News Release from Oklahoma Insurance Department
OKLAHOMA CITY – Oklahoma Insurance Commissioner John D. Doak has ordered a public hearing to investigate a rise in earthquake insurance rates. The May 24 hearing will include data gathered by the Oklahoma Insurance Department as well as comments from insurers and citizens.
“This is a proactive move to protect consumers,” said Doak. “We’ve seen some rate increase filings up to 100 percent come through the office and we want to make sure we have a reasonably competitive market. There needs to be a valid financial basis for any rate increase and healthy competition that benefits consumers.”
State Rating Laws
Under state law, property and casualty rates adhere to the “use and file” system. Under the “use and file” system, insurers may implement a rate increase then notify the Oklahoma Insurance Department after the fact. However, if the line of business is not competitive the rating laws revert to a “prior approval” system. Under a “prior approval” system, rates must be filed and approved before they can be used.
Concerns About Competitiveness
The purpose of the hearing is to determine whether there is a reasonable degree of competition in the Oklahoma earthquake insurance market. Commissioner Doak has concerns about the competitiveness of earthquake insurance because:
- Recent filings have not substantiated the need for increased rates.
- The prevalence of multi-line discounts makes it difficult for a consumer to switch carriers to get a lower price or a lower deductible on earthquake insurance.
- 70 percent of earthquake insurance policies in Oklahoma are sold by just a few companies.
During the hearing, Commissioner Doak will consider:
- The number of insurers actively writing coverage
- Market share information
- Economic barriers that could prevent new carriers from entering the market
- Market concentration
- Whether long-term profitability for insurers in the market is reasonable
- The relationship between insurers’ costs and revenue
The hearing is scheduled for May 24 from 8:00 a.m. to 10:00 a.m. at the Oklahoma Insurance Department, 3625 NW 56th St., Suite 100, Oklahoma City. Any person who wishes to be heard must notify the Department in advance by emailing General Counsel Gordon Amini at Gordon.Amini@oid.ok.gov no later than May 17. The hearing notice is available here.
Comments will be strictly limited to the issues of competition and pricing in the earthquake insurance market. The hearing is not a forum to discuss complaints about claim denials or manmade causes of earthquakes. There is a limited time for public comment. If some citizens do not get a chance to speak, they will be asked to provide a written testimony.
OID Gathering Claims Data
The Oklahoma Insurance Department is in the process of collecting earthquake claims data from 2010-present. This will allow the Department to analyze payments and ensure fair claims handling is taking place.
“I am responsible for making sure consumers are protected and that insurers are financially solvent,” said Doak. “Gathering this data helps me accomplish both goals.”
Outreach Events Scheduled
The Oklahoma Insurance Department is hosting a series of outreach events on earthquake insurance beginning May 3. Consumers will be able to meet one-on-one with insurance experts. Those with specific questions should bring their earthquake insurance policy. The full list of events can be found here.