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Not Enough 'Flex' in Connecticut Flex Rating Bill, Says NAMIC

INDIANAPOLIS (March 20, 2006)-A Connecticut legislative committee took a tentative step on the road to insurance rate modernization, but also posted a Road Closed sign that must be obeyed in two years.

HB-5463, which was reported favorably out of the Insurance and Real Estate Committee on Tuesday, would allow auto insurers to adjust rates within a predetermined percentage range without obtaining prior regulatory approval. The initiative is advanced by the Insurance Association of Connecticut, a NAMIC advocacy partner.

However, lawmakers made two substantial changes to the proposal prior to reporting it out of committee. They lowered the deviation percentage from 12 percent to four percent, and they inserted a two-year sunset. Both changes are problematic, according to National Association of Mutual Insurance Companies (NAMIC).

"While any liberalization of rating can be viewed favorably, insurers should be given more freedom to adjust rates in response to changing market conditions," said Paul Tetrault, Northeast state affairs manager for NAMIC. "We are hopeful that the deviation level can be increased as the bill moves through the legislative process."

Tetrault also said that the two-year sunset inserted by the committee is cause for concern "because any move towards enhanced competition needs to be given time to work in the marketplace.".

In testimony submitted to the committee on March 2, Tetrault told lawmakers that Connecticut's auto insurance market would benefit greatly from the enactment of legislation allowing insurers leeway to make meaningful adjustments to their rates in response to changing market conditions.

Experience in other states has shown that consumers benefit when insurers have the freedom to respond quickly to marketplace dynamics, Tetrault pointed out.

"Greater rating freedom makes it easier for insurers to lower rates in a competitive environment because they know they can respond appropriately if market conditions change," he asserted. "It also keeps rates stable by allowing insurers to make refined rating decisions. Finally, by removing rate review from state regulators, greater rating freedom promotes a better allocation of limited public resources."

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For further information, contact
Robert Detlefsen, Ph.D.
(317) 875-5250 Tel
(317) 879-8408 Fax
rdetlefsen@namic.org