Commercial Rate Filing Revisions Approved by Governor
The Governor has approved Senate Bill 2176 as passed in the 2010 legislative session. The bill addressed several high profile topics, including the process by which commercial property and casualty insurers may adjust their rates. The bill revises current rate submission and approval requirements for selected types of commercial insurance, including:
Excess or Umbrella
Surety and Fidelity
Boiler and Machinery
Errors and Omissions
Directors and Officers, Employment Practices, and Management Liability
Intellectual Property and Patent Infringement Liability
Advertising Injury and Internet Liability
Property Risks Rated Under Highly Protected Risks Plans
Other Categories Determined by the Office of Insurance Regulation if a Competitive Market Exists, the Additional Categories are Similar to Those Exempted, or Otherwise to Improve the OIR’s Efficiency
An insurer availing itself of the filing the new filing process would notify the OIR within 30 days of implementing a rate change. The notice will include the name of the insurer, the type or kind of insurance for which rates are being adjusted, the total written premium in the preceding year for the kind or type of insurance, and the statewide average percentage of the rate change. The OIR then could initiate a review to determine if the implemented rates are excessive, inadequate or unfairly discriminatory. The OIR in that case would use existing statutory standards relating to the reasonableness of rates, including standards relating to recognition of past and prospective expenses and losses, profits and contingencies, investment income, trend factors, and other factors bearing upon the frequency or severity of claims or on expenses.
A rating organization similarly may notify the OIR within 30 days following a rate change, with the OIR then being able to review the rating organization’s loss and exposure statistics to verify that the rates are not excessive, inadequate or unfairly discriminatory.
The bill contains a corresponding provision removing commercial automobile insurance covering 20 or more vehicles from current rating law requirements. Again, the rates cannot be excessive, inadequate or unfairly discriminatory, and would be filed within 30 days following implementation. The OIR then could review the rates using existing statutory standards relating to the reasonableness of rates, including standards relating to recognition of past and prospective expenses and losses, profits and contingencies, investment income, trend factors, and other factors bearing upon the frequency or severity of claims or on expenses. A similar provision applies to rates developed by rating organizations for commercial automobile insurance covering 20 or more vehicles.