The National Association of Mutual Insurance Companies has told a Hawaii legislative committee that passage of rate modernization laws would benefit state commerce and insurance consumers.
In written comments filed last week, NAMIC State Affairs Manager Christian John Rataj cited a number of reasons why Hawaii lawmakers should consider liberalizing their rating laws for property/casualty products. According to Rataj, modernization would achieve five principal public policy objectives:
1) Promotion of greater market competition in the insurance industry;
2) Streamlined rate filing with the Division of Insurance;
3) Increased insurance product availability and reduction of insurance rates;
4) Reduction of the incentive for the federal preemption of state insurance legislation; and
5) Improvements to the efficiency and accuracy of insurance underwriting and claims adjusting.
“The United States economy is founded upon the premise that free-market competition is fundamental to capitalism and that government regulations in the marketplace should be designed to promote open and effective market competition for the benefit of the consumer. Unfortunately, many states, with the intent of protecting consumers, have used government regulations to restrict open and effective market competition,” stated Rataj.
Over the past three years, 12 states have adopted some form of regulatory modernization. In 2003, modernizing legislation was adopted in Nebraska (commercial lines), New Hampshire (commercial lines), New Jersey (auto), Louisiana (personal lines) and Texas (personal lines). In 2004, modernizing legislation was adopted in Massachusetts (commercial lines), Oklahoma (personal lines), Rhode Island (personal lines), South Carolina (homeowners), and South Dakota (personal and commercial lines). In 2005, modernizing legislation was adopted in Alaska (personal lines), Minnesota (personal lines), and Nebraska extended their reform efforts to personal lines.
“This pattern of rate modernization clearly demonstrates that there is an ever-growing belief that the restrictive regulatory practices of the past have not prompted insurance rate reductions, as hoped by those promoting restrictive regulatory practices, and that regulation of the insurance industry must be approached from a market competition standpoint, like the one that is controlling in the other professional sectors of the business community,” stated Rataj.
Since Hawaii currently has a prior-approval rating system, “NAMIC applauds the Hawaii Legislature’s decision to explore the idea of joining the ranks of states that have adopted some form of rate modernization as a pragmatic mechanism to stabilize and regulate insurance rates, promote responsible insurance practices, and break the perpetual and escalating cycle of regulatory action that has distorted the insurance marketplace to the detriment of the insurance consumer,” stated Rataj.
In NAMIC’s written comments, Rataj stated that “studies have routinely demonstrated that rate modernization increases availability of insurance products and typically results in premium savings to the insurance consumer.” As evidence to support this contention, Rataj referred to comments made by the Louisiana Commissioner of Insurance, J. Robert Wooley, who stated that “information provided to a joint meeting of the Louisiana Senate and House Insurance Committees today [March 2005] shows the positive results of flexible insurance rating, including more than $38 million in savings in the form of rate decreases for consumers.”
In support of rate modernization, Rataj wrote that “[t]he policies and procedures associated with a restrictive regulatory system, directly impact the risk management decisions of insurance consumers, the claims practices of insureds and the relationship between the insurance industry, the state regulator and the judicial system.”
The full text of NAMIC’s written comments can be read on NAMIC Online at
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