INS-33-09-00007-A Flexible Rating for Nonbusiness Automobile Insurance Policies
1/6/10 N.Y. St. Reg. INS-33-09-00007-A
NEW YORK STATE REGISTER
VOLUME XXXII, ISSUE 1
January 06, 2010
RULE MAKING ACTIVITIES
INSURANCE DEPARTMENT
NOTICE OF ADOPTION
I.D No. INS-33-09-00007-A
Filing No. 1432
Filing Date. Dec. 21, 2009
Effective Date. Jan. 06, 2010
Flexible Rating for Nonbusiness Automobile Insurance Policies
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:
Action taken:
Addition of Part 163 (Regulation 153) to Title 11 NYCRR.
Statutory authority:
Insurance Law, sections 201, 301, 2350 and art. 23
Subject:
Flexible Rating for Nonbusiness Automobile Insurance Policies.
Purpose:
This rule re-establishes flexible rating for nonbusiness automobile insurance policies required by section 2350 of the Insurance Law.
Text or summary was published
in the August 19, 2009 issue of the Register, I.D. No. INS-33-09-00007-P.
Final rule as compared with last published rule:
No changes.
Text of rule and any required statements and analyses may be obtained from:
Andrew Mais, NYS Insurance Department, 25 Beaver Street, New York, NY 10004, (212) 480-2285, email: amais@ins.state.ny.us
Assessment of Public Comment
The Department received comments from a property/casualty insurance trade association composed of more than 1,000 member property/casualty insurance companies (PCIAA), a property/casualty insurance trade organization concentrated only on New York (PCNYIA) and a property/casualty insurance trade organization composed of more than 1,400 members (NAMIC).
All three trade organizations commented on Section 163.2(d) of the proposed regulation, which provides "[N]notwithstanding any provision of this Part, an insurer shall not implement an overall average rate increase on a file and use basis subsequent to an overall average rate increase greater than the five percent flex-band that the superintendent has already prior-approved in the twelve-month period immediately preceding the effective date of the proposed increase." The trade organizations contend that this section is contrary to the statutory language in New York Insurance Law Section 2350, which establishes flex-rating for noncommercial automobile insurance. PCIAA also asserted that the regulation is inconsistent with the Department's application of flex rating in the past.
NAMIC further commented that Section 163.2 may hinder the statute's effectiveness in promoting competition. The second sentence of Section 163.2(b) reads, "If a proposed overall average rate increase combined with a prior rate increase implemented within a twelve-month period of the proposed effective date of the request exceeds the five percent flex-band, then the insurer shall obtain the superintendent's prior approval before implementing the change." NAMIC asserts that this provision goes beyond the intent and language of the statute in limiting insurers' ability to make rate changes without prior approval.
After reviewing the comments, the Department determined that the regulation should not be modified. The insurer trade organizations' alternative proposal would disregard any rate increase that had been prior approved during the same 12-month period in determining the 5% overall flex band limitation. While an insurer under this alternative approach would still have to support its flex-rate filing with new data subsequent to a prior approved rate filing, significant automobile rate increases occurring within a 12-month period would be exempt from prior approval. As previously stated in the Department's Regulatory Impact Statement, the Legislature intended that an insurer seeking a rate change resulting in an overall rate increase above 5% during a 12-month period must first obtain the Superintendent's prior approval.
The regulation's approach is not unduly burdensome on insurers. In fact, under the regulation, an insurer may file for a rate increase on a prior approval basis at any time subject to the Insurance Department's review of such increase.
Moreover, although the repealed regulation did take the approach suggested by the industry, the approach in the current regulation is consistent with 11 NYCRR161 (Regulation 129), entitled "Flexible-Rating System; Rating Plans; Tort Reform Refiling Requirements", which governs flexible rating for most property/casualty commercial lines of insurance. Section 161.5(g) states "Following a rate change which required and received prior approval, no further rate change in the same direction within an applicable flex-band can be made by the insurer with respect to that market for a 12-month period after the effective date of such approval. If, notwithstanding this limitation, an insurer determines that it requires such a further rate change, it may seek the superintendent's prior approval." The approach in Part 161 has been successful and has provided both stability as well as flexibility in the commercial lines market, and should do the same for the personal lines automobile insurance market.
