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.”
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.
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, 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 8-10 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 e-mailing General Counsel Gordon Amini at Gordon.Amini@oid.ok.gov no later than May 17. The hearing notice is available here.
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.”