'Road Map' Draft Calls For Rate Dereg Phase-In

By Arthur D. Postal, Washington Bureau Chief

NU Online News Service, Aug. 24, 2:50 p.m.EDT?Commercial lines carriers would see immediatederegulation while there would be a three-year phase-in period onpersonal lines under the "road map" legislation unveiled toindustry lobbyists by the leadership of the House FinancialServices Committee last week.[@@]

Under the draft, personal lines carriers would have to quoterates that could go up or down only 7 percent on a statewide basisin the first year, and 12 percent in the second year, the so-called"flex-band" approach. The draft legislation then calls for creationof full rate deregulation in the third year in personal lines, theIllinois model, with at most informational filing at the statelevel.

The rate issue is likely to generate the most controversy of allprovisions in the 17-title legislation. For one thing, it deviatesfrom the principle underlying the rest of the bill by effectivelypre-empting state rate regulation.

The proposal has the support of the property/casualty carrierinsurance trade groups, although they are likely to suggest thatfurther changes be made, while testifying on the issue before theCapital Markets Subcommittee of the House Financial ServicesCommittee next month. The draft was released to the trades lastThursday and Friday by Rep. Richard Baker, R-La., chairman of thesubcommittee, and committee staffers.

Those voicing support in principle for the draft were staffofficials of the Property Casualty Insurers Association of America,the National Association of Mutual Insurance Companies and theAmerican Insurance Association. Officials of the IndependentInsurance Agents and Brokers of America and the Council ofInsurance Agents and Brokers were studying the document andpromising comment shortly.

"Our members see great merit in the approach," said RobertZiman, senior vice president at PCI. "This is a positive stepforward, and the process appears consistent with policy advocatedall along at PCI, that is, promotion of competitive markets."

David Winston, senior vice president-federal affairs for NAMIC,said the group has long supported rate deregulation and embracesthis concept in the draft bill wholeheartedly. He also said thatNAMIC supports the call for a federal/state partnership, as in theseven-member "Coordination Partnership" created by thelegislation.

NAMIC does not support creation of the bank model, for example,an optional federal charter, he said. That provision calls forthree state regulators representing small, large and "other"states, the Secretary of the Treasury, and representatives from theSecurities and Exchange Commission and the Federal Reserve Board.The chairman would be appointed by the United States President.

Julie Rochman, AIA senior vice president-public affairs of theAmerican Insurance Association, issued a statement saying, "AIAapplauds Chairmen Oxley and Baker for taking this step towardending decades of oppressive state price and product controls thatstifle competition and disadvantage insurance consumers. We pledgeto work along side the chairmen and their colleagues on the Hill tomake these reforms a reality."