Whether or not a risk is deregulated in a particular jurisdiction is not always clear, and that can lead to confusion for those responsible for filing commercial forms, rates and rules in an organization. When speed to market first came to the regulatory forefront, one approach taken by many states was to deregulate some, but not all, commercial products from review and approval. Other jurisdictions, decided they could either exempt all commercial products or simply all products designed to cover a particular type of exposure, for example kidnap and ransom, a coverage not written by many companies and for which there is a limited need in the marketplace.
States that decided to deregulate or to exempt all commercial products or specified commercial products from review and approval altogether may have determined that the market for those products was highly competitive. Or there may be some other reason, such as a lack of consumer complaints or any other indication of a problem. This type of exemption from filing law allows a regulator to focus its resources on market conduct, rather than rate/rule and form review. Examples of this approach can be found in Arkansas (see 23-67-206) and Connecticut (see Bulletin PC-63-01).
It is more common for states to decide that certain risks, generally “large commercial risks” or “industrial insureds” qualify to be deregulated from form and/or rate/rule review and approval as long as they meet one or more criteria. The criteria typically relate to the size and the sophistication of the risk. For example, Alaska requires that the risk have the following: a net worth of over $30 million; net revenues or sales of over $75 million; more than 300 employees per individual company or 800 per holding company aggregate; annual aggregate premiums of over $250,000 and requires that the risk procures its insurance through use of a risk manager, employed or retained by the firm. (See 3 AAC 29.515) If coverage is to be issued to a risk not meeting those criteria, the insurer must have followed normal filing procedures for any forms and/or rates issued.
When operating in a state that has any sort of deregulation in place, make sure that you pay attention to the details to avoid potential penalties.
Editor’s recommendation: Turn to AuthenticWeb for State Filing and NILS INsource for more information on commercial deregulation.
