Bill proposes more deregulation of commercial insurance

Last year, Florida lawmakers took a step toward deregulating commercial motor vehicle insurance; this year, some legislators hope to go even farther. A bill that passed out of the Senate Banking and Insurance Committee this week would allow insurance companies to offer a number of different commercial insurance products before the rates are approved by the Office of Insurance Regulation.

We can’t talk about approving rates without first discussing the process. Both personal lines and commercial insurance companies in Florida have complained that the rate-making process in the state is onerous. They have argued that the process contributes to insurers’ reluctance to do business here.

Florida law allows two different types of rate approvals. The “file and use” rule requires companies to submit rates to OIR for approval at least 90 days before selling policies at that rate. The rate must be approved by OIR prior to its use.

In contrast, the “use and file” rule allows a company to use a new rate without prior approval. The company must file the rate with the OIR within 30 days of its introduction. If the OIR finds the rate excessive, the insurer must refund the difference to policyholders.

The use and file rule garners the most criticism from insurers. They say that the OIR turns down rate hikes on such a regular basis, forcing the insurance companies to settle with policyholders, that the use and file rule is meaningless.

In our next post, we’ll discuss the proposed law and how opponents have responded to it.

Source: Insurance Journal, “Florida Senate Looking to Expand Commercial Deregulation,” Michael Adams, 02/08/11

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