News Briefs

NAMIC ENCOURAGES RATE MODERNIZATION IN HAWAII: The National Association of Mutual Insurance Companies has told a Hawaii legislative committee that passing rate modernization laws would benefit state commerce and insurance consumers. According to NAMIC State Affairs Manager Christian John Rataj, rate modernization would: Promote greater market competition in the insurance industry; Streamline rate filing with the Division of Insurance; Increase insurance product availability and reduce insurance rates; Reduce the incentive for the federal pre-emption of state insurance legislation; and Improve the efficiency and accuracy of insurance underwriting and claims adjusting. “The United States’ economy is founded upon the premise that free-market competition is fundamental to capitalism and that government regulations in the marketplace should be designed to promote open and effective market competition for the benefit of the consumer,” he said. “Unfortunately, many states, with the intent of protecting consumers, have used government regulations to restrict open and effective market competition.” Over the past three years, 12 states-Alaska, Louisiana, Massachusetts, Minnesota, Nebraska, New Hampshire, New Jersey, Oklahoma, Rhode Island, South Carolina, South Dakota and Texas-have adopted some form of regulatory modernization. Hawaii currently has a prior-approval rating system, but NAMIC is applauding the state legislature for “exploring the idea of adopting some form of rate modernization as a pragmatic mechanism to stabilize and regulate insurance rates, promote responsible insurance practices, and break the perpetual and escalating cycle of regulatory action that has distorted the insurance marketplace to the detriment of the insurance consumer Studies have routinely demonstrated that rate modernization increases availability of insurance products and typically results in premium savings to the insurance consumer,” Rataj said.

SHIFTING COMMUTER HABITS CAN CUT CALIF. AUTO RATES: By reducing the number of miles they drive each week, California commuters could reduce their automobile insurance premiums, according to the Insurance Information Network of California. As gasoline prices increase past $3 per gallon in some areas, some commuters may turn to public transportation to ease the crunch. But making public transportation a habit may simultaneously save consumers money in auto insurance. According to IINC, auto insurance premiums rely on many factors ranging from a driver’s safety record to the type of car being insured. The car’s annual mileage is also one of several critical factors in determining how much a car owner spends on insurance. Some insurance companies offer discounts to motorists who drive fewer than a predetermined number of miles each year. The effects of reducing automobile mileage on insurance premiums will vary depending on the driver’s personal circumstances and by insurer. “As commuters turn to public transit to reduce their household fuel bills, they should report reduced annual automobile mileage to their insurer or insurance agent,” said Candysse Miller, IINC executive director. “While the insurance savings may not completely offset the impact of skyrocketing gasoline prices on your household budget, the combined benefit of reduced fuel, maintenance and insurance costs could make public transportation a budgetary bonus for many commuters.”

CREDIT-BASED INSURANCE SCORING ESSENTIAL IN ALASKA: In response to proposed regulations that would prohibit the use of credit-based insurance scoring in the renewal of insurance policy underwriting, NAMIC testified on Aug. 30 at an Alaska Division of Insurance hearing that “at renewal, insurance carriers need the flexibility to engage in total circumstances analysis of the basis for change in a consumer’s credit score to ensure that consumers receive a premium rate that is commensurate with their current potential risk of loss exposure.” The proposed regulations concerned NAMIC because “they categorically prohibit the consideration of credit scores in policy renewal situations without consideration of the factual basis for the change in the consumer’s credit score,” according to State Affairs Manager Rataj. In essence, the proposed regulations: Outline the requirements for an acceptable insurance scoring model; Set for the statistical validation required for an acceptable insurance scoring model; Prohibit the use of credit histories in insurance policy renewals, unless the consumer waives the requirement in writing; and Limit how an insurer may use a “neutral credit” history report. NAMIC supports underwriting freedom and the use of credit-based insurance scoring because there is an irrefutable correlation between a consumer’s credit score and his potential risk of loss exposure, according to the association. Consequently, NAMIC suggests that the DOI consider drafting a provision that “affords insurance carriers an opportunity to evaluate all risk-of-loss based variables necessary for the carrier to determine if the insurance renewal applicant has had a change in circumstances that correlates to an increased potential for claims exposure,” Rataj said.

ARIZ. RULING MAY THREATEN WORKPLACE SAFETY: The Arizona Supreme Court has invalidated what the Property Casualty Insurers Association of America believes was a valuable law designed to help provide drug and alcohol-free working environments, according to PCI Regional Vice President Sam Sorich. In David C. Grammatica v. Arizona Industrial Commission, the court struck down a 1999 law that denied workers’ compensation benefits to injured workers who had either refused to take a drug or alcohol test, or failed the test. The court ruled the law unconstitutional because it deprives an injured worker of his or her constitutional rights to workers’ comp benefits. “Virtually no injury caused in the workplace while an employee is under the improper influence of illicit drugs or alcohol is ever truly an accident, Sorich said, pointing to a March 21, 2005, friend-of-the-court brief filed in the case by PCI. The U.S. Department of Labor and Occupational Safety and Health Administration define injuries resulting from impairment by drug or alcohol use at the workplace, not as accidents, but rather as avoidable workplace hazards. “Striking down this law sends the wrong message to Arizona residents that they may place themselves, their coworkers and the public at a significant and unjustifiable risk of serious and substantial harm by going to work drunk or high without fear or losing workers’ compensation benefits.” Sorich said.

Topics Carriers Auto Legislation Workers' Compensation Arizona