N.Y. Legislature Passes Coastal/Flex Legislation

A comprehensive bill (A.11693/S.8624) that would reinstate flex rating for automobile insurance throughout the state was passed by both houses of the New York State Legislature on Tuesday, a move supported by the American Insurance Association (AIA). The bill would also address issues surrounding insurance for homeowners in New York's coastal areas.

“Reinstatement of flex rating for private passenger automobile insurance has been one of the insurance industry’s top priorities in New York over the last seven years,” said Gary Henning, AIA Northeast Region assistant vice president. “A return to a more flexible rating system will better allow competitive market forces to work, ultimately delivering better products and more choices to consumers.”

Flex rating for automobile insurance had previously been in effect in New York from 1995 to 2001. During that time, premiums were relatively stable and more carriers were writing automobile insurance, according to Henning.

Under the bill, carriers would be allowed unlimited flexes downward and two flexes upward annually, within a 5% rating band. Any amount greater than the five percent limit would still have to be approved by the Superintendent of Insurance.

“Flex rating provides insurers with a more streamlined rating system,” said Henning. “In other states it has helped to increase the number of insurance companies doing business in the state, while decreasing the number of consumers in the residual market. Most importantly, increased competition helps reduce costs to consumers. We commend the legislature for taking another positive step towards modernizing the New York State market.”

With regard to homeowners' insurance, the legislation would make the New York Property Insurance Underwriting Association (NYPIUA) permanent. Up until this legislation, the market of last resort for homeowners unable to get insurance in the private market had to be reauthorized periodically. “Making NYPIUA permanent will provide for greater stability in the residual market,” explained Henning.

The bill would also implement a program designed to attract more competitors to the state's homeowners' insurance market. In addition, NYPIUA would be allowed to offer a more expansive type of coverage, "broad form coverage," to homeowners throughout the state. “The provisions in the bill would also create an incentive plan for carriers to write more coverage in coastal areas," said Henning.

A special advisory panel on homeowners' insurance and catastrophe coverage would also be created under the bill. The advisory panel would be required to report back to the legislature by Nov. 30, 2009, and annually thereafter, on ways to better protect people and property living in the state's coastal areas, and on ways to improve the homeowners' insurance marketplace for both insurers and consumers.

The bill will now go to Governor Paterson's desk, and is expected to be signed.