Glossary

Prior approval

A rate regulation system in which insurers must get the state regulator's approval before using new rates or rating rules.

Also called: prior approval rating law, prior approval state

Prior approval is a form of rate regulation in which an insurer must file proposed rates, with the data supporting them, at the state insurance department and get approval before charging them. It is the strictest of the common systems. Others include file-and-use, where rates can take effect once filed and are reviewed afterward, and use-and-file, where rates are filed within a set time after they take effect.

Under prior approval, regulators check that rates are not excessive, inadequate or unfairly discriminatory. They may approve the requested change, approve a smaller one, or reject it, and many states treat a filing as approved if the regulator does not act within a set period. California's system, created by proposition 103, is the best-known example. A rate filing there is deemed approved 60 days after public notice unless a hearing is held, consumers can request one, and the commissioner must hold one on a timely request when a personal lines increase exceeds 7%.

Supporters say prior approval protects consumers from unjustified increases. Critics say that when approved rates lag rising claim costs, insurers may stop writing new policies. Either way, the system your state uses affects how quickly prices respond to change. See how car insurance rate approval works.

Last reviewed October 4, 2026

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Related terms

Rate filing The package of proposed rates, rating rules and supporting data an insurer submits to a state regulator when it wants to change prices. File-and-use A rate-regulation system in which insurers can start charging new rates once they are filed with the state, without waiting for advance approval. Proposition 103 The 1988 California ballot measure that requires approval of auto rates before use, mandates a Good Driver Discount and made the commissioner elected. State department of insurance The state agency that licenses insurers and agents, reviews rates and policy forms, monitors solvency and handles consumer complaints. Insurance rate The price per unit of coverage an insurer files with the state, which rating factors then adjust to produce your individual premium.

Related guides

California car insurance: costs, Prop 103 and the 2025 minimums How Proposition 103 shapes California car insurance prices, what the 30/60/15 minimums since 2025 mean, and where California ranks on cost. California Proposition 103 explained What California's 1988 Prop 103 did: the 20% rollback, prior approval of rates, the Good Driver Discount, ranked rating factors and paid consumer intervenors. How car insurance rate approval works How states review car insurance rates: prior approval, file-and-use, use-and-file and flex rating, what regulators check, and how to follow a filing yourself. Loss ratios and rate filings: how insurers justify an increase How insurers use loss ratios, expense ratios and trend data to justify a rate change, what regulators check, and how to read a filing yourself. Michigan's no-fault reform explained What Michigan's 2019 auto insurance law changed: PIP choice levels, a Medicare-based medical fee schedule, a smaller MCCA fee and limits on rating factors. What drives car insurance costs in New York New York's $50,000 no-fault benefit, city density, fraud and high liability losses make it a top-three state for cost. What the 2026 reforms change.