NAII Leads Effort for ‘Best Practices’ List on Personal Lines Auto

With some regulators reportedly intent on removing personal lines regulatory modernization from their agenda, the National Association of Independent Insurers (NAII) offered to lead an industry effort to review personal auto rates and forms filing systems with the goal of creating a “best practices” list for state regulators.

The National Association of Insurance Commissioners (NAIC) held its meeting of the Improvements to State Based Systems (EX) Working Group in Atlanta this past weekend. At prior meetings of this working group there was discussion of removing regulatory modernization of personal lines from the list of the goals.

“The NAII is committed to preserving and improving state regulation of insurance and as such, was opposed to removing the review of personal lines framework from the agenda,” Gerald Zimmerman, senior counsel for the National Association of Independent Insurers (NAII) noted.

According to Zimmerman, in working toward personal lines modernization, the NAII realizes that neither the NAIC, nor many of the states with prior approval laws are in a hurry to modernize their archaic rating systems and move to a “use and file” or other competition-driven systems. While not giving up on a broader modernization, the NAII stepped forward to offer the “best practices”
approach as a way to keep the issue at the forefront of the regulatory agenda.

“The overall goal of the committee was to reduce the time-line between when a company files a rate and when that rate is approved,” Zimmerman said. “A 30-day turn around time for approval had been suggested as the optimum target time frame. Many states have adopted prior approval of rates for personal lines auto, yet the turn around time for approval of those rates is often much longer than 30 days and that factor inhibits insurers ability to react
in a timely way to changing market conditions.”

NAII reportedly offered to spearhead an effort to find the best and most efficient methods of state insurance departments’ prior approval of rates and then to create a comprehensive list, making the “best practices” list available to all regulators.

“The NAII will look at all states with prior approval rating systems and
separate the functional and expedient systems from those states with systems that are sluggish and ineffective,” Zimmerman said. “NAII intends to coordinate efforts with other industry groups. At the same time we will review studies done recently by the NAII Insurance and Research Division that specifically addressed the personal lines auto prior approval rating systems around the country. The goal is to continue to look for the ‘best practices’ in this line of business that will promote regulatory modernization and streamlining. If the industry and regulators can come to some agreement on review practices, we hope it will cause momentum for broader review of prior approval systems.”

Zimmerman was unsure if a “best practices” list could be a completed project by the June NAIC Summer Meeting in New York, but said that whatever was accomplished at that time would be shared with the committee.