PRINTER'S NO. 732
No. 653 Session of 1975
INTRODUCED BY A. K. HUTCHINSON, SCHMITT, GILLETTE, TOLL, COHEN,
ROMANELLI, SCHEAFFER, ZEARFOSS, STAHL AND TRELLO,
MARCH 4, 1975
REFERRED TO COMMITTEE ON CONSUMER PROTECTION, MARCH 5, 1975
AN ACT
1 Amending the act of May 17, 1921 (P.L.789, No.285), entitled, as
2 amended, "An act relating to insurance; establishing an
3 insurance department; and amending, revising, and
4 consolidating the law relating to the licensing,
5 qualification, regulation, examination, suspension, and
6 dissolution of insurance companies, Lloyds associations,
7 reciprocal and inter-insurance exchanges, and certain
8 societies and orders, the examination and regulation of fire
9 insurance rating bureaus, and the licensing and regulation of
10 insurance agents and brokers; the service of legal process
11 upon foreign insurance companies, associations or exchanges;
12 providing penalties, and repealing existing laws," altering
13 the method of computation of unearned premium liability and
14 reserve, the distribution of unallocated liability loss
15 expense payments, the distribution of unallocated
16 compensation loss expense payments, and removing a
17 requirement specifying certain information to be furnished in
18 an annual report or statement.
19 The General Assembly of the Commonwealth of Pennsylvania
20 hereby enacts as follows:
21 Section 1. Section 310, act of May 17, 1921 (P.L.789,
22 No.285), known as "The Insurance Department Act of one thousand
23 nine hundred and twenty-one," amended May 20, 1949 (P.L.1498,
24 No.449), is amended to read:
25 Section 310. Computation of Unearned Premium Liability.--In
1 determining the liabilities upon its contracts of insurance of
2 any insurance company, other than life insurance companies, and
3 the amount such company should hold as an unearned premium
4 liability, the Insurance Commissioner shall, [for casualty
5 insurance,] calculate such amount on a monthly pro-rata basis or
6 its equivalent on the premiums in force at the end of any
7 liability period (quarterly and/or annually) except in the case
8 of noncancellable health and accident insurance issued on and
9 after January first, one thousand nine hundred fifty [charge
10 one-half of the premium on all annual policies written within
11 one year, and, on policies written for more than one year, he
12 shall charge one-half of the current year's premiums, plus the
13 whole of the premiums for subsequent years. For fire insurance,
14 he shall charge fifty per centum of the premiums written in
15 their policies upon all unexpired risks that have one year or
16 less than one year to run, and a pro rata of all premiums on
17 risks having more than one year to run]; on perpetual insurance,
18 he shall charge the cash deposit received, less a surrender
19 charge of not exceeding ten per centum thereof. For marine and
20 inland insurance, he shall charge fifty per centum of the
21 premium written in the policy [upon yearly risks and] upon risks
22 covering more than one passage not terminated, and the full
23 amount of the premium written in the policy upon all other
24 marine and inland risks not terminated: Provided, That the
25 Insurance Commissioner may, in his discretion, charge a premium
26 reserve equal to the unearned portions of the gross premiums
27 charged, computed on each respective risk from the date of the
28 issuance of the policy.
29 Section 2. Section 312 of the act is amended to read:
30 Section 312. Definitions.--The term "earned premiums," as
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1 used in sections 313 to [317, inclusive, shall include gross
2 premiums charged on all policies written, including all
3 determined excess and additional premiums, less return premiums
4 other than premiums returned to policyholders as dividends, and
5 less reinsurance premiums and premiums on policies cancelled,
6 and less unearned premiums on policies in force.] 316 inclusive
7 shall be calculated by adding the unearned premium liability on
8 policies in force at the beginning of a calendar period plus the
9 premiums written during the calendar period (including gross
10 premiums charged on all policies written and including all
11 determined excess and additional premiums less returned premiums
12 other than premiums returned to policyholders as dividends and
13 less reinsurance premiums and less premiums on policies
14 cancelled) and less the unearned premium liability on policies
15 in force at the end of the calendar period. But any
16 participating company which has charged in its premiums a
17 loading solely for dividends, shall not be required to include
18 such loading in its earned premiums, provided a statement of the
19 amount of such loading has been filed with, and approved by, the
20 Insurance Commissioner.
21 The word "compensation" shall relate to all insurance
22 effected by virtue of statutes providing compensation to
23 employes for personal injuries irrespective of fault of the
24 employer.
25 The word "liability" shall relate to all insurance except
26 compensation insurance, against loss or damage from accident to
27 or injuries suffered by an employe or other person and for which
28 the insured is liable.
29 The terms "loss payments" and "loss expense payments" shall
30 include all payments to claimants, including payments for
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1 medical and surgical attendance, legal expenses, salaries, and
2 expenses of investigators, adjusters, and field men, rents,
3 stationery, telegraph and telephone charges, postage, salaries,
4 and expenses of office employes, home office expenses, and all
5 other payments made on account of claims, whether such payments
6 shall be allocated to specific claims or unallocated.
7 Section 3. Section 313 of the act, amended July 12, 1935
8 (P.L.956, No.305), is amended to read:
9 Section 313. Computation of Reserve.--The reserve required
10 of stock and mutual [casualty] insurance companies and exchanges
11 for outstanding losses under insurance against loss or damage
12 from accident to, or injuries suffered by, an employe or other
13 person, and for which the insured is liable, shall be computed
14 as follows:
15 [(a) For all liability suits being defended under policies
16 written more than--
17 I. Ten years prior to the date as of which the statement is
18 made, one thousand five hundred dollars ($1500) for each suit.
19 II. Five and less than ten years prior to date as of which
20 the statement is made, one thousand dollars ($1,000) for each
21 suit.
22 III. Three and less than five years prior to the date as of
23 which the statement is made, eight hundred and fifty dollars
24 ($850) for each suit.]
25 (b) For all liability [policies written] premiums earned
26 during the three years immediately preceding the date as of
27 which the statement is made, such reserve shall be sixty per
28 centum of the earned liability premiums of each of such three
29 years, less all loss and loss expense payments made under
30 liability policies written in the corresponding years [but in
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1 any event, such reserves shall, for the first of such three
2 years, be not less than seven hundred and fifty dollars ($750)
3 for each outstanding liability suit on said year's policies].
4 (c) For all compensation claims under policies written more
5 than three years prior to the date as of which the statement is
6 made, the present value, at four per centum interest, of the
7 determined and estimated future payments.
8 (d) For all compensation [claims under policies written]
9 premiums earned in the three years immediately preceding the
10 date as of which the statement is made, such reserve shall be
11 sixty-five per centum of the earned compensation premiums of
12 each of such three years, less all loss and loss expense
13 payments made in connection with such claims under policies
14 written in the corresponding years, but, in any event, such
15 reserve shall be not less than the present value, at four per
16 centum interest, of the determined and the estimated unpaid
17 compensation claims under policies written during each of such
18 years.
19 Section 4. Sections 314 and 315 of the act are amended to
20 read:
21 Section 314. Distribution of Unallocated Liability Loss
22 Expense Payments.--[All unallocated liability loss expense
23 payments made in each of the first four calendar years in which
24 an insurer issues liability policies, shall be distributed as
25 follows: In the first calendar year, one hundred per centum
26 shall be charged to the policies written in that year; in the
27 second calendar year, fifty per centum shall be charged to the
28 policies written in that year, and fifty per centum to the
29 policies written in the preceding year; in the third calendar
30 year, forty per centum shall be charged to the policies written
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1 in that year, forty per centum to the policies written in the
2 preceding year, and twenty per centum to the policies written in
3 the second year preceding; and in the fourth calendar year,
4 thirty-five per centum shall be charged to the policies written
5 in that year, forty per centum to the policies written in the
6 preceding year, fifteen per centum to the policies written in
7 the second year preceding, and ten per centum to the policies
8 written in the third year preceding.]
9 All unallocated liability loss expense payments made in a
10 given calendar year [subsequent to the first four years] in
11 which an insurer has been issuing liability policies, shall be
12 [distributed as follows: Thirty-five per centum shall be charged
13 to the policies written in that year; forty per centum to the
14 policies written in the preceding year; ten per centum to the
15 policies written in the second year preceding; ten per centum to
16 the policies written in the third year preceding; and five per
17 centum to the policies written in the fourth year preceding]
18 made in accordance with instructions recommended and promulgated
19 from time to time by the National Association of Insurance
20 Commissioners for completion of Schedule P of the annual
21 statement of any insurance company, association or exchange
22 authorized to transact business in this Commonwealth.
23 Section 315. Distribution of Unallocated Compensation Loss
24 Expense Payments.--[All unallocated compensation loss expense
25 payments made in each of the first three calendar years in which
26 an insurer issues compensation policies, shall be distributed as
27 follows: In the first calendar year, one hundred per centum
28 shall be charged to the policies written in that year; in the
29 second calendar year, fifty per centum shall be charged to the
30 policies written in that year, and fifty per centum to the
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1 policies written in the preceding year; in the third calendar
2 year, forty-five per centum shall be charged to the policies
3 written in that year, forty-five per centum to the policies
4 written in the preceding year, and ten per centum to the
5 policies written in the second year preceding.]
6 All unallocated compensation loss expense payments made in a
7 given calendar year [subsequent to the first three years] in
8 which an insurer has been issuing compensation policies, shall
9 be [distributed as follows: Forty per centum shall be charged to
10 policies written in that year; forty-five per centum to the
11 policies written in the preceding year; ten per centum to the
12 policies written in the second year preceding; and five per
13 centum to the policies written in the third year preceding] made
14 in accordance with instructions recommended and promulgated from
15 time to time by the National Association of Insurance
16 Commissioners for completion of Schedule P of the annual
17 statement of any insurance company, association or exchange
18 authorized to transact business in this Commonwealth.
19 Section 5. Section 317 of the act is repealed.
20 Section 6. This act shall take effect immediately.
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