R590. Insurance, Administration.R590-121. Rate Modification Plan Rule.
R590-121-1. Authority.
This rule is promulgated by the commissioner pursuant to Sections 31A-2-201, 31A-2-203, and 31A-19a-203.
R590-121-2. Purpose and Scope.
(1) The purpose of this rule is to establish criteria for:
(a) modifying manual rates through insurer rate modification plans; and
(b) using rate modification plans to determine whether rates meet the standards under Section 31A-19a-201.
(2) This rule applies to:
(a) a property and casualty insurer;
(b) a rate service organization required to file rates and supplementary information under Section 31A-19a-203;
(c) a commercial line of insurance, whether monoline or packaged;
(d) workers' compensation insurance; and
(e) employers' liability insurance.
(3) This rule does not apply to:
(a) professional liability insurance;
(b) inland marine risks, which, by general custom, are not written according to manual rules or rating plans; and
(c) consent-to-rate risks submitted under Subsection 31A-19a-203(6).
R590-121-3. Definitions.
Terms used in this rule are defined in Sections 31A-1-301 and 31A-19a-102. Additional terms are defined as follows:
(1) "Experience rating plan" means a rating plan or system where a manual rate for insurance is adjusted or modified based on the past loss experience of the insured.
(2) "Manual rate" means a rate, designed to apply on a generic basis to similar risks within the same market, filed with the department by an insurer or rate service organization and made part of the rating manual used by an insurer or rate service organization.
(3)(a) "Rate modification plan" means a rating plan or procedure that lists various risk characteristics or conditions and a range of modification factors that may be applied for those characteristics or conditions to the manual rate of a particular insurance risk, the effect of which is to increase (debit) or decrease (credit) the manual rate.
(b) Rate modification plans include plans commonly called Schedule Rating Plans and Individual Risk Premium Modification Plans.
R590-121-4. Rate Modification Justification.
(1) A rate modification plan, justified according to the standards herein, is permitted.
(2) The commissioner determined that using an unjustified rate modification plan is unreasonable, is not based on reasonable criteria, and is unfairly discriminatory.
(3) The use of an unjustified rate modification plan in the rating of commercial property and casualty insurance risks located in Utah is prohibited.
(4) The following elements shall be considered in determining whether a rate modification plan is justified:
(a)(i) A rate modification plan must limit its application to maximum debits or credits of 25%.
(ii) A modification generated by loss experience or company expense experience is not subject to this limitation.
(b) A rate modification plan must be based only on rating characteristics not already reflected in the manual rates, and the plan must clearly indicate the objective criteria to be used.
(c) A rate modification plan designed to be applied simultaneously to property, liability, or vehicle coverage shall contain reasonable factors that give appropriate recognition to the distinct exposures involved in the coverages.
(d) A rate modification plan must provide that when a risk is rated above the manual rate (debited), an insured, applicant, or their agent or broker, upon request, will be advised by the insurer of the factors that resulted in the adverse rating so that the insured or applicant will be fairly apprised of any corrective action that might be appropriate with respect to the insurance risk.
(e)(i) An insurer's filing of changes or revisions to a rate modification plan it previously filed may not result in the elimination of a debit or credit established under the prior plan for a risk currently insured by the insurer.
(ii) A change in an established debit or credit for a risk currently insured must be based on a change in the risk and not on a change in the provisions of a rate modification plan.
(f)(i) Any initial and succeeding filing of a rate modification plan must be submitted according to established filing procedures and must include a complete copy of the plan, even if only minor changes are being made.
(ii) The filing must also include a letter or filing memorandum from the insurer that provides:
(A) a comparison of the proposed changes to any existing plan as currently filed;
(B) the reasons and justification for the proposed changes; and
(C) a statement of the estimated number of Utah insureds affected by the changes and the estimated Utah premium dollar impact of the changes.
(5) The following elements shall be considered in determining whether the application of a rate modification plan is justified:
(a) A rate modification plan must be used to acknowledge variance in risk characteristics and not merely to gain competitive advantage.
