A flex rating law is

A flex rating law is

• A. Prior approval is required for all rate changes
• B. Rates are filed and reviewed after changes
• C. Prior approval is required only if the new rates exceed a specified percentage above or below the previously filed rates
• D. There are no rate changes allowed

Answer: (C)

Flex rating law allows insurers to adjust rates quickly within a defined range around the rates already on file. The key idea is a corridor: changes that stay within this corridor can be implemented without prior approval, while larger moves beyond the corridor must be filed and approved before use. This structure lets rates respond to current experience without giving up regulatory oversight for substantial changes. For example, if the corridor is set at plus or minus 15%, a 12% increase can take effect without prior approval, but a 20% increase would require filing and approval. This differs from systems that require prior approval for all changes, or that file-and-use any adjustment after the fact, or that prohibit changes altogether.

Flex rating law allows insurers to adjust rates quickly within a defined range around the rates already on file. The key idea is a corridor: changes that stay within this corridor can be implemented without prior approval, while larger moves beyond the corridor must be filed and approved before use. This structure lets rates respond to current experience without giving up regulatory oversight for substantial changes. For example, if the corridor is set at plus or minus 15%, a 12% increase can take effect without prior approval, but a 20% increase would require filing and approval. This differs from systems that require prior approval for all changes, or that file-and-use any adjustment after the fact, or that prohibit changes altogether.