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A new Colorado regulation is hanging over the heads of Health and Automobile Insurers-and we call it the “Fair Accountable Insurance Rates Act,” also known as the FAIR Act.

This new Act claims to provide easy access to health and automobile insurance coverage for all Coloradans and create new reporting requirements for the insurance companies.

Authored by local Democrats, Rep. Morgan Carroll (Aurora) and Sen. Paula Sandoval (Denver), and approved and signed by Governor Bill Ritter on June 5, 2008, the Act promises what appears to be a good thing…right?

Colorado rates are said to be the 7th most expensive in the country, and the increasing rates combined with the declining coverage surely sparked this legislative change, according to Rep. Carroll.

After much thought, the general assembly has agreed that insurance rates should not be excessive, inadequate, or unfairly discriminatory. In order to achieve this goal, certain insurance rates will now be subject to pre-approval, based on established benefit ratio standards, by the commissioner of insurance.

In an effort to provide accessible and affordable health and automobile coverage, the Act requires each insurance carrier to file with the commissioner of insurance a detailed description of its rating and renewal practices, and such information to be public when filed.

The Act also requires each insurance carrier to file annually with the commissioner the number of lives insured in the previous year, as well as requires requested rate filing increases for health and automobile insurance to be submitted to the commissioner of insurance at least 60 days prior to the proposed implementation date.

Although the Act allows the rates to be implemented if the commissioner of insurance does not approve the rates within the 60-day period, it also authorizes the commissioner to disapprove rates upon later review.

The commissioner of insurance is required to disapprove rates if certain conditions apply and insurance carriers must report to the division of insurance if specific reasons apply to an increase in rates for health and automobile insurance. The division of insurance is required to track such information and make it public.

Also, the Act prohibits persons from willfully withholding information that will affect rates or premiums charged or from giving false or misleading information and violation will result in penalty. And lastly, the Act requires that use of credit information for underwriting purposes be open to the public.

Before the Act was signed, Colorado law did not require insurance companies to justify their rate increase before it took effect.

Niki Skaggs
Law Clerk
J.D. Candidate 2009
University of Denver

Coming Up Next: The Fair Act – How Does It Effect Consumers?

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