Proposal: Payroll Risk Insurance Act

Photo by Kelly Sikkema on Unsplash

First published May 11, 2020

The NAIC & Center for Insurance Policy and Research have placed a special call for policy position briefs exploring the “potential development of a federal program to provide pandemic related business interruption coverage.”

The Centers for Better Insurance has submitted the attached short policy brief proposing the Payroll Risk Insurance Act.

This proposal starts from the premise that the States must be fundamentally accountable for any pandemic business income coverage program because:

• The orders triggering pandemic business income loss originate and terminate as decisions made by the individual States; and
• The responsibility to manage the economic consequences of those individual State decisions should likewise reside with the respective States.

This proposed Federal law leaves with each State considerable flexibility to design and run a program that works best for that State — or opt out of such a program altogether. It also commits the federal government to provide these programs proportionate and carefully managed financial support especially with respect to the protections offered to small businesses and nonprofits.

States are incented to focus the insurance industry’s catastrophe claims capabilities on quickly delivering financial assistance to the most vulnerable employers during the first four weeks of a pandemic emergency. These “financial first responders” would buy policymakers valuable time to fully evaluate the crisis and determine what, if any, additional financial responses are appropriate.