Zurich American Insurance Co. will refund about $4.6 million to policyholders of New York statutory disability insurance policies because the carrier failed to spend at least 60 percent of total premiums on claims as required by the state's law.
Approximately 73,000 policyholders—primarily small businesses—will receive refunds through an agreement with the New York Department of Financial Services (DFS), according to a statement from Gov. Andrew Cuomo's office.
The department says Zurich failed to meet the 60 percent minimum loss ratio (MLR) because it overestimated the amount of money it would spend to pay claims when customers received their quotes. The refunds will involve policies issued in 2009, 2010 and 2011.
Zurich reported the lower-than-required MLR to DFS and has submitted a corrective action plan detailing how it will pay the refunds.
As part of the state's workers compensation insurance program, employers are required to provide statutory disability benefits insurance to employees unless they are exempt under the state's laws.
The state's statutory disability benefits insurance provides temporary cash benefits to an eligible employee to replace, in part, wages lost when an off-the-job illness or injury disables them, and for disabilities arising from pregnancy.
Zurich issued a statement saying, "Although Zurich is withdrawing from the statutory disability market, we continue to uphold our responsibilities to our current policyholders and are pleased to have completed the refund process."
Update: 1:05 p.m. EDT with comment from Zurich
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