NAMIC: Rate Modernization Initiatives Likely in 6 States in 2006

January 3, 2006

At least six states are likely to advance rate modernization initiatives this year, a legislative preview prepared by the National Association of Mutual Insurance Companies (NAMIC) reveals.

NAMIC Senior State Advocacy Director Neil Alldredge said bills favoring more competitive rating practices-NAMIC’s top state legislative priority-are expected in Connecticut, Hawaii, Indiana, Iowa, Massachusetts and New York.

“Lawmakers across the country are beginning to recognize that their constituents truly benefit when the regulatory system moves away from restrictive rating practices and adopts a more competitive approach that encourages more competition and better pricing of products in the marketplace,” Alldredge said. “NAMIC encourages legislators in every state to engage in this debate, the record is clear, competition helps consumers and now is the time to enact reform.”

He added that NAMIC advocates will be working this year to oppose what he called “anti-competitive” legislation being proposed by Michigan Gov. Jennifer Granholm. It would impose a 20 percent rate rollback for auto and homeowner insurance rates and eliminate a provision in existing law that would eliminate the requirement that a lack of competition must exist for rates to be deemed excessive.

“The governor’s actions represent a step backwards and will have the unintended consequence of making the Michigan market less competitive than it is today,” Alldredge said.

Other issues identified in the NAMIC preview include credit-based insurance scoring and security breach legislation.

Alldredge predicted that as many as 40 states may introduce insurance scoring bills this year. While a few states may continue efforts to prohibit insurance scoring outright, most bills are likely to seek restrictions where individuals may be involved in “extraordinary life circumstances.” NCOIL may amend their model legislation to capture the life circumstances restriction as well.

Last year, 21 states enacted security breach notification laws, Alldredge noted, making it one of the most active types seen across the country.

“We anticipate more states looking at this issue this year since members of Congress have so far failed to enact a law creating uniform national standards,” Alldredge said. “The more states that enact such legislation, the more they are likely to enact provisions different from each other. This is problematic for businesses doing business in multiple states.”

Alldredge said last year’s hurricane season is likely to cause more attention being focused this year on stronger building codes. He noted that NAMIC already has joined an industry coalition seeking a statewide building code in Mississippi and will be working to eliminate the Panhandle exemption in the Florida building code.

Other emerging issues include local government emergency service fees and laws governing event data recorders. NAMIC advocates also will be working on bills correcting court decisions viewed as misguided by the industry, no-fault laws and workers’ compensation reforms.

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