New York Governor David Paterson has signed into law a bill that brings flex rating for auto insurance back to the state and makes permanent the state's homeowners insurer of last resort.

The bill was sponsored by Senate Insurance Committee Chairman James Seward, R-Chenango, and Assembly Insurance Committee Chairman Joe Morelle, D-Irondequoit.

With respect to flex rating, the bill would allow carriers to adjust auto insurance rates within a 5 percent flex band without approval from the state's superintendent of insurance. The insurance superintendent can still reject rates if he finds they are not justified.

New York previously had a flex rating system in place, but it expired in 2001. The state then switched to a prior approval system.

The American Insurance Association (AIA) noted that the flex rating provision will not take effect in New York until Jan. 1, 2009.

The bill also makes permanent the New York Property Insurance Underwriting Association (NYPIUA), the state's insurer of last resort for homeowners, which provides much of the coverage for properties located on the coast. This provision is effective immediately.

The bill also authorizes NYPIUA to write broader coverage, and it calls for the program to establish incentives to encourage insurers to write wraparound policies. Until now NYPIUA has lacked permanent status and frequently has seen its operating legislation lapse before a belated renewal, causing problems for homeowners in the interim.

Gary Henning, AIA Northeast Region assistant vice president, said in a statement, "AIA commends Senator Jim Seward and Assemblyman Joe Morelle for introducing, and Governor Paterson for signing, this important piece of legislation. Increasing the availability of homeowners' insurance along the coast and encouraging greater competition in the private passenger auto insurance market will ultimately provide better products and more choices for New York State consumers."

Paul Magaril, regional manager and counsel for the Property Casualty Insurers Association of America (PCI), said, "Flex rating will create a more competitive insurance market in New York and provide consumers the advantages of lower rate adjustments and even rate decreases. This is an example of the governor's commitment to modernizing New York's insurance regulatory environment."

Ellen Melchionni, president of the New York Insurance Association (NYIA), said she considered the bill "a major victory for New York."

She also noted that New York previously had a 7 percent flex band rather than the 5 percent band passed today.

But, she said, this bill is a "step in the right direction," and she commended Sen. Seward and Assemblyman Morelle for working to pass the legislation.

Regarding NYPIUA, Ms. Melchionni noted that coverage has lapsed in the past when the program was not reauthorized quickly enough by the Legislature. Making NYPIUA permanent, she said, solves this problem.