Auto Exempted from Colorado Fair Accountable Insurance Rates Act

After more than five hours of testimony and deliberation on Colorado House Bill 1389, the House Business Affairs and Labor Committee has amended a controversial bill that insurance associations said would have imposed a prior approval regulatory system on insurance. The amendment exempts automobile insurance from the legislation. The bill now is headed for the House Appropriations Committee.

“With this development, the committee is preserving the state’s competitive marketplace for auto insurance,” said Kelly Campbell, regional manager for the Property Casualty Insurers Association of America (PCI). “Although we oppose the notion that government control of rates works better than market forces, nevertheless we are pleased that the committee at least narrowed the scope of the bill. Over the past five years Colorado’s competitive rating system for auto insurance has delivered rate reductions of up to 35 percent for consumers. Since 2003 dozens of insurance companies have entered the auto insurance market and now consumers have over 200 insurers competing for their business. Last night Colorado motorists were the winners because regulatory systems based on competition have proven to be beneficial for consumers.”

Earlier this month, PCI as well as the American Insurance Association expressed opposition to the bill, noting that changing the insurance rating system from file-and-use to prior approval for auto insurance would have reduced competition in the auto insurance market and potentially increased costs for Colorado consumers.

Fred Bosse, AIA regional vice president, praised the Colorado House for its decision, saying, “The Colorado Business Affairs and Labor Committee demonstrated great wisdom by preserving the competitve auto insurance market in the state. Today, the legislature took a step forward in recognizing the best interests of Colorado drivers and made the prudent decision to not add unnecessary bureaucracy and costs to the auto insurance system.”

However, bill supporters believed 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 believed that “certain insurance rates should be subject to preapproval, based on established benefits ratio standards, by the commissioner of insurance,” the Assembly Bill text stated.

As amended, the Fair Accountable Insurance Rates Act would apply to small group sickness and accident insurance. Carriers would be required to submit rate increases to the state Insurance Commissioner at least 60 days prior to the proposed implementation. And if the Commissioner does not respond to the rates within a 60-day period, then the carrier can implement the rates.

For more information, visit http://www.leg.state.co.us/clics/clics2008a/csl.nsf/fsbillcont3/A9D0C892B8408F21872573680059F8CC?open&file=1389_01.pdf.

Sources: PCI, Colorado Legislature

Topics Auto Legislation Market Colorado