The Louisiana Department of Insurance reported that information provided by Commissioner of Insurance Robert Wooley to a joint meeting of the Louisiana Senate and House Insurance Committees shows the positive results of flexible insurance rating, including more than $38 million in savings in the form of rate decreases for consumers.
Flexible rating, or Flex Band, was approved during the 2003 Regular Legislative Session and became effective January 1, 2004. It applies to all property and casualty lines of insurance. The Legislature approved Flex Band after recognizing the need for insurance regulatory reform and for insurers to be able to adjust their rates in order to timely respond to current market conditions.
Flexible rating allows insurers to amend rates as many times as necessary in a 12-month period within the -10 percent to +10 percent flex band. The Louisiana Insurance Rating Commission (LIRC) continues to hear rate requests in excess of 10 percent, or those considered to be not actuarially justified by the department.
Commissioner Wooley says the data shows companies are not asking for the maximum 10 percent rate increase under Flex and the filings made under Flex are not being automatically “rubber stamped” by the department, as some opponents of the measure feared.
The Commissioner also states that the rate reductions seen under Flex are significant because such large decreases have not been requested in recent years under the LIRC system. Wooley attributes the rate decreases to competition in rate levels amongst companies. In 2002, the LIRC approved $1,973,984 in rate decreases. That number increased to $2,304,474 in 2003.
One of the most important goals of flexible rating was to promote a free market system by encouraging a competitive market, thus improving the availability of property and casualty insurance products.
Another concern of some with the passage of Flex Band was whether the system would cause too much confusion with the general public and an increase in consumer inquiries to the Department of Insurance. Department data shows that in 2003, the Department’s Property and Casualty Consumer Affairs Division received 2,454 consumer inquiries. In 2004, the staff saw a 17 percent drop from the previous year, with
2,033 inquiries.
Link to: Statistics comparing LIRC vs. Flex Band in 2004 for all P/C lines.
Link to: Rate decreases meeting flexible rating requirements.
Topics Louisiana Property Casualty
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