Abstract
In this paper, the authors discuss Consent to Rate (CTR) laws. These laws, found in many states, allow insurers in a given marketplace to charge a rate that differs from the approved rate if the insured completes the appropriate documentation consenting to the rate change. As such, CTR laws effectively allow for the circumvention of strict rate regulation laws by providing a way for insurers in highly regulated marketplaces (e.g., homeowners or automobile) to charge higher rates than those promulgated or approved by state insurance regulators. The paper proceeds as follows. First, an overview of CTR laws and the impact on consumers. Next, a case study approach is used, using three neighboring states to provide detailed information on their rate regulation model and the extent of use of CTR law. Based on the experience of the three states, the authors find evidence that insurers leverage CTR laws to obtain rate increases when rates are suppressed by the rate approval process.
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