New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 161 - Flexible-rating System; Rating Plans; Tort Reform Refiling Requirements › Section 161.0 - Preamble

Current through Register Vol. 46, No. 28, July 10, 2024
(a) On June 28,
				  1986, omnibus legislation embodied in chapters 220 and 221 of the Laws of 1986
				  was signed into law, in response to affordability and availability problems
				  experienced in New York and the rest of the nation in connection with
				  commercial risk insurance, professional liability insurance, and public entity
				  insurance, as these terms are added and defined in section 107  of the Insurance Law. Companion
				  legislation, containing tort reform measures in addition to those in the
				  omnibus legislation, was signed into law on July 30, 1986, becoming chapter 682
				  of the Laws of 1986.
(b) Among the
				  components of this omnibus legislation is a significant change, a
				  flexible-rating system ("flex-rating"), pursuant to new section 2344  of the Insurance Law, amended in part
				  by chapter 235 of the Laws of 1989, in regard to rate changes for
				  property/casualty commercial insurance markets not subject to prior approval.
				  Since January 1, 1970, most commercial insurance markets have been subject to a
				  competitive rating system, which permitted insurers on a file and use basis to
				  revise rates upward or downward without prior approval of the Superintendent of
				  Insurance. This competitive rating system relied almost exclusively upon
				  interaction among market forces, tending to produce wide cyclical swings in
				  commercial insurance rates.
(c) In
				  order to promote stability and predictability of insurance rate changes in
				  problem markets involving vital coverages and enhance consumer protection, the
				  new laws institute the flex-rating system, a novel blending of prior approval
				  and competitive rating principles. Flex-rating allows periodic rate changes
				  within applicable flexibility bands ("flex-bands") on a file-and-use basis and,
				  unless markets are specifically exempted by the superintendent from
				  flex-rating, requires the superintendent's approval in order to implement rate
				  changes beyond such bands. Exempt markets remain subject to file and
				  use.
(d) Section 2344  of the Insurance Law requires that
				  regulations setting forth flex-rating exemptions, standards and procedures be
				  promulgated. In addition, section 2344 provides that insurer rating plans,
				  pursuant to which rates are modified in the development of premiums for
				  individual risks, shall be approved by the superintendent compatible with
				  criteria established by regulation. These rating plan standards will encourage
				  sound underwriting, maximize risk management and permit recognition in an
				  equitable manner among insureds of expected differences in loss and expense
				  characteristics in accordance with reasonable rating plans.
(e) Section 2344 also requires that, no later
				  than 90 days after the effective date of the omnibus legislation, viz., on or
				  before September 26, 1986, rates for commercial risk, professional liability
				  and public entity insurance markets not exempted from flex-rating must be
				  refiled by affected insurers, to reflect the likely cost-reductive effects
				  reasonably attributable to the Civil Practice Law and Rules, Court of Claims
				  Act, and Not-for-Profit Corporation Law amendments that are also integral parts
				  of the omnibus and companion legislation.