State Farm Mutual Automobile Insurance Co.’s recent announcement that it will cut Louisiana auto insurance premiums by 2.1 percent in February is proof that the flex band law passed two years ago is effective, according to the Property Casualty Insurers Association of America.
“The flex band law, which permits insurers to adjust premiums up or down by 10 percent, is allowing State Farm to move quickly to provide Louisiana drivers with immediate reductions,” said Greg LaCost, senior counsel and regional manager for the association, which supported the legislation.
The 2003 law 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 Insurance Rating Commission. Before flex band rating took effect, Louisiana used a prior approval system, in which the rating commission approved all rate changes, resulting in many consumers and businesses left with fewer choices.
“When companies have the ability to base prices on risk—without fear of regulatory retribution and without excessive bureaucratic cost associated with price controls—competition improves and consumers benefit,” LaCost said.
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