A carrier's trade group representative said his organization is hopeful of pushing through a measure to change New York's insurance rate regulation structure to a market-based system despite tough Assembly opposition.
The proposal, circulated for comment by the Albany-based New York Insurance Association, would establish a file and use system in the state for both commercial and personal lines.
Bernard Bourdeau, president of NYIA, acknowledged that the proposal will have to overcome significant hurdles, saying that "in the past, the chairman of the Assembly insurance committee [Assemblyman Pete Grannis, D-Manhattan] has said he opposes competitive market-based pricing."
However, Mr. Bourdeau added, "I think there are those in the Assembly that will support this proposal." He also argued that "the burden of proof falls on those who favor government price controls" to show that they work to protect consumers and keep prices lower.
The proposal would allow insurance companies in competitive markets to use rate and policy forms once they have been filed with the states.
"This will allow insurers to respond quickly to consumer demand for new products and changing market conditions," Mr. Bourdeau said, adding that the proposal would also include consumer safeguards.
"If a particular insurance market is found to be non-competitive by objective criteria, rates and policy forms will be subject to prior approval by the regulator," he said.
Mr. Bourdeau said that NYIA's draft legislation calls for using the same objective criteria for determining if a market is non-competitive that the Federal Trade Commission and the U.S. Justice Department use in evaluating mergers for anti-trust purposes.
Known as the Herfindahl index, the criteria is used to measure market concentration for different areas of commerce. Under the NYIA proposal, the state would apply this measurement of market concentration to the rate and policy form review for each property-casualty insurance market.
Where the market is found to be competitive, insurers would operate under the file and use system, while the state could establish a "flex rating" system allowing file and use within certain pricing bands for those markets determined to be only moderately competitive.
If a market is found to be "non-competitive" under the index, the department would be required to impose prior approval or rates and forms.
"In this way, the measure allows for insurers to respond quickly to consumer demands and to loss costs in competitive environments while ensuring protections to consumers when the market is not competitive," said Mr. Bourdeau.
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