Revamping the way insurance is regulated in Louisiana is back on the legislative radar screen this session, according to the Property Casualty Insurers Association of America (PCI), with one bill that would enhance modernization efforts passed last year and one bill that would eliminate those reform efforts.
House Bill 1514 would enable commercial insurers to adjust rates without first receiving permission from the Insurance Rating Commission. Insurers would be able to file a notice of a rate change with the Department of Insurance’s Office of Property and Casualty, and the rate would take effect 45 days later unless the commissioner took action to block it or approve the rate more quickly. HB 1514 passed the full House in a unanimous vote and now heads to the Senate.
On the flip side, Senate Bill 270 would negate the flex-band rating reform model instituted last year. The measure, being held in the Senate Insurance Committee, calls for prior approval of rate changes—up or down—by the Louisiana Insurance Rating Commission.
“Last year, the commissioner, legislature, and governor took an important step toward modifying the insurance rate making system to make Louisiana a more attractive place to come and conduct business,” said Greg LaCost, senior counsel and regional manager for the PCI, which is opposing Senate Bill 270. “By eliminating the flex-band rating system, the state will return to a stringent and broken regulatory system that could force companies to leave. The goal of achieving widespread availability of insurance to consumers at a sound rate would be jeopardized.”
A new law was approved last year that gives insurers the freedom to make timely adjustments—up or down—to their rates within a 10 percent band in a 12-month period without appearing before the rating commission. The commission’s actuarial staff can still review the rate adjustments and determine if they are actuarially justified. This flexibility in the rate making process is called flex-band rating. Before flex-band rating took effect, a prior-approval system was in place in which the Insurance Rating Commission approved all rate changes, resulting in many consumers and businesses left with fewer choices.
“The lack of competition among insurers was a significant factor in the state’s higher-than-average auto and homeowners insurance rates,” LaCost said. “Several states, such as South Carolina and Oklahoma, have implemented flex rating with positive results. Since South Carolina switched to a flex-rating system in 1999, more than 100 new auto insurers entered the market, average auto insurance rates decreased and the state’s residual market plan insures under 200 drivers, compared to more than 1 million less than 10 years ago.”
Louisiana is beginning to experience similar success. During a House Insurance Committee hearing in March, state insurance department officials, legislators and agents’ representatives reported on the positive change in perception that insurance companies are having about Louisiana. Additionally, the commissioner recently indicated that five companies have applied to begin writing homeowners insurance in Louisiana.
“The new regulatory environment is causing companies to reconsider their market share, or lack of it, in the state,” LaCost said. “Increased competition will mean more companies offering a variety of products and prices and providing consumers with greater choices, better service and better rates than highly regulated markets. HB 1514 would further extend the flexibility in regulation and allow commercial insurers to provide new products to the marketplace at a much quicker pace.”
Topics Carriers Legislation Louisiana
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