Georgia Insurance Commissioner Ralph Hudgens is not running for re-election in 2018.

Does Georgia auto insurance rate law need fixing?

Candidates lining up to replace Georgia Insurance Commissioner Ralph Hudgens are vowing to change the state law that the incumbent blames for preventing his office from doing anything to slow auto insurance rate hikes.

Jim Beck, a longtime insurance agency staffer and leader of the Georgia Christian Coalition, announced his candidacy Tuesday, and like some of the other hopefuls, he says the 2008 law allowing companies to begin charging higher rates without state approval needs to go.

“The experiment as currently being implemented at the Department of Insurance is not working for Georgia and should be repealed in the 2018 legislative session,” Beck said.

Shane Mobley, a Republican who works in the health care industry, said, “I feel like what needs to happen every time they have a rate increase request is it needs to be run through the insurance commissioner’s office, and we need to analyze it.”

Hudgens announced in mid-July that he would not seek another term.

The candidates’ comments come a few weeks after The Atlanta Journal-Constitution reported that Georgia led the nation with the highest increase in personal auto insurance rates, according to an analysis by S&P Global Market Intelligence. And that’s nothing new: Georgia ranked either first or second nationally for increases in the three previous years, too.

Insurers cite many factors, including an increase in the number of cars on the road, accidents, traffic fatalities and the cost of fixing cars. They also cite an increase in distracted drivers, an issue the General Assembly plans to study. State Farm said that over the past five years, it paid out over $1 billion more in auto claims and expenses in Georgia than it took in.

But Hudgens also noted that under the 2008 state law that he supported while he served in the Georgia Senate, the insurance commissioner can do little to stop rate increases by companies.

After rates skyrocketed in the late 1980s, the General Assembly changed state law so that the state’s insurance commissioner had to approve increases proposed by companies. The industry hated the law, and its lobbyists at the Capitol fought to change it.

After more than a decade of trying, they succeeded in 2008 when then-House Insurance Chairman Tom Knox, R-Cumming, stuck language on an innocuous Senate bill returning Georgia to a “file and use” system in place in about 30 other states. Under the new law, companies could implement new rates and the insurance commissioner could merely review them to make sure they aren’t either “excessive or inadequate” to keep the company in business, and to make sure they aren’t discriminatory.

The definition of “excessive” in the 2008 law all but guarantees that if there are multiple companies selling insurance in the Georgia market it will be difficult, legally, to fight a big rate hike, Hudgens’ office said. So when Allstate, for instance, filed for a 25 percent rate hike last year, Hudgens said there was nothing his office could do, citing the law. More than 200 companies sell auto insurance in Georgia.

John Oxendine, who was the insurance commissioner when the law took effect, warned that it would lead to the kind of rate hikes Georgia is seeing today. Beck, who worked with Oxendine and lobbied for Nationwide Insurance in 2008, said he addressed a group of car insurers on the issues a few years after the law changed.

“I urged them then to avoid behaving like insurance companies ‘gone wild’ and raising rates too aggressively,” he said. “My caution was that they would risk a tremendous public backlash and possible repeal of the 2008 law.”

Mobley said his mother has been in the industry for decades, and he thinks it’s long past the point that the law needs to be changed back to give the state more say in reviewing rates.

“It definitely hasn’t worked. You have a bunch of publicly traded companies vying for big profits,” Mobley said. “I would keep an open mind and look at the requests fairly.”

Any attempt to change the law would likely meet fierce opposition in the General Assembly from both lawmakers and industry lobbyists.

When Hudgens talked to members of the House Insurance Committee about making some tweaks in the law earlier this year, the panel’s chairman, Richard Smith, said the state had a “free-market system” and that consumers were free to call around and find a new insurance company if they felt their current rates were too high.

Several lawmakers sell insurance for a living, and insurers are big donors to the campaigns of legislators.

And not all the candidates have come out for scrapping the law.

State Deputy Insurance Commissioner Jay Florence is running as a Republican against Beck and Mobley. His kickoff fundraiser was sponsored by Hudgens, a lobbyist for the insurance industry and insurance industry officials, among others.

Florence says if he’s elected, he would build a consensus among lawmakers to “tweak” the law to give the commissioner more power over rates.

“I think it makes sense to change the law so that if the rate increase is excessive, the department has the ability to roll them back,” Florence said.

That would require the law to be changed to set an actuarial standard for what “excessive” means, something Hudgens has also supported.

When asked how she would lower rates, Tomeka Kimbrough, a Democrat and insurance business owner, responded: “The insurance industry must keep up with demand and supply, which can cause premiums to increase. In most states, the insurance commissioner decides the rates, but in Georgia, the General Assembly decides the duties of the insurance commissioner.

“We as Georgians must do what’s legal and economically sounds regarding insurance rates,” she added. “Should the law change, then we could change the method in which rates are filed. If the law stays the same, we must look at how not having control over rates can affect the Georgia economy.”

Cindy Zeldin, a health care advocate running as a Democrat, is more direct. She said state consumers need a stronger supporter in Hudgens’ office, one who will make the process of buying insurance more transparent and raise questions about why, for instance, a driver’s credit score is used to help determine his or her insurance. And, she said, the 2008 law needs to go.

“We should never have given away the authority to scrutinize rate increases before they go into effect, and that prior approval authority should be restored,” she said. “I’ll work with the Legislature to bring it back.”

Support real journalism. Support local journalism. Subscribe to The Atlanta Journal-Constitution today. See offers.

Your subscription to the Atlanta Journal-Constitution funds in-depth reporting and investigations that keep you informed. Thank you for supporting real journalism.