S.C. Homeowners’ Flex Rating Bill Gets House Backing

The South Carolina House of Representatives has passed a personal lines modernization bill that will reportedly give consumers more choices of products and companies by enhancing the competitive nature of the market. The bill now returns to the Senate for consideration of House-passed amendments.

“We commend the House for passing S.B. 686, which allows insurers to adjust homeowners rates up or down by 7 percent without prior regulatory approval,” said Robert Herlong, vice president and regional manager for the Property Casualty Insurers Association of America (PCI). “Flex rating provides a reasonable plan that lessens regulatory burdens for both insurers and regulators and encourages insurers to enter the market without compromising consumer protection.”

Passage of the bill is reportedly another incremental step in South Carolina’s trend toward regulatory modernization. The state introduced flex rating for private passenger auto insurance in 1999, and has seen an increase in the number of insurers writing in the market, from 78 in 1996 to 165 in 2003.

This has reportedly resulted in more choices and more competitive rates for South Carolina consumers. In 2000, the state eliminated prior approval requirements for commercial policies with a threshold of $50,000 in premium, and removed the premium threshold in 2002. Today, only medical malpractice and credit-related insurance products require preliminary filing.

S.B. 686 includes a number of consumer protection provision, including:

· Limiting insurers to no more than two rate increases per year, with the second increase subject to prior approval;

· Requiring prior approval for rate changes outside the flex band.

“The flex-rating system of S.B. 686 should be considered an interim approach to broader reform,” said Herlong. “The bill will allow for a file and use type rating system if the Director finds there is a competitive market in the state. We only have to look at the commercial reforms to see that the file and use system was implemented gradually over several years. PCI believes that under the leadership of Insurance Director Ernie Csiszar, we will see even more regulatory modernization and a more competitive market in the future.”