(INDIANAPOLIS) June 25, 2008 – Passage of auto flex-rating legislation in New York shows there is significant momentum in the states for enacting laws to modernize the regulation of property/casualty insurance rates, according to the National Association of Mutual Insurance Companies (NAMIC).
Before adjourning the 2008 legislative session earlier today, New York lawmakers approved legislation (A11693/ S 8624) that will enable auto insurers to adjust rates twice annually within a 5 percent band without obtaining prior regulatory approval. The flex-rating change was included in an omnibus insurance bill passed by the New York Senate and Assembly which is expected to be signed by Gov. David Paterson.
“Passage of this legislation in New York, together with recent developments in other states, demonstrates there is real momentum for progress in rate modernization,” commented Neil Alldredge, NAMIC's vice president for state and regulatory affairs. “More and more, state lawmakers are realizing that restrictive rating laws are not only unnecessary, but also counterproductive, since they stifle competition and ultimately hurt consumers.”
The passage of the New York flex-rating legislation follows the recent enactment of broad flex-rating legislation in Kansas, as well as the adoption of auto rate modernization legislation in Georgia. The Kansas measure, based on model legislation developed by the National Conference of Insurance Legislators, establishes a 12 percent flex-band for personal lines.
A larger flex-band enhances competition and makes a flex-rating system more effective, Alldredge explained. “New York consumers would benefit more from even greater rating freedom,” he said. “But the passage of this legislation shows that rate modernization is achievable in a large and diverse state known for having a challenging political environment, and we believe other states will take note and follow New York’s example.”
Over the past five years, 20 states have adopted some form of regulatory modernization, moving away from strict prior approval. Upon enactment of this legislation, New York will become the eighth state to have implemented flex rating, along with Alaska, Connecticut, Kansas, Louisiana, North Dakota, Rhode Island, and South Carolina.
Currently, 15 states have a use and file system for at least one property/casualty line, allowing insurers to implement rates without prior regulatory approval. Twenty-six states have eliminated all rate filing requirements for some business, such as large commercial risks.
In another significant rate modernization achievement, Massachusetts abandoned its system of a single state-set rate for private passenger auto insurance in April, allowing insurers to file their own rates and compete for the first time in 30 years.
“These developments send a clear message that states possess the ability to improve the way they regulate property/ casualty insurance,” Alldredge said. “Reform is moving forward.”
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Posted: Wednesday, June 25, 2008 12:00:00 AM. Modified: Wednesday, June 25, 2008 3:57:24 PM.
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