Released: March 9, 2005
Commissioner of Insurance Robert Wooley says information provided to a joint meeting
of the Louisiana Senate and House Insurance Committees today shows the positive
results of flexible insurance rating, including more than $38 million in savings
in the form of rate decreases for consumers.
Flexible rating, or Flex Band, was approved during the 2003 Regular Legislative
Session and became effective January 1, 2004. It applies to all property and casualty
(P&C) lines of insurance. The Legislature approved Flex Band after recognizing
the need for insurance regulatory reform and for insurers to be able to adjust their
rates in order to timely respond to current market conditions.
Flexible rating allows insurers to amend rates as many times as necessary in a 12-month
period within the 10% to +10% flex band. The Louisiana Insurance Rating Commission
(LIRC) continues to hear rate requests in excess of 10%, or those considered to
be not actuarially jus tified by the Department.
Commissioner Wooley says the data shows companies are not asking for the maximum
10% rate increase under Flex and the filings made under Flex are not being automatically
"rubber stamped" by the Department, as some opponents of the measure feared.
The Commissioner also states that the rate reductions seen under Flex are significant
because such large decreases have not been requested in recent years under the LIRC
system. Wooley attributes the rate decreases to competition in rate levels amongst
companies. In 2002, the LIRC approved $1,973,984 in rate decreases. That number
increased to $2,304,474 in 2003.
One of the most important goals of flexible rating was to promote a free market
system by encouraging a competitive market, thus improving the availability of property
and casualty insurance products.
Another concern of some with the passage of Flex Band was whether the system would
cause too much confusion with the general public and an increase in consumer inquiries
to the Department of Insurance. Department data shows that in 2003, the Department's
Property and Casualty Consumer Affairs Division received 2,454 consumer inquiries.
In 2004, the staff saw a 17% drop from the previous year, with 2,033 inquiries.