended by Chapter 287 of the Laws of 1995, permits an insurer to establish a multi-tier program, in regard to private passenger motor vehicle insurance in the voluntary market. Although "private passenger motor vehicle insurance" is not defined in § 2349, the Department’s regulation that implemented the section, N.Y. Comp. Codes R. & Regs. tit. 11 Part 154 (2000) (Regulation 150) states that, for the purposes of the regulation, "private passenger motor vehicle insurance" means a covered policy of automobile insurance, as defined in § 3425 (specifically, § 3425(a)(1)).

Section 154.2(c) states that an insured may be uptiered only upon the end of the required policy period. Since the required policy period is now three years for newly issued policies since August 2, 2001, the inquirer questioned whether that meant that an insurer could no longer uptier upon each anniversary date but only after the end of three years, which he indicate would be very restrictive.


Section 154.2(c) provides:

The underwriting rules governing potential tier movement shall permit an insured to be moved to a higher rated tier only upon the end of the required policy period, as defined in section 3425, notwithstanding changes in underlying exposure during the required policy period…

Section 154.3(b) further provides:

At least 30 days, but not more than 60 days, in advance of the end of the required policy period, an insurer shall mail or deliver a notice of intent to uptier to each first named insured that the insurer intends to move to a higher rated tier…

The regulation merely refers back to the definition of "required policy period" contained in § 3425, without specifying which of the two definitions contained therein would apply. At the time the regulation was promulgated, the "required policy period" for an automobile insurance policy was a one-year period. However, this is not the case for an automobile policy newly written on and after August 2, 2001 because the "required policy period" for such a policy is three years. Hence, an insurer may not uptier such a policy except at the end of the three years.

For further information you may contact Principal Attorney Paul Zuckerman at the New York City Office.