Property and Casualty Commercial Rate and Policy Form Model Law Approved

December 14, 2001

State insurance commissioners have advanced a model law to modernize commercial rate and form filings, with final approval possible in the spring.

A working group of the National Association of Insurance Commissioners (NAIC) approved the Property and Casualty Commercial Rate and Policy Form Model Law. It would allow commercial insurers to use a rate before filing it with state insurance commissioners, who would still have authority to reject a rate, particularly in markets the commissioner deems noncompetitive.

The model also calls for a file-and-use system for forms, with the commissioner having 30 days to look at them.

Approval of rate-and-form modernization was among the most important developments the NAIC’s Winter National Meeting in Chicago, said Larry Kibbee, a vice president with the Alliance of American Insurers. “Congress will get to see what the NAIC is doing to modernize state insurance regulation,” he said.

The House Financial Services Committee has held hearings to see what insurance commissioners are doing to modernize state regulation, and Rep. Michael Oxley (R-Ohio), head of the Financial Services Committee, told the NAIC in Chicago that Congress would resume its scrutiny after settling the question of a federal terrorism reinsurance plan.

But Congress also is looking at personal-lines modernization, which the NAIC needs to address, said Robert Zeman, vice president and assistant general counsel for the National Association of Independent Insurers.

The National Association of Mutual Insurance Companies (NAMIC) supports a different modernization model put forth by the National Council of State Legislators, but it sees the NAIC model as a way to get modernization language into the states, said Roger Schmelzer, vice president of regulatory affairs for NAMIC.

During one session at the Chicago meeting, before the modernization model was approved, J. Robert Hunter, director of insurance for the Consumer Federation of America, said the model wasn’t modernization, but “deregulation” of commercial insurance. The market isn’t competitive, Hunter said, and the NAIC is “pouring gasoline on a fire” because insurers already are “jacking up prices.”

It’s not deregulation because state insurance commissioners can still approve or disapprove rates and forms, said Ohio Director of Insurance Lee Covington, who chairs the NAIC’s Improvements to State-Based Systems Working Group.

“This bill lessens regulation, so it’s deregulation,” Hunter said. “You’re just wrong.”

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