Establishes as a distinct territory for purposes of rating private passenger nonbusiness automobile insurance policies, a certain city with a population between 19,040 and 25,000 which is geographically contiguous to a city with a population between 292,648 and 350,000; provides that the superintendent may require insurers to adjust existing or establish new territory definitions based on such review.
TITLE OF BILL: An act to amend the insurance law, in relation to providing for a review of certain existing rating territory definitions for non-business automobile insurance policies
PURPOSE: To provide for a thorough review of private passenger auto insurance rating territory definitions and rate implications of such definitions, and to authorize the superintendent to require insurers to use adjusted or new territory definitions and rating factors.
SUMMARY OF PROVISIONS: Section one would require the superintendent of the state insurance department to conduct a thorough review of rating territory definitions in use in this state and the rate implications of such definitions for non-business private passenger automobile insurance. Based on the review, the superintendent may require insurers to adjust existing or establish new territory definitions and related rating factors. The superintendent shall first focus on the long recognized problems with the City of Lackawanna in conducting the review and requiring any insurers actions. The superintendent shall report to the legislature and governor on the conclusions of the review and any actions taken based on the findings.
Section two would authorize the superintendent to impose prior approval of private passenger auto territorial relativities and rating factors and to require revisions of such relativities and factors which have been put in effect under the flex rating law.
JUSTIFICATION: All private passenger automobile insurers group risks into geographic territories as a way to achieve a homogeneous group of insurers with similar loss experience for rating purposes. Traffic patterns and insurance claims experience are taken into account in setting the territorial boundaries. The rating territories in use today have remained largely unchanged for over three decades. Particularly in areas around territory borders, notable changes in economic conditions, population trends, traffic patterns and insurance claims experience, which are acute in some areas like the City of Lackawanna in the Buffalo area, lead many residents to question whether their rates are accurate or fair. For instance, the City of Lackawanna, which is grouped with the City of Buffalo for insurance rating purposes, has undergone a substantial decrease in heavy industry-related jobs and population -- losing 28,000 jobs and one-third of its population since 1987 -- and has seen decreases in traffic density and accidents. Yet auto insurance rates are now approximately 35% higher for Lackawanna residents than for its other surrounding communities such as Hamburg. The federal
General Accounting Office, in a 1980 study of automobile insurance rating concluded: "With few exceptions, State insurance departments have not assured the validity of rating territories despite the fact that in most cases the existing territorial boundaries were established long ago and by a process about which no one has much information." A complete review of the territorial rating system is long overdue. The department needs statutory authority to require insurers to make any adjustments to their territories and rating factors based on the findings of its review.
LEGISLATIVE HISTORY: 2001-02: S.883/A.1476 Passed Assembly in 2001 & 2002 2003-04: S.658/A.2654 No action 2005-06: S.5271/A.559 Referred to Insurance 2007-08: S.2628/A.4405 Passed Assembly 2009-10: S.1965/A.2238 Referred to Insurance
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: Immediately.
STATE OF NEW YORK ________________________________________________________________________ 3104--A 2011-2012 Regular Sessions IN SENATE February 8, 2011 ___________Introduced by Sens. KENNEDY, GALLIVAN -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance -- recommitted to the Committee on Insurance in accordance with Senate Rule 6, sec. 8 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the insurance law, in relation to providing for a review of certain existing rating territory definitions for non-business automobile insurance policies THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 2307 of the insurance law is amended by adding a new subsection (f) to read as follows: (F) (1) NOTWITHSTANDING ANY OTHER PROVISION OF LAW, WITH RESPECT TO NON-BUSINESS AUTOMOBILE INSURANCE POLICIES, THE SUPERINTENDENT SHALL UNDERTAKE A THOROUGH REVIEW OF RATING TERRITORY DEFINITIONS AND RATE IMPLICATIONS OF CURRENT TERRITORIAL DEFINITIONS IN USE IN THIS STATE, WITH PARTICULAR FOCUS ON CHANGING DEMOGRAPHICS, BORDERLINE ZIP CODES, TERRITORIAL GROUPINGS, AND ALTERNATIVE APPROACHES TO ACHIEVING HOMOGENE- ITY. (2) BASED ON SUCH REVIEW, THE SUPERINTENDENT MAY REQUIRE INSURERS TO ADJUST EXISTING OR ESTABLISH NEW TERRITORY DEFINITIONS AND TO USE SUCH ADJUSTED OR NEW TERRITORIES IN RELATION TO SUCH POLICIES. (3) WITH RESPECT TO SUCH REVIEW AND ANY REQUIREMENTS MADE PURSUANT TO THIS SECTION, THE SUPERINTENDENT SHALL FIRST FOCUS ON CITIES WITH A POPULATION OF MORE THAN NINETEEN THOUSAND FORTY BUT LESS THAN TWENTY-FIVE THOUSAND HAVING HAD A DECREASE IN TRAFFIC DENSITY AND ACCI- DENTS, WHICH ARE GEOGRAPHICALLY CONTIGUOUS WITH A CITY WITH A POPULATION OF MORE THAN TWO HUNDRED NINETY-TWO THOUSAND SIX HUNDRED FORTY-EIGHT BUT LESS THAN THREE HUNDRED FIFTY THOUSAND. (4) THE SUPERINTENDENT SHALL REPORT TO THE GOVERNOR AND THE LEGISLA- TURE ON SUCH REVIEW AND ACTIONS TAKEN PURSUANT TO THIS SUBSECTION.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD06774-02-2 S. 3104--A 2
S 2. The review required by section one of this act shall be completed by July first in the year next succeeding the year in which it shall have become law, and the report required by section one of this act shall be submitted no later than December thirty-first in the year next succeeding the year in which it shall have become law. S 3. This act shall take effect immediately.