PCI Supports New York’s Competition-based Flex Rating Proposal

The Property Casualty Insurers Association of America (PCI) is encouraging New York legislators to pass legislation (A-11693/S-8624) introduced today that would reinstate insurance flex rating for auto insurance and address coastal homeowners insurance issues. 
 
“This is a very positive development for consumers,” said Paul Magaril, regional manager and counsel for PCI. “We have been strong advocates for a return to flex rating. 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. Furthermore, with flex rating, companies were more willing to lower their rates because they knew they would be able to adjust their rates quickly if necessitated by market conditions. There is no reason to believe that the state’s insurance environment could not reap these benefits once again.” 
 
The bill would allow auto insurers to increase or decrease their premiums by up to five percent annually without the prior approval of the Superintendent of Insurance. 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. 
 
“We commend the insurance committee chairs, Assemblyman Joseph Morelle, (D-Monroe) and Senator James Seward, (R-Milford) for their leadership on this issue and for sponsoring the bills,” said Magaril. “New York Superintendent of Insurance Eric R. Dinallo has endorsed this approach as a means of making the insurance marketplace more competitive." 
 
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. Just this year Kansas enacted HB 2689 which follows the National Conference of Insurance Legislators (NCOIL) personal lines flex-rating model with a 12 percent flex band. There has also been progress on rate and form filing modernization in Connecticut, Georgia, North Dakota and Wisconsin. Last year New Mexico dropped its prior approval system for auto and homeowners insurance in favor of a file and use system. 
 
New Yorkers saw significant benefits when it converted from prior approval to a flex-rating law in 1996. At that time auto insurance rates stabilized or reduced immediately thereafter and the number of insurers increased by 28 percent during the six years flex rating was in place. In 2001, when the state reverted to prior approval – its status today – policyholders saw larger increases in their premiums as well as a decline in their choice of auto insurers.  
 
“By adopted a less restrictive rating system, drivers in New York can once again have the advantages of lower rate adjustments and even rate decreases as well as greater company selection in a more competitive environment,” said Magaril. 
 
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.