New Push For Rate Deregulation

While just a discussion draft at this point, the SMART Act allows a seven percent flex band in the first year and 12 percent band in the second year. After the second year, no state would be permitted to "require the approval, establishment or prior review of any rate charged for an insurance policy by any insurers."

Industry representatives said in a discussion at an NAIC session and in later interviews that Congress' move was a step in the right direction, but noted that the SMART Act, or the federal standards process, was a long way from resulting in actual legislation, whose final form will in all likelihood differ from the current discussion draft.

That is why the industry representatives at the NAIC meeting said they are hoping to spur the Kansas City, Mo.-based group to push the states to move forward on personal lines rate deregulation either in the form of backing a model rating law produced by the National Conference of Insurance Legislators or the creation of its own such document.

"There is no need for the NAIC to reinvent the wheel and develop a new personal lines model legislation when state legislators have already developed such model legislation," said Robert Zeman, senior vice president for the Property Casualty Insurers Association of America.

But the effort to push the NCOIL bill was somewhat stymied at the NAIC meeting this time around by the leadership vacuum there since the president and vice president resigned last month. Former president Ernst Csiszar left to take a job with industry, and former vice president Jim Poolman said he wanted more time to spend with his family.

Yesterday the Operational Efficiencies Work Group put off any action that would start the ball rolling on adopting some sort of personal lines deregulation bill because regulatory staff did not want to take any such action without the blessing of any of the states' commissioners?all of whom were at the plenary session that was busy electing new officers for the next three months.

The NAIC has already developed a commercial lines deregulation model regulation. And regulators appeared to be at least receptive to personal lines deregulation before the Sept. 11 attacks led to a sharp spike in commercial rates and a general wariness on the part of regulators to take any deregulatory steps.

Judging from the vociferous reaction of the consumer groups to the SMART Act with its tentative steps toward rate deregulation, any widespread acceptance in the states will not come without quite a fight.

J. Robert Hunter, former Texas insurance commissioner, who now heads the Consumer Federation of America insurance section, said the SMART Act would leave "millions of consumers vulnerable to price gouging, as well as abusive and discriminatory insurance classification practices."