The Massachusetts House and Senate have both approved legislation to deregulate insurance rates and forms for certain large commercial risks.
The measure permits commercial accounts with more than $30,000 in premium that also meet several other criteria to choose to be exempt from the state’s prior approval of rates law. It now goes to the desk of Gov. Mitt Romney.
“This bill (HB 1700) represents the first time in many years that the Legislature has acted to remove a layer of regulation from the insurance industry,” said Frank O’Brien, PCI vice president and New England regional manager for the Property Casualty Insurers Association of America (PCI).
“Massachusetts is one of the most highly regulated insurance marketplaces, and this action will put the state in step with the rest of the country and make the Commonwealth a more attractive place for commercial insurers to do business,” he added.
Large commercial policyholder are defined as any business or public entity which has aggregate property and casualty insurance premiums of $30,000 (excluding workers’ compensation) and which has certified that it elects to be treated as a large commercial policyholder and understands the limited regulatory oversight that this connotes.
Eligible large commercial policyholders must also certify that they meet two of the following criteria:
• Net Worth of $ 10 million; or
• Net revenue or sales of $5 million; or
• More than 25 employees per individual company or more than 50 employees per holding company aggregate; or
d. Non-profit or public entity with an annual budget or assets of $25 million or more; or
• Municipality with a population of 20,000 or more; or
• Retains a risk manager who shall be a full-time employee or a person retained by a large commercial policyholder, either of which must be licensed and must be one of the following: a certified insurance counselor, a chartered property and casualty underwriter, an associate in risk management, a certified risk manager, or a licensed insurance advisor in property and casualty insurance.
The bill requires that all such policies contain a notice that the it is not subject to all of the provisions of insurance law that apply to other commercial lines products and may contain significant differences from a policy that is subject to all provisions of insurance law. The disclosure notice must also include a policyholder’s acknowledgement statement, to be signed and dated by the first named insured prior to the effective date of coverage.
Each licensed special insurance broker must maintain copies of these acknowledgments.
Other provisions of the measure require that the policy be delivered at least 20 days prior to the effective date and that insureds be permitted to terminate the policy, on a pro-rata basis and without penalty, within 20 days of the receipt of the policy.
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