YOU ASK:

What is the definition of Prior Approval States?

WE ANSWER:

Prior Approval States are states that require insurance companies to first file any premium rate changes with them and await approval on these rates before these can be applied to their products.

State regulators closely watch the rate changes of insurance companies that are licensed to operate in the state. There are a few remaining prior approval states, since most states have decided to go into an open competition system. Instead of the state insurance commission doing the act of regulating the premium rates, the open competition system contends that market forces will be the ones dictating the premium rates. This is because as there is market competition, an insurance company would try to offer attractive rates in order to generate sales.

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