Nev. Flex-rating System for Insurance Rates Proposed

February 28, 2003

A flex-rating bill introduced in Nevada would foster competition and modernize rate regulation in the state, according to the National Association of Independent Insurers (NAII).

Senate Bill 12 would create a flex-rating system, allowing an insurer to make average rate adjustments of up to 7 percent for personal lines insurance without first obtaining the insurance commissioner’s approval. Under current Nevada law, auto and homeowners insurance rate modifications are subject to the insurance commissioner’s prior approval.

“SB 12 is an important reform that merits enactment because the bill creates a more efficient, reasonable and competitive regulatory environment that benefits Nevada consumers,” said Sam Sorich, vice president and western regional manager of the NAII at a Senate committee hearing last week. “The measure will encourage greater price competition and create incentives for insurers to lower their rates. We encourage the Senate Commerce and Labor Committee to approve SB 12.”

The bill does not affect the basic authority of the insurance commissioner to regulate or disapprove homeowners and automobile insurance rates or allow an insurance company to use rates that are excessive, inadequate or unfairly discriminatory. But the bill does affect the timing of the commissioner’s review of a range of rate changes, Sorich said.

“Nevada’s current prior approval system creates an inherent delay that comes with the need to submit, review and approve rate changes,” Sorich said. “The time lag between the rates that an insurer is charging and rates that is should be charging often puts an insurer’s rate analysis out of date.

“Companies in Nevada are currently restrained from vigorously competing on rates by the restrictions of the prior approval law,” Sorich said. “SB 12 would moderate the level of rate changes, helping to avoid the jolt of major rate adjustments and assisting consumers to work insurance rate modifications into their household budgets.”

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