TRENTON, N.J., November 4 – The state is proposing to change the way insurance companies file for limited rate changes on car insurance policies.

The proposal, in effect, would replace the standard prior approval filing, and replace it with a new one dealing with simple changes in base rates, territory relativities, and increased limit factors.

The proposal is outlined in PRN 2006-325, and public comment will be received up to December 1

Marshall McKnight, an Insurance Department spokesman, said the proposal calls for simple changes in base rates, territory relativities, and increased limit factors " but not the more complicated tier definitions, surcharges, insurance scoring models, and other criteria.

Present System

The spokesman said that, under the present system, the more complicated the issues, the more questions the department has to ask, making the process longer instead of more efficient.

It was explained that, originally, the term limited rate changes referred to the maximum rate impact allowed. Those maximums are seven percent of an overall policy cost, and up to 10 percent for each coverage allowed. Additionally, under the current limited rate change procedure, the department is given 60 days to act on a rate change request if it is under seven percent.

That process started two years ago.

McKnight said that insurers began to include additional changes in rating plans, such as tiers, insurance scoring, class plans, and other criteria, which blended into a net result of less than seven percent, but ended up, in some cases, increasing rates for individuals by more than 10 percent.

Proposed Changes

The new proposals would change this by restating and recodifying the overall impact of less than seven percent and a 10 percent maximum by coverage.

It was noted that, despite these caps, an individual territorial rate can exceed coverage cap, just as long as the net effects average less than seven percent overall, and less than 10 percent by coverage.

Another change proposed affects the time frames. If a filer includes a new formula or method for calculating its rate request, the time frame of 60 days could be suspended to give the department sufficient time to clarify issues with the new approach.

The social impact of the proposed changes, the department wrote, would make the rate process for limited rate changes more efficient for all insurers and continue to foster a more competitive market place for the state.

The statement concludes, The department believes that by creating a more competitive private passenger automobile insurance market, consumers are provided more choices at potentially lower rates when selecting their private passenger automobile insurer.