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The Charleston Gazette
Mar 09, 2005
by Scott Finn
Bill would allow instant rate hikes for business insuranceHike premiums now, ask for permission later -- that's the deal insurance companies for businesses would receive under a bill being proposed by the state Insurance Commission.
Under the bill, insurance companies would no longer have to wait 60 days to see if the Insurance Commission approved their rate increases, changes in deductibles or exclusions for coverage.
Instead, they would receive approval of the rate increase or other changes the minute they file it. The Insurance Commissioner would have 30 days to object, or the changes would become permanent.
West Virginia is one of only 10 states with "prior approval" for commercial insurance, said Deputy Insurance Commissioner Bill Kenny. The other states operate under a "file and use" system, like what the bill proposes, he said.
"Essentially, this puts us in step with the vast majority of states," Kenny said. "It speeds up the process for companies to address the market."
Kenny said insurance companies would be more likely to do business in West Virginia under this new system. He also promised the Insurance Commission would still scrutinize rate increases and other changes to make sure they are fair.
The Insurance Commission can't have it both ways, said Lawrence Markey Jr., staff attorney for California-based Foundation for Taxpayer and Consumer Rights. Insurance companies like a file-and-use system because it makes it easier to increase profits, he said.
"This streamlines their ability to raise rates," Markey said. "Once the insurance company receives a rate increase, then it's harder for the government to come in and take it away."
The House Banking and Insurance Committee passed the bill last week. The committee's Insurance chairman, Delegate H.K. White, D-Mingo, said he asked House Judiciary Chairman Jon Amores, D-Kanawha, to hold the bill until they can determine if it would increase rates.
Last year, commercial insurance companies made 140 rate filings with the Insurance Commission, according to commission staff.
Kenny said small businesses would have an easier time finding insurance coverage under the bill. He said the number of businesses having to buy unregulated, surplus lines of insurance has increased because traditional insurers won't cover them.
"We're much better off to look at regulated companies," Kenny said.
The new law also would give more flexibility in how insurance companies write policies for businesses. For example, they would have an easier time raising or lowering deductibles, or writing exclusions that specify what the company won't cover.
Kenny said the Insurance Commission reduces or rejects "less than half" of the requests for rate increases.
Under the new system, it is possible a company could start charging a new rate or put in place a new deductible or exclusion, only to have the insurance commissioner decide after 30 days to change the rate or not allow the other changes.
If that happened, it would be up to the insurance commissioner to decide whether policyholders would be refunded the money they lost.
"If the insurance companies start gouging, then they're going to get rate rollbacks," Kenny said.
Markey said not to count on a rebate. His nonprofit challenges insurance rate increases in California, which has a file-and-use system. Insurance companies often argue that it would be cumbersome and expensive to send out rebate checks.
"They'll say the horse is out of the barn, and then they'll have a stronger negotiating position for what the rate should be," Markey said.
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