Georgia: House Subcommittee Considers Rate Modernization

The Georgia House Insurance Subcommittee on Property and Casualty met Jan. 24 to hear testimony on rate modernization. Emily Bagwell of NAMIC advocacy partner, the Georgia Association of Property and Casualty Insurance Companies, testified, as did representatives from State Farm, GEICO, Allstate, the Independent Agents Association of Georgia, the American Insurance Association, and Georgia Watch.

Drs. Richard Phillips and Martin Grace of the Risk Management and Insurance Department at Georgia State University presented information and conclusions on insurance rate regulation based on numerous studies they and others have conducted. They noted that these studies consistently result in conclusions favoring rate deregulation.

Phillips and Grace emphasized that the system in Georgia is not broken now but may eventually break because heavy-handed regulation does not serve the market well in the long term. Even with a reasonable regulator, they pointed out other pressures will cause a too-stringent system to crack. “The system needs rate flexibility” to withstand and adjust quickly to those pressures.

One example they shared is that of auto insurance systems that artificially suppress rates and, in doing so, promote subsidization of high-risk drivers by low-risk drivers, giving high-risk drivers little incentive to change their conduct. “Drs. Phillips and Grace made a very compelling argument for rate deregulation,” said Bagwell.

Rep. Rich Golick, subcommittee chair, stressed that any legislation on the subject of rate modernization would have to be balanced, and he brought up the concept of more frequent market conduct exams to provide that balance. He also indicated that he was unsure if legislation would be brought forth this year, citing the complexity of the subject and the need for thorough study and investigation.

“Rate modernization is a priority on NAMIC's state issues agenda, and we will continue to take advantage of opportunities to advocate for changes in Georgia,” said Liz Reynolds, NAMIC's Southeast state affairs manager. “It’s important for us to work closely with GAPCIC, other industry members, the Legislature, and Commissioner Oxendine if we are to accomplish this goal.”

Direct questions to NAMIC State Affairs Manager Liz Reynolds.

Posted: Tuesday, January 29, 2008 12:00:00 AM. Modified: Thursday, January 31, 2008 9:40:23 AM.

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