'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 immediate deregulation while there would be a three-year phase-in period on personal lines under the "road map" legislation unveiled to industry lobbyists by the leadership of the House Financial Services Committee last week.[@@]

Under the draft, personal lines carriers would have to quote rates that could go up or down only 7 percent on a statewide basis in the first year, and 12 percent in the second year, the so-called "flex-band" approach. The draft legislation then calls for creation of full rate deregulation in the third year in personal lines, the Illinois model, with at most informational filing at the state level.

The rate issue is likely to generate the most controversy of all provisions in the 17-title legislation. For one thing, it deviates from the principle underlying the rest of the bill by effectively pre-empting state rate regulation.

The proposal has the support of the property/casualty carrier insurance trade groups, although they are likely to suggest that further changes be made, while testifying on the issue before the Capital Markets Subcommittee of the House Financial Services Committee next month. The draft was released to the trades last Thursday and Friday by Rep. Richard Baker, R-La., chairman of the subcommittee, and committee staffers.

Those voicing support in principle for the draft were staff officials of the Property Casualty Insurers Association of America, the National Association of Mutual Insurance Companies and the American Insurance Association. Officials of the Independent Insurance Agents and Brokers of America and the Council of Insurance Agents and Brokers were studying the document and promising comment shortly.

"Our members see great merit in the approach," said Robert Ziman, senior vice president at PCI. "This is a positive step forward, and the process appears consistent with policy advocated all 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 embraces this concept in the draft bill wholeheartedly. He also said that NAMIC supports the call for a federal/state partnership, as in the seven-member "Coordination Partnership" created by the legislation.

NAMIC does not support creation of the bank model, for example, an optional federal charter, he said. That provision calls for three state regulators representing small, large and "other" states, the Secretary of the Treasury, and representatives from the Securities 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 the American Insurance Association, issued a statement saying, "AIA applauds Chairmen Oxley and Baker for taking this step toward ending decades of oppressive state price and product controls that stifle competition and disadvantage insurance consumers. We pledge to work along side the chairmen and their colleagues on the Hill to make these reforms a reality."

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

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