The Georgia legislature has passed and sent Gov. Sonny Perdue a measure that changes the auto insurance rate setting process and makes other insurance law changes.

An insurance trade group said the bill, which allows file and use for private passenger auto rates above the mandated minimum liability limits, should improve market conditions.

“We feel positive about the potential that Gov. Perdue will sign it,” said Julie Pulliam, public affairs director of the American Insurance Association's southeast region. But, she noted, he has a lengthy period in which to act.

“He has not yet received it, and we don't know when that will happen,” Ms. Pulliam said. She said her organization will urge him to sign it.

The AIA said it constitutes a major improvement to current policy. The bill would still require prior approval for auto rates up to the minimum limits.

The bill also provides the consumer with options to choose which type, if any, uninsured or underinsured motorist coverage they wish. Under the bill, a consumer can either opt out of the system, choose the current version of uninsured motorist coverage, or choose to buy what is known as a “stackable” policy.

The bill also modifies two recent state Supreme Court decisions the industry considers adverse.

In one, Abrohams vs. Atlantic Mutual, the court found that under state law a liability umbrella policy that includes auto liability must include uninsured motorist coverage equal to the liability limits unless the uninsured motorist coverage is affirmatively rejected in writing.

The new bill clarifies the law to explicitly exclude uninsured motorist coverage from umbrella policies.

A second decision, Dees vs. Logan, stated that uninsured motorist coverage could not offset payments to the insured from any other source, such as workers' compensation or similar benefits. The new bill said such offsets of benefits are allowed.

“Both of these court decisions, if not addressed legislatively, would have been costly to policyholders in the form of higher rates,” said Ray Farmer, AIA assistant vice president, southeast region.

Another provision changes the rating mechanism for private passenger automobile insurance coverage by allowing competitive rating–file and use–to operate for voluntary insurance while retaining prior approval for the mandatory insurance required to operate a vehicle in the state.

“Market-oriented rating laws, like the file and use proposal, benefit consumers and insurers alike,” Mr. Farmer said. “A file and use rating law encourages greater competition than one that requires prior state approval,” he added.

Special Reports /

Georgia Legislature Approves Auto Rate Reform

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