Kansas Gov. Signs Rate Modernization Bill

The Governor of Kansas, Kathleen Sebelius (D), today signed into law the rate modernization bill (HB 2689) for personal lines of insurance, according to the American Insurance Association (AIA). Flex band rating will foster competition in both the homeowners and auto insurance markets, offer more choices for consumers, and positively impact the economy of Kansas.

“We thank Commissioner Praeger and the Legislature for sending this important bill to Governor Sebelius and applaud the Governor for signing it into law. HB 2689 provides insurers with some much needed flexibility that will not only help restore a healthy, competitive insurance market in Kansas, but still provides the Insurance Commissioner with regulatory oversight of insurance rates,” said John Marlow, AIA assistant vice president, Southwest Region. “The system has worked well in other states, and would substantially improve the insurance rating system and promote competition in the Kansas insurance market.”

Flex band rating systems have been used in states like Louisiana and South Carolina to provide insurers with a more streamlined rating system, resulting in a significant increase in the number of insurers doing business in the state.

“These states have since moved to a full file-and-use rating system because of the significant impact the incremental step flex band rating had on the overall insurance marketplace in restoring competition in the market,” continued Marlow. “We are pleased the Governor saw the wisdom of making this important first step.”

Flex band rating allows insurers to file rate increases/decreases less than 12% with the actuarial staff of the Kansas Insurance Department (KID). The KID still has the power of review and approval if the insurer’s rate is actuarially justified. Only actuarially justified rates may be approved. This allows smaller rate filings to be regulated through a streamlined actuarial administrative process. Insurance Commissioner Sandy Praeger wrote a letter in support of this bill during the legislative session.