The Colorado Legislature is considering a bill that would add bureaucratic red tape and costs to the state’s automobile insurance system, claims the Property Casualty Insurers Association of America (PCI), which is opposing the bill.
House Bill 1389, the Fair Accountable Insurance Rates Act, would create new reporting requirements, including:
– Each insurance carrier to file with the commissioner of insurance a detailed and public description of its rating and renewal practices for health and automobile insurance.
– Each insurance carrier to file annually with the commissioner the number of lives insured in the previous year.
-Requested rate filing increases for health and automobile insurance to be submitted to the commissioner at least 60 days prior to the proposed implementation date. Allows the rates to be implemented if the commissioner does not approve the rates within the 60-day period. Allow the commissioner to disapprove the rates upon later review. And requires the commissioner to disapprove the rates if certain conditions apply.
– Insurance carriers to report to the division of insurance if specific reasons apply to an increase in rates for health and automobile insurance. Requires the division to track such information and make it public. Prohibits persons from willfully withholding information that will affect rates or premiums charged or from giving false or misleading
information. Creates penalties for a violation.
-Requires that use of credit information for underwriting purposes be open to the public.
PCI says the prior approval regulatory system and new reporting requirements will add costs and delays without providing any consumer benefit.
“This bill is a classic example of over-regulation,” said Kelly Campbell, regional manager for PCI. “The prior approval system creates an inherent delay that comes with the need to submit, review and approve rate changes. This process is cumbersome, slow and costly. This would be like the state controlling whether Wal-Mart and Target can sale price an item rather than letting stores compete for business with pricing, products and service. Competition is working well and consumers have seen significant savings in their automobile insurance without an overly bureaucratic control of prices.”
PCI indicated that the Division of Insurance already has strict oversight powers under the current file and use regulatory system. The commissioner also has broad powers to order rates be corrected, discontinued or modified. The commissioner is also given broad authority to fine, suspend or revoke the license of insurers for violations of the insurance statutes, the association noted.
“This legislation takes a negative approach that is out of step with national trend toward streamlining regulatory processes,” Campbll said. “Just this year we have seen incremental progress on rate and form filing modernization in Connecticut, 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. Establishing prior approval of prices will preclude companies from adapting to changes in the marketplace. This will serve only to hurt consumers.”
Based on Division of Insurance data from 2003 – 2006, there were greater consumer savings under file and use reviews than prior approval, PCI indicated. In 2006, file and use reviews resulted in $3 million in consumer savings while prior approval only resulted in $77,000 in consumer savings.
However, bill supporters believe that insurance coverage should be accessible for all Coloradans, and that “to provide accessible and affordable coverage, insurance rate increases should not be excessive, inadequate, or unfairly discriminatory.” To achieve that goal, they believe that “certain insurance rates should be subject to preapproval, based on established benefits ratio standards, by the commissioner of insurance,: the Assembly Bill text states.
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