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Rate Capping, Part 1

May 1, 2012

Insurance rate filingsRate stability rules, also known as “rate capping” or “transition rating” rules, have become increasingly popular in recent years primarily due to advanced predictive modeling methods.   When an insurer implements revised rating plans that utilize the output from those sophisticated methods, it can produce significant premium changes for its book of business.  Similar disruptions may also occur when a book of business is moved from one insurer to another.  To mitigate the impact on policyholders, insurers often propose rating rules or formulas that reduce the magnitude of the premium changes for certain policyholders.

In order to ensure that all policyholders in Washington are treated fairly and equitably by insurers’ rate stability rules, the Office of the Insurance Commissioner has proposed a new rule that prescribes standards by which to evaluate and approve or disapprove them.  The newly proposed rule, WAC 284-24-130, applies only to personal lines of property and casualty insurance.

Proposed Rule Making Order: http://insurance.wa.gov/laws_regs/documents/2011-17102.pdf

WA OIC online comment form: http://insurance.wa.gov/laws_regs/commentform.shtml

 

Check back for info about the public hearing held at the Washington Insurance Commissioner’s Office.

 

Article by: Jim Antush,  Actuarial Services Consultant

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