PCI Encourages NY Governor to Sign Flex-Rating Legislation Bill

In the final days before the New York Legislature’s summer recess, lawmakers passed legislation S-8624 today that would reinstate insurance flex rating for auto insurance and address coastal homeowners insurance issues. The Property Casualty Insurers Association of America (PCI) is encouraging Gov. David Paterson to sign the bill. 
 
“This is an important victory for consumers,” said Paul Magaril, regional manager and counsel for PCI. “By taking this positive step lawmakers are enhancing consumer choice, competition and improving the state’s insurance regulatory system. From 1996 to 2001, New York had flex rating and the law allowed companies to quickly react to market conditions, thereby preventing large rate swings. On average, auto insurance premiums are lower in states with flex rating or open competition than in states which require prior approval of rates. In addition, under flex rating, premiums tend to be more stable because insurers are more likely to contain rate changes to the flex band if possible, so as to avoid the burdens associated with prior approval. We are urging the governor to sign this bill because the flex rating approach is a significant improvement over prior approval systems.” 
 
The bill will allow auto insurers to increase or decrease their premiums a maximum of five percent annually without the prior approval of the Superintendent of Insurance. However, flex rating does not allow insurers to increase premiums without insurance department oversight. Insurers must still file their rates with the insurance department, and the superintendent can reject them if he finds they are not justified. 
 
“The insurance committee chairs, Assemblyman Joseph Morelle, (D-Monroe) and Senator James Seward, (R-Milford) demonstrated strong leadership by championing change that will result in a more competitive marketplace,” said Magaril. “Sen. Seward and many others in the Legislature have been long-time supporters of flex-rating. Now with the leadership of Assemblyman Morelle, we saw a great example of bi-partisan cooperation that will produce benefits for consumers.” 
 
Across the country, the national trend is for states to adopt “speed to market” or competitive rating systems that streamline insurance regulation and more fully embrace free-market principles. Earlier this year Kansas adopted flex rating for personal lines. There has also been progress on rate and form filing modernization in Connecticut, Georgia, North Dakota and Wisconsin. 
 
About PCI 
 
PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association. PCI members write over $194 billion in annual premium, 40.1 percent of the nation’s property/casualty insurance.