National Association of Mutual Insurance Companies

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Kansas: NAMIC Testifies on Rate Modernization Bill

Republican Senate Insurance Committee Chair Ruth Teichman held a meeting to hear testimony on SB 560, based on the National Conference of Insurance Legislators’ Flex-Rating Model Act and related issues. The bill would adopt NCOIL’s model.

First to testify in favor of the bill was Joe Thesing, NAMIC’s director – state affairs. In his testimony, (http://www.namic.org/pdf/080220KanSB560Testimony.pdf) Thesing said, “We believe the primary barrier to fundamental reform of the property/casualty industry is price regulation of insurance rates. This belief is the cornerstone of NAMIC’s agenda for change in the states. Passage of rate modernization laws benefits consumers with respect to price and availability of insurance products.”

Other industry advocates also testified in favor of the bill, reiterating the point that Kansas must move forward to attract more carriers to the state.

The NCOIL flex-rating model creates a 12 percent flex band for personal lines of insurance. The model was overwhelmingly adopted by NCOIL in 2003 and is viewed as an interim step toward rate regulation based on an open competition system. Currently, eight states have flex-rating laws.

Testifying on behalf of the insurance department was Deputy Director Bob Tomlinson. Tomlinson agreed that now is the time to modernize but said the state should move forward “with caution.” The insurance department offered the following amendments:

  • Reduce the flex-band from 12 percent to 7 percent and;
  • Cap increases of individual risks at 25 percent

NAMIC and other industry advocates expressed concern about each amendment, which appeared to resonate with members of the committee. The department had also considered an amendment to add “excessive” to Section 3 of the bill but rescinded the language after NAMIC pointed out such an addition would be a “backdoor form of prior approval.”

The hearing was scheduled for only one hour. Teichman has scheduled an additional hearing for today. NAMIC and other industry advocates will encourage members of the committee to approve SB 560 as originally introduced.

Senate Bill 560 is the bi-product of a unanimous recommendation made last year by Kansas Insurance Department Fee Modernization and Rating Laws Task Force. The task force was established to study personal lines regulatory modernization and other topics. NAMIC was a member of the task force and made the motion to adopt the NCOIL Flex-Rating model. The motion was seconded by Property Casualty Insurers Association of America and approved unanimously. During the discussion, the American Insurance Association recommended consideration of the NCOIL Property/Casualty Insurance Modernization Act, which calls for a use-and-file system for personal lines. The task force ultimately chose to recommend the flex-rating model as it has a better chance of withstanding scrutiny from legislators and the insurance department.

Direct questions to NAMIC’s Director – State Affairs Joe Thesing.

Posted: Tuesday, February 26, 2008 12:00:00 AM. Modified: Wednesday, February 27, 2008 9:43:36 AM.

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