Date:June 17, 2008
To:All Property and Casualty Insurers
From:Sean Dilweg, Commissioner of Insurance
Subject:Renewals and Nonrenewals

Based on the number of administrative actions involving violations of s. 631.36, Wis. Stat., and s. Ins 21.01, Wis. Adm. Code, over the last few years, it appears some insurers may need to review their renewal and nonrenewal procedures. The following is a brief discussion of some significant requirements of the statute.

Renewals

Section 631.36 (4), Wis. Stat., states that "a policyholder has a right to have the policy renewed, on the terms then being applied by the insurer to similar risks, for an additional period of time equivalent to the expiring terms…unless at least 60 days prior to the date of expiration provided in the policy a notice of intention not to renew the policy is mailed or delivered to the policyholder or, with respect to failure timely to pay a renewal premium, a notice is given, not more than 75 days nor less than 10 days prior to the due date of the premium, which states clearly the effect of nonpayment of premium by the due date."

This applies to personal and commercial policies, except worker's compensation. Section Ins 21.01 (6), Wis. Adm. Code, applies to worker's compensation policies. It mirrors the above statute, except with respect to failure timely to pay a worker's compensation renewal premium. Notice of a worker's compensation renewal must be given not more than 75 days nor less than 30 days prior to the due date of the premium.

The statute and the rule require that either a nonrenewal or a renewal notice be sent prior to the renewal/expiration date. If proper notice is not sent before the renewal date, the insurer must offer renewal at the old terms and old rates for an equal length of time as the expiring policy.

It should be noted that the statute and the rule require a renewal notice to state clearly the effect of nonpayment of premium by the due date. Wording in the notice that states that the policy will be continued if payment is made by the due date, or similar wording, does not meet the requirements of the statute or rule.

Renewals with Altered Terms

Section 631.36 (5), Wis. Stat., addresses proper notice needed when the insurer wishes to renew the policy, but on less favorable terms or with a premium increase of 25% or more from the expiring policy. The insurer must send a notice stating what the less favorable terms are and/or what the increased premium is at least 60 days prior to the renewal date. If the notice is sent less than 60 days prior but before the renewal date, the notice must also include a statement of the policyholder's right to cancel without penalty within 60 days of when the notice was sent and that the new terms and/or rates do not take effect until 60 days after the altered terms notice was sent. If the policyholder decides to cancel during the 60-day notification period, the return premium must be calculated pro rata based on the old rates. If the policyholder decides to continue the policy, the new terms and/or rates are in effect for the remainder of the policy term after the 60-day period expires. Failure to provide proper notice prior to the renewal date means that the policy must be continued on the old terms and old premiums for another policy term the same as the expiring term.

Two exceptions that do not require the 60-day notice for premium increases are:

  1. If the premium increase is less than 25% and generally applies to the class of business to which the requirement belongs or
  2. The premium change is due to a change based on action by the policyholder that alters the nature or extent of the risk insured against, such as a change in classification, units of exposure, policy coverage, etc.

Some insurers have stated that they are unable to send proper, timely notices because they do not have sufficient renewal underwriting information. In these cases, the insurer can give the policyholder a good faith estimate of the increase either as a dollar amount or a percentage amount. Then, when sufficient information is obtained, the insurer can renew the policy at a premium that does not exceed the estimate given. This applies to personal and commercial policies, except worker's compensation.

Nonrenewals

As stated earlier, s. 631.36 (4), Wis. Stat., and s. Ins 21.01 (6), Wis. Adm. Code, state that a policyholder has a right to have the policy renewed, at the old terms and rates, unless a notice of intention not to renew is sent at least 60 days prior to the renewal/expiration date. If an insurer wishes to nonrenew a policy, the notice must be sent at least 60 days in advance. The insurer may not extend the term of the existing policy beyond the current expiration date or issue a policy with a term of less than the expiring term in order to meet the 60-day notice requirement.

Pursuant to s. Ins 21.01 (10), Wis. Adm. Code, no termination of a worker's compensation policy is effective unless such termination complies with s. 601.31 (2), Wis. Stat., including the Wisconsin Compensation Rating Bureau receiving proper notice of nonrenewal at least 60 days prior to any nonrenewal.

Under s. Ins 21.01 (6), Wis. Adm. Code, nonrenewal of a worker's compensation policy is effective whether or not the notice was given to the policyholder if the employer obtains replacement insurance coverage or an order is issued exempting the employer from carrying worker's compensation insurance under s. 102.28 (2), Wis. Stat.

Insurers are reminded that they must provide a full 60 days notice. The date of mailing and the date of termination may not be counted within the 60 days, as neither of the days is a 24-hour period. Also, we have noted that some insurers are not taking into account that February is a shortened month and have given less than 60 days notice for nonrenewals that were to take effect in March or April.

Reasonably Precise Reasons

A nonrenewal notice must state with reasonable precision the facts that caused the insurer to nonrenew. The following are examples of reasons that are not reasonably precise: "does not meet our underwriting guidelines," "unacceptable credit history," "motor vehicle record," and "claims history." The insurer must list the general reasons in order to meet the reasonably precise requirement. For example, if the reason is the person's driving record, the nonrenewal notice should list the specific driving-related violations and/or accidents.

Risk-Sharing Plans

A nonrenewal notice must also provide adequate instructions to the policyholder for applying for insurance through a risk-sharing plan under ch. 619, Wis. Stat., if such a plan exists for the coverage provided under the terminated policy.


If one or more of the aforementioned requirements for nonrenewals is not met, i.e., less than 60 days notice, reason not reasonably precise, or no risk-sharing plan notice, then the nonrenewal notice is not effective. That means the insurer must offer renewal and, dependent upon the timing, the insurer must renew the policy on the old terms and rates unless proper renewal notice could be sent prior to the renewal/expiration date.

If you have any questions, you may contact Rebecca Rebholz, Insurance Examiner, via telephone at (608) 264-8111 or via e-mail at rebecca.rebholz@wisconsin.gov.