Louisiana Auto Premium Reduction Proof Of Flex-Band Effectiveness

BATON ROUGE, LA – State Farm Mutual Automobile Insurance Co.'s recent announcement that they will cut Louisiana auto insurance premiums by 2.1 percent in February is proof that the flex band law passed two years ago is effective.

"The flex band law, which permits insurers to adjust premiums up or down by 10 percent, is allowing State Farm to move quickly to provide Louisiana drivers with immediate reductions," said Greg LaCost, senior counsel and regional manager for the Property Casualty Insurers Association of America (PCI), which supported the legislation.

The 2003 law gives insurers the freedom to make timely adjustments – up or down – to their rates within a 10 percent band in a 12-month period without appearing before the Insurance Rating Commission. Before flex-band rating took effect, Louisiana utilized a prior-approval system, in which the rating commission approved all rate changes, resulting in many consumers and businesses left with fewer choices.

"When companies have the ability to base prices on risk – without fear of regulatory retribution and without excessive bureaucratic cost associated with price controls – competition improves and consumers benefit," LaCost said.

PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association. PCI members write $173.6 billion in annual premium, 39.1 percent of the nation's property/casualty insurance. Member companies write 49.1 percent of the U.S. automobile insurance market, 37.8 percent of the homeowners market, 31.8 percent of the commercial property and liability market, and 38.5 percent of the private workers compensation market.

Source: PCI