Provides for a review of rating territory definitions for non-business automobile insurance policies

1 Co-sponsor

• Patrick M. Gallivan

BILL NUMBER:S367

Title of bill

An act to amend the insurance law, in relation to providing for a review of certain existing rating territory definitions for non-business automobile insurance policies

Purpose

To provide for a thorough review of private passenger auto insurance rating territory definitions and rate implications of such definitions, and to authorize the Superintendent to require insurers to use adjusted or new territory definitions and rating factors.

Summary of provisions

Section one would require the superintendent of the state insurance department to conduct a thorough review of rating territory definitions in Use in this state and the rate implications of such definitions for non-business private passenger automobile insurance. Based on the review, the superintendent may require insurers to adjust existing or establish new territory definitions and related rating factors. The superintendent shall first focus on the long recognized problems with the City of Lackawanna in conducting the review and requiring any insurers actions. The superintendent shall report to the legislature and governor on the conclusions of the review and any actions taken based on the findings.

Section two would authorize the superintendent to impose prior approval of private passenger auto territorial relativities and rating factors and to require revisions of such relativities and factors which have been put in effect under the flex rating law.

Justification

All private passenger automobile insurers group risks into geographic territories as a way to achieve a homogeneous group of insurers with similar loss experience for rating purposes. Traffic patterns and insurance claims experience are taken into account in setting the territorial boundaries. The rating territories in use today have remained largely unchanged for over three decades. Particularly in areas around territory borders notable changes in economic conditions, population trends: traffic patterns and insurance claims experience, which are acute In some areas like the City of Lackawanna in the Buffalo area, lead many residents to question whether their rates are accurate or fair. For instance, the City of Lackawanna, which is grouped with the City of Buffalo for insurance rating purposes, has undergone a substantial decrease in heavy industry-related jobs and population -- losing 28,000 decreases in traffic density and accidents. Yet auto insurance rates are now approximately 35% higher for Lackawanna residents than for its other surrounding communities such as Hamburg. The federal General Accounting Office, in a 1980 study of automobile insurance rating concluded: "With few exceptions, State insurance departments have not assured the validity of rating territories despite the fact that in most cases the existing territorial boundaries were established long ago and by a process about which no one has much information." A complete review of the territorial rating system is

long overdue. The department needs statutory authority to require insurers to make any adjustments to their territories and rating factors based on the findings of its review.

Legislative history

2001-02: S.883/A.1476 Passed Assembly in 2001 & 2002. 2003-04: S.658/A.2654 No action 2005-06: S.5271/A.559 Referred to Insurance 2007-08: S.2628/A.4405 Passed Assembly 2009-10: S.1965/A.2238 Referred to Insurance 2011-12: S.3104 Referred to Insurance

Fiscal implications

None.

Effective date

Immediately.