If passed, the bill would significantly impact state insurance laws by prohibiting insurers from basing certain insurance rates on past loss experiences, both locally and outside of Hawaii. This change aims to foster a more accurate pricing model that reflects potential future losses, thereby potentially benefiting policyholders through more equitable rates. Additionally, the bill's introduction includes provisions for establishing criteria to ensure rates remain fair and non-discriminatory.
House Bill 2163, introduced in the 32nd Legislature of Hawaii in 2024, seeks to amend existing insurance regulations by redefining key aspects of rate-making, particularly focusing on how insurance rates are established. The bill proposes an alteration in the definition of 'prospective loss costs,' shifting the basis from historical aggregate losses to catastrophe modeling techniques. This update is aimed at making insurance rate assessments more predictive and relevant to current and foreseeable risks rather than being solely reliant on past data.
The introduction of HB2163 may encounter contention within the legislative framework, particularly regarding concerns from the insurance industry about the feasibility and reliability of utilizing catastrophe modeling over historical data. Advocates for the bill may argue that historical models do not adequately predict future risks, especially in light of increasing climate change impacts on natural disasters. Therefore, there may be a divide between those who support the modernization of insurance practices and those who are concerned about the implications this switch has for insurance pricing and stability.