Industry trade groups said they expect Connecticut Governor M.Jodi Rell to sign a bill approved by the legislature yesterday thatpermits insurers to change personal lines rates within certainlimits without regulatory permission.

Insurer organizations said passage of the flex-ratinglegislation would create a more competitive insurance market,giving consumers greater access to more products at lowerprices.

In expectation the bill would get the governor's signature, theConnecticut Insurance Department said it believes the bill strikesa reasonable balance by allowing for a 6 percent rate band.

“Adequate enforcement authority is also maintained by giving thecommissioner the continued authority to determine whether a filingis inadequate or unfairly discriminatory,” said the department. “Wewill be analyzing our rate filing process in light of this new lawto determine where added review efficiencies might berealized.”

Connecticut's Assembly passed the measure, Senate Bill 410, on a144-1 vote. The legislation provides flex-rating for personal linesinsurance with a 6 percent flex band and a three-year sunset.

It also includes provisions relating to uninsured/underinsuredmotorist coverage relating to requirements insurers may impose forsuch coverage to be accessed.

Kristina Baldwin, regional manager and counsel at the PropertyCasualty Insurers Association of America, said the bill is a stepto help consumers because “a flex-rating system allows insurers torespond to competitive market conditions and determine appropriaterate level changes. This system is beneficial to insuranceconsumers as prices are more stable.”

Flex-rating enables insurers to implement rate changes within apercentage band without approval from the regulator, but ensuresthat larger changes must still undergo regulatory review beforegoing into effect, she noted.

Under Connecticut's current prior-approval systems, all ratesand rating plans must be filed and approved before going intoeffect. According to PCI, these systems often make the insurancemarketplace less competitive than it could be if it operated undera more streamlined approach.

“On average, auto insurance premiums are 10 percent lower instates with flex rating or open competition than in states whichrequire prior approval of rates,” said Ms. Baldwin. “In addition,under flex rating, premiums are more stable because insurers aremore likely to contain rate changes to the flex band if possible,so as to avoid burdens associated with prior approval.”

Laura Kersey, assistant vice president for the Northeast Regionat the American Insurance Association, echoed Ms. Baldwin'scomments, saying the bill will allow insurers to quickly respond tomarket conditions and foster greater competition, thus benefitingconsumers.

She said Republican Gov. Rell is expected to sign the measureinto law.

When testimony was taken on the bill, AIA said flex-ratingshould free insurance department staff “to devote more time andresources to other issues, such as reviewing insurer solvency andinsurer policy form filings.”

“Flex-rating has achieved positive market expansion in stateswhere it has been enacted, such as Louisiana and South Carolina,”said AIA, noting that Alaska, Kentucky and Rhode Island have alsoadopted flex rating provisions.

The National Association of Mutual Insurance Companies said itsupported an earlier version of the legislation, which would haveenabled insurers to adjust rates within a 12 percent band.

NAMIC noted that at one point, lawmakers lowered the flex bandto 4 percent and proposed a two-year sunset, which NAMIC said wouldhave threatened the effectiveness of the measure. NAMIC said thecurrent measure was passed after lobbying efforts by its advocacypartner, the Insurance Association of Connecticut.

Although the governor is generally expected to sign the measure,a spokesman for Gov. Rell, David Dearborn, would say only that shehad not taken a position on the bill, “which will be reviewed indetail when it reaches the governor's desk.”

Article updated 9:27 a.m. May 3