Property/casualty insurance trade groups, the American Insurance Association (AIA) and the National Association of Mutual Insurance Companies (NAMIC), have submitted testimony to the Minnesota Legislature in opposition to a proposed auto insurance regulation bill the groups say is misguided.
According to NAMIC, two of the bills most troubling provisions are one that contains a rollback provision that the association says would lead to insurer insolvencies and another that would limit rating factors.
The AIA said that while the recently introduced bill, SF 2770, follows several years of debate on auto insurance reform in the state, it does not include the solutions worked out during those conversations.
Steve Schneider, Midwest region vice president for AIA, said SF 2770 would hurt the insurance industry’s financial ability to serve its customers, as it would require retroactive redistribution of funds paid by customers to ensure their personal financial protection in the event of an automobile accident.
The legislation, which was introduced last week, follows several years of debate about reform of the industry. But the bill does not include the solutions that were devised during those conversations, Schneider said.
In addition, he added, the measure would hurt the insurance industry’s financial ability to serve its customers. The legislation would require retroactive redistribution of funds paid by customers to ensure their personal financial protection in the event of an automobile accident.
“We consider this proposal very troubling because it represents a complete reworking of state law without considering the solvency of our industry. … Insurers are businesses. To pay claims, they must stay in business. To stay in business, they must satisfy customers and meet the stringent financial solvency requirements enforced by the Department of Commerce,” Schneider said in a statement released by the AIA.
He added that the “proposal brings those objectives into conflict. The forced retroactive redistribution of premiums will undermine the industry and its ability to serve its customers. We urge the rejection of this legislation and look forward to a continued conversation about real reform that works for consumers and industry.”
In written testimony to Minnesota Senate Commerce Committee Chair James P. Metzen, Mark Johnston, NAMIC’s director of State Affairs – Midwest Region, said the association strongly opposes SF 2770.
“Among its provisions, two stand out as being misguided,” he wrote.
- “The rate rollback provisions in the bill suffer from constitution infirmities as shown by the holdings of courts in other states. They also could result in insurer insolvencies to the long term detriment of Minnesota consumers.
- “The provisions in the bill that limit rating factors will result in cross-subsidization that harms rural Minnesotans and many others.”
He said both the Senate Commerce Committee’s Insurance Fraud Working Group and the statutorily created Task Force on No-Fault Auto Insurance Issues have worked on auto insurance reforms. He urged the Legislature to follow the lead of those two groups.
“The fundamental issue with auto insurance affordability in Minnesota is the cost of providing policy benefits. In addition to implementing the suggestions made by the Task Force and the Fraud Working Group, the state should end the practice of diverting funds from the Auto Theft Prevention Surcharge to cover other state spending,” Johnston said.
Instead the funds should be used “for programs that reduce the burden of auto theft on consumers in general and the economically vulnerable in particular,” he said.
Source: NAMIC, AIA