NCOIL Adopts Modernization Act in Effort to Modernize Personal Lines Regulation

July 18, 2001

The National Conference of Insurance Legislators (NCOIL) adopted a model bill that calls for states to adopt a use-and-file approach for personal lines rates, in what industry groups are calling a significant victory in the modernization of personal lines regulation.

The Property/Casualty Insurance Modernization Act, which was introduced and sponsored by Rep. Shirley Bowler of Louisiana, was adopted on June 13 by the NCOIL Property/Casualty Committee and the NCOIL Executive Committee.

“We’re indebted to NCOIL and to Rep. Bowler for using foresight and common sense in the adoption of this model act,” said Robert L. Zeman, vice president and assistant general counsel of the NAII, who spearheaded the effort to have NCOIL address the issue and last week testified at the NCOIL hearing on the act.

Rep. Bowler’s proposed model, which applies to both commercial and personal lines, strikes a reasonable and effective balance by providing a competitive system for personal lines insurance rates while concurrently providing appropriate consumer safeguards such as additional authority for the insurance regulator, Zeman said.

Other key elements of the model, which would be customized to suit each state, include:

* A use and file system for personal lines of insurance;

* A prohibition on inadequate or unfairly discriminatory rates;

* A requirement that insurers receive prior approval of rate changes if a market is found not competitive;

* Consumer access to state insurance department information on pricing and coverages;

* Separate treatment for insurance rates.

The NCOIL action comes in the wake of recent federal focus on the modernization issue, specifically last month’s hearings of the U.S. House Financial Services Committee where Chairman Michael G. Oxley criticized the current “patchwork” system of insurance regulation.

“NAII has committed to our members as well as those of NCOIL, the NAIC and other public policy organizations that we will support meaningful reforms in the states for the sake of improving public policy and helping preserve state regulation,” Zeman said. “NCOIL’s adoption of this model act will go a long way toward furthering that goal.”

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