Oklahoma regulator declares state's earthquake insurance market 'noncompetitive'
Oklahoma's chief insurance regulator has declared the state's earthquake insurance market noncompetitive after some insurers have filed triple-digit rate increases over the past few years.
The order will change the way insurers file their rates with the Oklahoma Insurance Department.
State Insurance Commissioner John Doak made the ruling after a public hearing on the state's earthquake insurance market in May.
Before the ruling, insurers had filed rate increases of up to 300 percent for earthquake insurance policies, sometimes without explanation, Doak said.
"Consumer protection is the right thing to do at this particular moment at this unique time in Oklahoma history when we are trying to deal with this emerging issue," Doak said in an interview.
At the hearing in May, the Insurance Department released data that showed the total amount of earthquake premiums written in the state has nearly tripled from about $7 million in 2010 to $19 million in 2015.
At the same time, the number of companies writing earthquake insurance policies has declined. Four insurance companies control 55 percent of the Oklahoma earthquake insurance market, the agency said.
Several insurers have filed rate increases for earthquake policies without explanation, Doak said in a statement.
After last month's hearing, Doak found that a reasonable degree of competition does not exist in the market and that consumers have a limited ability to shop for a competitive price.
Because of the findings, Doak issued the order that requires property and casualty insurers to file their earthquake insurance rates before using them.
Under the Doak's new order, the insurers can institute a rate increase if the Insurance Department raises no objections to the increase, said Gordon Amini, general counsel of the department.
If the Insurance Department raises questions about a rate increase, it typically prompts an exchange of correspondence between insurance regulators and the company.
“Certainly, we immediately ask them to justify the change,” Amini said.
Before the order, insurance companies followed the “use and file” system that is required in a competitive market. Under the “use and file” system, an insurer can use any rate so long as it filed the rate with the Insurance Department within 30 days after implementation.
Some insurers have voiced concerns that the change will further reduce competition in the market.
Joe Woods, vice president of state government relations for the Property Casualty Insurers Association of America, said the process could make smaller insurers leave Oklahoma.
“Each file-and-use process will mean more regulator oversight of the products, and we think that is a negative for the market,” Woods said. “When you have a market that is marginally competitive the solution is not to put more regulations on the market, the solution is less regulation.”