Insurers Win in Conn. on Insurance Scoring, Flex Rating and 'Bad Faith'

Sean P. Carr
A.M. Best
March 13, 2009

HARTFORD, Conn., Mar 13, 2009 (A. M. Best via COMTEX) -- Property/casualty insurers are celebrating legislative victories in Connecticut on "bad faith," flex rating and credit-based insurance scoring.

The state General Assembly's Joint Committee on Insurance and Real Estate amended H.B. 6444, removing language that would have banned the use of credit-based insurance scoring in favor of language codifying its use with some restrictions, said Laura Kersey, assistant vice president, northeast region, for the American Insurance Association.

Cutting off the use of credit-based insurance scoring and limiting the use of geographic location would have resulted in lower-risk consumers subsidizing higher-risk consumers, said Paul Magaril, regional manager and counsel for the Property Casualty Insurers Association of America.

"To achieve the goal of pricing based on an individual’s risk of loss, insurers simply want to use the most accurate, statistically valid tools available and these tools have proven to be among the best predictors of loss," Magaril said in a statement.

The committee also backed H.B. 6280, which would extend Connecticut’s flex-rating law, set to expire July 1, for two years. This legislation would allow the state to continue to permit flex-rating for personal risk insurance rate filings. Currently, insurers may implement annual changes of plus or minus 6% in personal automobile and homeowners insurance rates without prior regulatory approval (BestWire, Feb. 18, 2009).

"This law is working well for consumers and should be allowed to continue producing positive results," Magaril said.

In another win for insurers, the committee voted down a "bad faith" bill that would have expanded the scope of the state's unfair practices law. The legislation would have lowered the standard for violations and allowed insureds or third-party claimants to sue insurance companies for both actual and punitive damages (BestWire, Feb. 4, 2009).

"Few measures would have been as costly to consumers or as damaging to the state’s insurance industry as S.B. 763," Magaril said. "Passage of this bill would have spurred unnecessary litigation and been a huge windfall for the state’s personal injury attorneys."

In 2007, the top five writers of private-passenger auto insurance in Connecticut, according to A.M. Best Co. state/line product information based on direct premiums written, were: Allstate Insurance Group, with a 13.3% market share; Berkshire Hathaway Insurance Group, 10.8%; Liberty Mutual Insurance Cos., 10.8%; Progressive Insurance Group, 8.7%; and Travelers Insurance Cos., 8.3%.

In 2007, the top five writers of homeowners multiperil in Connecticut were: Allstate Insurance Group, with a 12.3% market share; Travelers Insurance Cos., 12.0%; Chubb Group of Insurance Cos., 11.8%; Liberty Mutual Insurance Cos., 9.5%; and Hartford Insurance Group, with 6.1%.

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