BILL NUMBER:S763

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 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
2011-12: S.3104 Referred to Insurance
2013-14: S.367 Referred to Insurance

FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:

Immediately.