Committee updates insurance modeling rules, requires model filing while limiting direct exams of modeling firms

The Senate Finance Committee passed an amended House Bill 2174 on March 13 that changes how the state regulates companies that produce models insurers use to set rates. The bill renames advisory organizations as "modeling and data organizations," requires those organizations to file models with the Department of Financial Institutions (DiFi), and clarifies how DiFi reviews and approves models.

Industry witnesses, including Mark Osborne (RELX) and representatives of domestic insurers, said the change modernizes regulation and reduces redundant work: filing a model once allows DiFi to vet it before insurers use it, streamlining multiple rate filings. "This would allow the model to be prefiled," an industry representative said, adding that preclearance reduces repetitive review burdens.

Several senators expressed concern about limiting DiFi's authority to examine modeling firms directly because the department needs to understand vendors' practices to protect consumers and monitor rate impacts. Proponents said DiFi can still review a model in the filing process and can access model-related information through insurers when investigating consumer complaints; the bill leaves regulators able to disapprove a model or prevent insurers from using it.

An amendment shifted language to require (rather than permit) certain filings and clarified that the department regulates models and the use of models, not to eliminate oversight, but to avoid imposing costly market-conduct exams on modeling vendors whose work is a product rather than an insurer's market conduct.

The committee adopted the amendment and passed HB 2174 as amended.