INDIANAPOLIS (May 2, 2006)—Connecticut lawmakers have taken a meaningful step forward in modernizing the state’s insurance regulatory environment by passing a bill to introduce flex-rating to the state’s personal lines markets.
The state’s House of Representatives voted 144-1 Monday in favor of legislation (SB-410) to establish a flex-rating system, allowing insurers to adjust rates within a six percent rating band without regulatory approval. The bill, which will next go to Gov. M. Jodi Rell for her signature, has an effective date of July 1, 2006, and it contains a three-year sunset provision.
The National Association of Mutual Insurance Companies (NAMIC) offered testimony in support of an earlier version of the legislation, which would have enabled insurers to adjust rates within a 12 percent band. At one point, lawmakers lowered the flex band to four percent and proposed a two-year sunset, changes that threatened the effectiveness of the measure. However, improvements were achieved due to the efforts of the Insurance Association of Connecticut, a NAMIC advocacy partner.
The version ultimately passed by lawmakers will give insurers substantial leeway to adjust rates, and the longer sunset gives it a better chance of having a meaningful impact in the market, according to NAMIC.
“The bill will enable insurers to respond appropriately to changing market conditions, which will benefit insurers and consumers alike,” commented Paul Tetrault, NAMIC’s state affairs manager for the Northeast.
“Passage of this legislation is a very positive development in the process of moving towards greater rating freedom to produce a better-functioning marketplace,” Tetrault added. “This measure will make it easier for insurers to lower rates when warranted because they will have the confidence that they can respond appropriately if market conditions change. Furthermore, it will promote rate stability by allowing insurers to make refined rating decisions.”
Tetrault noted that the flex-rating bill will also help the state’s Insurance Department in its allocation of scarce resources. “Under this legislation, regulators will not have to review filings proposing rate adjustments within the six percent band,” he pointed out. “This will allow the Department to focus on more substantial matters rather than a multitude of marketplace adjustments.”
The legislation will also enact changes regarding what a policyholder must show in order to assert a claim for uninsured /underinsured motorist coverage. This portion of the legislation will become effective October 1, 2006.
For further information, contact
Rick Nelson, APR, CAE
(317) 875-5250 Tel
(317) 879-8408 Fax
Paul Tetrault, Esq.
(978) 969-1046 Tel
(978) 969-1066 Fax