OLR Report 2012-R-0227 describes the state law regulating homeowners' insurance policy rates.
State law (1) prohibits inadequate, excessive, or unfairly discriminatory homeowners' insurance rates and (2) requires property and casualty insurers to file with the insurance commissioner their rates, supplementary rate information, and any supporting information used for the rates (CGS §§ 38a-686 and 38a-688).
By law, a rate is inadequate if it is unreasonably low for the insurance provided and its continued use would endanger the insurer's solvency, destroy competition, or create a monopoly. Whether a rate is considered excessive depends on whether the existing homeowners' insurance market is competitive or noncompetitive. A rate in a competitive market is not excessive. A rate in a non-competitive market is excessive if it is unreasonably high for the insurance provided. The law does not define an unfairly discriminatory rate.
The level of the Insurance Department's oversight of rates depends on the status of the market. In a competitive market, insurers must file homeowners' insurance rates and supplementary rate information with the insurance commissioner but may use the rates without his approval (“file and use” system of rate regulation). The commissioner retains the power to approve rates before they take effect. In a non-competitive market, insurers must receive approval from the department before using the rates (prior rate approval). The commissioner may disapprove a rate filing if the insurer fails to comply with rating requirements whether the market is competitive or noncompetitive. The state's current market is competitive, according to the Insurance Department.
Irrespective of the market conditions, the law permits insurers, until July 1, 2013, to file and use new rates for homeowners' insurance without the Insurance Department's prior approval if the rates increase or decrease by no more than 6%. This is referred to as “flex rating.”
For more information, read the full report.
