Insurance

Administration

Rule R590-127: Rate Filing Exemptions

Effective Date: 10/25/2021

Admin. Code Reference: R590-127

Rule Type: Current Rule

R590. Insurance, Administration.

R590-127. Rate Filing Exemptions.

R590-127-1. Authority.

This rule is promulgated by the commissioner pursuant to Sections 31A-2-201 and 31A-19a-103.

R590-127-2. Purpose and Scope.

(1) The purpose of this rule is to:

(a) identify permissible rates and plans under Section 31A-19a-203;

(b) make exemptions for filing rates and plans under Section 31A-19a-203; and

(2) This rule applies to each insurer licensed in this state to write liability insurance, professional liability insurance, property insurance, vehicle liability and physical damage insurance, and workers' compensation insurance.

(3) This rule applies to:

(a) an (a) rate, including an (a) rate for:

(i) a class of risks that are so different from each other that no single manual rate could be representative of all of them;

(ii) a class of risks that does not develop enough experience to warrant credibility for ratemaking purposes; and

(iii) a risk that involves a new product or coverage for which there is no past experience nor appropriate analogy to similar exposures for ratemaking purposes; and

(b) the procedure for rating an exposure that does not have a published prospective loss cost or manual rate, termed (a) rating.

R590-127-3. Definitions.

Terms in this rule are defined in Sections 31A-1-301 and 31A-19a-102. Additional terms are defined as follows:

(1) "(a) rate" means a rating rule or a rate expressed as the symbol "(a)" or the words "refer to company" listed opposite a classification code on the rule and rate pages of the Commercial Lines Manual.

(2) "(a) rating" means a special risk rating underwriting procedure used for classifying and rating any risk that presents a unique or unusual condition, exposure, or hazard for which the underwriter feels a Commercial Lines Manual classification or rate is not appropriate.

(3) "Commercial Lines Manual" means the manual of rates, classifications, and underwriting rules for commercial lines insurance, including:

(a) the Highly Protected Risk Plan, filed with the commissioner by the Insurance Services Office, Inc.; and

(b) any similar rating plan, manual or large risk property rating plan filed with the commissioner by another rate service organization or individual insurer.

(4) "Excess insurance" means a coverage designed to be:

(a)(i) in excess over one or more primary coverages; or

(ii) a self-insured retention; and

(b) that does not pay a loss until the loss amount exceeds a certain sum.

(5) "Guide (a) rate" means an advisory (a) rate that has been developed by a rate service organization or company home office underwriter that represents a rough average and is used as a guide or signpost.

(6) "Guide (a) Manual" means a collection of guide (a) rates with rules and procedures for use with (a) rates.

(7) "Increased limits factor" means a rating factor used to adjust a manual rate to a limit higher than the basic manual limit.

(8) "Self-insured retention" means the portion of a risk or potential loss assumed by an insured in an amount of at least $50,000 and in the form of a deductible, self-insurance, or no insurance.

(10) "Umbrella liability insurance" means insurance providing coverage in excess of the limits of a primary policy and additional basic liability coverages.

R590-127-4. Filing of Procedures.

(1) Each insurer to which this rule applies shall maintain a general statement of company policies and procedures for underwriting and developing (a) rates and (a) rating.

(2) The general statement shall include:

(a) a delineation of the extent of home office and branch office authority regarding the promulgation of (a) rates; and

(b) formal guidelines the insurer has established for a situation described in Subsection (2)(a).

(3) The general statement shall be made available to the commissioner upon request.

R590-127-5. (a) Rates.

(1) An (a) rate shall be exempt from the filing requirements of Section 31A-19a-203.

(2) When an (a) rate is used, the underwriting file shall contain full and supporting factual documentation verifying that the rate is an (a) rate and showing the development of the (a) rate assigned by the underwriter.

(a) If the insurer has a guide (a) Manual, the underwriter shall:

(i) start rate development with the guide (a) rate suggested in the manual;

(ii) document the steps in the development of an adjusted rate; and

(iii) show that the insurer's established procedure in the (a) rate development has been followed.

(b) If the insurer does not have a guide (a) rate, the underwriter shall document the steps in the development of the (a) rate, including:

(i) an analysis of the specific definable loss potential characteristics;

(ii) a comparison to similar risks and their manual rates;

(iii) available loss frequency and severity data;

(iv) an analysis of current engineering reports; and

(v) a discussion of any other pertinent underwriting criteria.

(3) As individual risk experience and characteristics are considered by the underwriter in developing the (a) rate, the only rate modification factors that may be applied to an (a) rate are:

(a) increased limits factors;

(b) package factors;

(d) expense modification factors; and

(e) deductible factors.

(4) If automated rating procedures automatically apply other modification factors, the underwriter should consider this fact when developing the initial rate.

(5) If an underwriter uses an increased limits factor that is different from the guide (a) increased limits factor in the Commercial Lines Manual, the underwriting file shall contain full and supporting factual data justifying the change in the guide (a) increased limits factor.

(6)(a) When an insurer renews a risk that contains an (a) rate, the underwriting file shall contain the following documentation:

(i) the underwriter's reevaluation of the (a) rate assigned; and

(ii) justification for the continuation of the (a) rate or the development of any new (a) rate.

(b) If the (a) rate previously assigned is revised more than plus or minus 25%, the underwriter's file documenting the (a) rate development for the prior year and the development and explanation for the new (a) rate shall be made available to the commissioner upon request.

R590-127-6. (a) Rating, Special Risk Rating.

(1) A rate that is developed by an underwriter through an (a) rating process is exempt from the filing requirements of Section 31A-19a-203.

(2) An underwriter is permitted to use (a) rating only in the following circumstances:

(a) when the underwriter can clearly demonstrate that a risk described by specific classifications in the Commercial Lines Manual presents unique or unusual conditions of exposure or hazard such that the application of the normal manual rate for that classification does not produce a reasonable and equitable rate for the risk;

(i) the underwriter should bear in mind that a manual classification is understood to be general in nature and may not exactly describe the risk being considered; and

(ii) an (a) rating is not to be used simply because the risk does not exactly match the manual classification description;

(b) when the coverage to be written is broader or more restricted than the coverage the manual definition of coverage provides as limited by applicable manual exclusions;

(c) when the insurer has developed a program for a type of risk or coverage that is not included in the Commercial Lines Manual and for which there is limited statistical data for ratemaking purposes;

(d) when a risk develops more than $100,000 in annual manual basic limits unmodified premium for automobile liability, general liability, glass, and theft insurance, individually, or $250,000 in any combination; or

(e) when the one-year deposit premium charged for the coverages afforded is $50,000 or more for boiler and machinery risks.

(3)(a) When an underwriter uses (a) rating, the underwriting file shall contain the following:

(i) a full explanation showing that the risk fits one of the circumstances described in Subsection (2); and

(ii) full and supporting factual documentation showing the development of the rate assigned by the underwritercontaining an analysis of:

(A) the specific definable loss potential characteristics;

(B) a comparison to similar risks and their manual rates, available loss frequency, and severity data;

(D) any other pertinent underwriting criteria.

(b) The underwriting file shall be made available to the commissioner upon request.

(4)(a) When an insurer renews a risk that has been (a) rated according to Section R590-127-6, the underwriting file shall contain documentation of the underwriter's reevaluation of the (a) rating and justification for the continuation of the (a) rating.

(b) If the (a) rating produces a renewal premium that varies more than plus or minus 25% from the expiring policy premium, the underwriting file documenting the rate development for the prior term and the renewal term, and an explanation for the change in premium, shall be made available to the commissioner upon request.

R590-127-7. Commercial Excess and Umbrella Liability Insurance.

(1) Rates and rating plans for commercial excess insurance or umbrella liability insurance are exempt from the filing requirements of Section 31A-19a-203.

(2)(a) The underwriting files of any excess insurance or umbrella liability insurance risk must contain full and supporting factual documentation justifying the rate and showing the development of the rate.

(b) The rate development documentation should analyze the specific definable loss potential characteristics regarding the risk's excess exposure and any other pertinent underwriting criteria.

(3) When an insurer renews a commercial excess or umbrella liability policy, the underwriting file shall contain the following documentation:

(a) the underwriter's reevaluation of the rate assigned; and

(b) justification for the continuation of the rate or the development of any new rate.

(4) The underwriting file shall be made available to the commissioner upon request.

R590-127-8. Severability.

If any provision of this rule, Rule R590-127, or its application to any person or situation is held invalid, such invalidity does not affect any other provision or application of this rule that can be given effect without the invalid provision or application. The remainder of this rule shall be given effect without the invalid provision or application.

KEY: insurance companies

Date of Last Change: October 25, 2021

Notice of Continuation: August 9, 2024

Authorizing, and Implemented or Interpreted Law: 31A-2-201; 31A-19a-103