Conn. Legislature Passes Flex-Rating for Personal Lines

May 2, 2006

The Connecticut House has passed a bill providing flex-rating for personal lines insurance with a six percent flex band.

The measure, Senate Bill 410, also includes new requirements governing access to uninsured/underinsured motorist coverage. The law sunsets after thre years if not renewed by lawmakers.

Insurers supported the legislation.

Flex-rating should foster a more competitive insurance market, according to the Property Casualty Insurers Association of America.

“On average, auto insurance premiums are 10 percent lower in states with flex rating or open competition than in states which require prior approval of rates,” maintained Kristina Baldwin, PCI regional manager and counsel. “In addition, under flex rating, premiums are more stable because insurers are more likely to contain rate changes to the flex band if possible, so as to avoid burdens associated with prior approval.”

Flex-rating enables insurers to implement rate changes within a percentage band without approval from the regulator. Larger changes must still undergo regulatory review before going into effect. Under the current prior approval systems, all rates and rating plans must be filed and approved before going into effect.

“Connecticut is taking an important step forward with legislation that will help consumers,” said Baldwin. “A flex-rating system allows insurers to respond to competitive market conditions and determine appropriate rate level changes. This system is beneficial to insurance consumers as prices are more stable.”

The bill was also actively supported by the American Insurance Association.

“This bill will allow insurers to respond quickly to market conditions and foster greater competition,” said Laura Kersey, AIA assistant vice president for the Northeast region. “Consumers benefit when insurers are allowed to compete.”

The bill now goes to Gov. M. Jodi Rell (R), who insurers say is expected to sign it into law.

Sources: PCI, AIA

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