BILL NUMBER: S583

SPONSOR: KENNEDY
 
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 auto-
mobile 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 insur-
ers 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 insur-
ance 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: traf-
fic patterns and insurance claims experience, which are acute in some
areas like the City of Lackawanna lead many residents to question wheth-
er their rates are accurate or fair. For instance, the City of Lackawan-
na, 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. The
federal General Accounting Office, in a 1980 study of automobile insur-
ance 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 find-
ings 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
2015-16: S.763 Referred to Insurance
2017-18: S.5014 Referred to Insurance

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
Immediately.