INDIANAPOLIS (July 13, 2006) – An official of the National Association of Mutual Insurance Companies (NAMIC) said today that a proposed rate and form filing draft being circulated by a National Association of Insurance Commissioners (NAIC) Working Group represents a “step backwards” in regulatory modernization.
NAMIC Regulatory Affairs Counsel Marsha Harrison, in a letter to the NAIC Personal Lines Market Regulatory Framework (EX) Working Group, said an NAIC model setting out a “file and use” system of rate regulation “would not represent progress towards regulatory modernization but, to the contrary, would constitute a step backwards.”
Harrison noted that in recent years, nine states have adopted flex-band rating systems and another 14 states have adopted more flexible “use and file” systems.
“NAMIC member companies believe that it is time for the NAIC to acknowledge the need for, and trend towards, less insurance price control,” Harrison said, adding, “This working group’s task presents the perfect opportunity for development of a model law based on competition in the marketplace and not on artificial regulation and control of insurance pricing based on factors unrelated to market conditions.”
Harrison also noted how the National Conference of Insurance Legislators (NCOIL), the National Conference of State Legislatures (NCSL), and the American Legislative Exchange Council (ALEC) all have endorsed competition as the best regulator of insurance rates.
“NCOIL has adopted a significant model law that would create a liberal “use and file” system for personal lines and an informational filing system for commercial lines,” Harrison said.
“NAMIC is troubled that the working group is starting its task by adopting a position—the ‘file and use’ model—for no apparent reason and without much discussion by the regulator members,” Harrison said. “A better approach might be for the working group first to agree on the principles that will provide the underpinnings of a model rather than starting with a model to which no one has agreed. Once the principles of a rate regulation scheme are agreed upon, the job of constructing a model law to incorporate those principles would become much easier.”
A copy of Harrison’s letter is available at NAMIC Online
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Posted: Thursday, July 13, 2006 12:00:00 AM. Modified: Thursday, July 13, 2006 3:38:44 PM.
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