Flex Band Bill Passes La. House Committee


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A bill that insurance groups say would modernize Louisiana’s insurance regulatory system and make insurance more available in the state has passed the House Insurance Committee. According to the National Association of Independent Insurers, Senate Bill 721 now heads to the full House for consideration.

The NAII maintains that the bill would provide more flexibility in state’s insurance rate-making process, while maintaining an oversight role for the Louisiana Rating Commission and its actuarial staff.

“This is a modest step toward regulatory modernization that has proven successful in other states,” said NAII Counsel Greg LaCost, who provided comments to insurance committee members on the bill. ” We fully expect Louisiana consumers to experience a similar positive result. Providing some flexibility in the rate-making process would serve as an incentive to bring more insurance companies back to Louisiana. The end result is that a more fair and flexible rating system will meet the needs of consumers, regulators and insurers.”

The measure would enable insurers to adjust their rates by 10 percent-up or down-without appearing before the rating commission. The commission’s actuarial staff would still review the rate adjustments and determine if they are actuarially justified. Rate adjustments of more than 10 percent would still require approval by the state Department of Insurance as well as the rating commission. Many states, such as South Carolina and Oklahoma, use flex rating with positive results, according to NAII data.

The NAII stated that since South Carolina switched to a flex-rating system in 1999, 105 new auto insurers have entered the market, average auto insurance rates have decreased and the state’s residual market plan dropped dramatically.

SB 721 has the backing of the Coalition to Insure Louisiana, of which NAII is a founding member. Members of the coalition, a broad-based group of business and professional organizations, believe the current process of getting prior approval on all rate changes from the Insurance Rating Commission has resulted in many companies deciding they cannot conduct business in Louisiana because of the long delays in the approval process and artificially suppressed rates.

“Flexibility in rating would serve as an incentive to bring more insurance companies back to Louisiana,” LaCost said. “More companies in the state means a greater variety of products and prices, giving consumers greater choices, better service and better rates than found in highly regulated markets.

“On the other hand, the ultimate impact of a price-control system is that it forces good risks to subsidize bad ones, increases the number of consumers in assigned risk pools, reduces the number of insurers doing business in a state, restricts consumer choice and restricts market innovations. It is important to improve and modernize the Louisiana commercial rating and filing law for a healthy insurance market.”

Despite the backing of insurance and business groups, not everyone is lining up to support the bill. According to the New Orleans Times-Picayune, the state’s governor is still trying to decide whether to sign or veto the bill if it gains legislative approval. In addition, at least one member of the rating commission, David Chozen of Lake Charles, disapproves of the bill. He told the Times-Picayune that it would essentially abolish the authority of the rating commission.


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