In Georgia every single vehicle must be insured at a state mandated minimum liability level. The legislation, SB 276, does absolutely nothing to change the Insurance Commissioner’s authority and obligation to pre-approve rates on the state mandated portion of insurance coverage, as is required under current law.

We agree with The Citizen’s concern that this legislation would not be a “free market” issue if the government removed state pricing controls for a product that is required to be purchased by consumers. However, that is not the case with this legislation.

As previously stated above, this bill continues to authorize and require the Insurance Commissioner to regulate rates for that required coverage, just as he does now. However, coverage that is voluntary and above the minimum will be subject to what is called “competitive rating” or a “file and use” system, which is used in 25 other states.

Insurance experts from Georgia State University testified that a competitive rating system is more beneficial to the consumer than prior approval. It allows hundreds of automobile insurers in the state to more effectively compete for consumers’ business, while giving consumers the promise of more choice.

As is the case with any product in a free market economy, businesses will compete to offer a better product at a better price when freed of preemptive, overbearing governmental price controls.

The reason insurers will not arbitrarily raise rates is that competition will not let them. That is the core of a free market economy. Even Clark Howard (Mr. Consumer Watchdog) said, “New Jersey finally got free market religion and it resulted in 75 percent of their drivers paying less.”]

He added that “while the state should play a role in making sure insurers live up to their commitments, in terms of pricing, that’s where the marketplace should reign supreme.”

Under this legislation, the Commissioner still has oversight of rates and can impose controls if he deems rates are excessive. This legislation just removes the anti-competitive bureaucratic red tape that requires prior approval by “Big Brother” before a private company can enter into a voluntary transaction with a private consumer.

In summary, under SB 276, Georgia will still regulate the price of the state-required liability coverage, but the free market will control the voluntary coverage, with the caveat that the Commissioner still has the ability to step in and regulate in the event he deems rates are excessive.

This legislation passed with overwhelming bipartisan support in both chambers (only 13 Nay votes of 236) because it strikes an effective balance between proper regulatory oversight and the core philosophical belief that the forces of the free market will provide enhanced competition which will benefit Georgia’s consumers.

Senator Ronnie Chance (R-Tyrone)

ronnie.chance@senate.ga.gov

Representative Matt Ramsey (R-Peachtree City)

matt.ramsey@house.ga.gov

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