PRIOR PRINTER'S NO. 732 PRINTER'S NO. 2235
No. 653 Session of 1975
INTRODUCED BY MESSRS A. K. HUTCHINSON, SCHMITT, MRS. GILLETTE,
MRS. TOLL, MESSRS. COHEN, ROMANELLI, SCHEAFFER, ZEARFOSS,
STAHL AND TRELLO, MARCH 4, 1975
AS REPORTED FROM COMMITTEE ON CONSUMER PROTECTION, HOUSE OF
REPRESENTATIVES, AS AMENDED, SEPTEMBER 25, 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) QUARTERLY OR ANNUAL <--
8 PERIOD, except in the case of noncancellable health and accident
9 insurance issued on and after January first, one thousand nine
10 hundred fifty [charge one-half of the premium on all annual
11 policies written within one year, and, on policies written for
12 more than one year, he shall charge one-half of the current
13 year's premiums, plus the whole of the premiums for subsequent
14 years. For fire insurance, he shall charge fifty per centum of
15 the premiums written in their policies upon all unexpired risks
16 that have one year or less than one year to run, and a pro rata
17 of all premiums on risks having more than one year to run] SUCH <--
18 AMOUNT SHALL BE CALCULATED ACCORDING TO THE METHODS SET OUT IN
19 SECTION 311.1 OF THIS ACT; on perpetual insurance, he shall
20 charge the cash deposit received, less a surrender charge of not
21 exceeding ten per centum thereof. For marine and inland
22 insurance, he shall charge fifty per centum of the premium
23 written in the policy [upon yearly risks and] upon risks
24 covering more than one passage not terminated, and the full
25 amount of the premium written in the policy upon all other
26 marine and inland risks not terminated: Provided, That the
27 Insurance Commissioner may, in his discretion, charge a premium
28 reserve equal to the unearned portions of the gross premiums
29 charged, computed on each respective risk from the date of the
30 issuance of the policy.
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1 Section 2. Section 312 of the act is amended to read:
2 Section 312. Definitions.--The term "earned premiums," as
3 used in sections 313 to [317, inclusive, shall include gross
4 premiums charged on all policies written, including all
5 determined excess and additional premiums, less return premiums
6 other than premiums returned to policyholders as dividends, and
7 less reinsurance premiums and premiums on policies cancelled,
8 and less unearned premiums on policies in force.] 316 inclusive
9 shall be calculated by adding the unearned premium liability on <--
10 policies in force at the beginning of a calendar period plus the
11 premiums written during the calendar period (including gross
12 premiums charged on all policies written and including all
13 determined excess and additional premiums less returned premiums
14 other than premiums returned to policyholders as dividends and
15 less reinsurance premiums and less premiums on policies
16 cancelled) and less the unearned premium liability on policies
17 in force at the end of the calendar period. [But any <--
18 participating company which has charged in its premiums a
19 loading solely for dividends, shall not be required to include
20 such loading in its earned premiums, provided a statement of the
21 amount of such loading has been filed with, and approved by, the
22 Insurance Commissioner.] SHALL INCLUDE GROSS PREMIUMS CHARGED ON <--
23 ALL POLICIES WRITTEN, INCLUDING ALL EXCESS AND ADDITIONAL
24 PREMIUMS AND REINSURANCE PREMIUMS ACCEPTED, LESS RETURN PREMIUMS
25 OTHER THAN PREMIUMS RETURNED TO POLICYHOLDERS AS DIVIDENDS, AND
26 LESS ALL REINSURANCE PREMIUMS CEDED AND PREMIUMS ON POLICIES
27 CANCELLED. EARNED PREMIUMS ATTRIBUTABLE TO ANY SPECIFIC PERIOD
28 SHALL BE CALCULATED BY ADDING TO THE LIABILITY FOR UNEARNED
29 PREMIUMS AT THE BEGINNING OF THE PERIOD, THE PREMIUMS WRITTEN
30 DURING THE PERIOD AND SUBTRACTING THE LIABILITY FOR UNEARNED
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1 PREMIUMS AT THE END OF THE PERIOD.
2 The word "compensation" shall relate to all insurance
3 effected by virtue of statutes providing compensation to
4 employes for personal injuries irrespective of fault of the
5 employer.
6 The word "liability" shall relate to all insurance except
7 compensation insurance, against loss or damage from accident to
8 or injuries suffered by an employe or other person and for which
9 the insured is liable.
10 The terms "loss payments" and "loss expense payments" shall
11 include all payments to claimants, including payments for
12 medical and surgical attendance, legal expenses, salaries, and
13 expenses of investigators, adjusters, and field men, rents,
14 stationery, telegraph and telephone charges, postage, salaries,
15 and expenses of office employes, home office expenses, and all
16 other payments made on account of claims, whether such payments
17 shall be allocated to specific claims or unallocated.
18 THE TERM "MONTHLY PRO-RATA BASIS" SHALL MEAN THAT CALCULATION <--
19 BY WHICH WRITTEN PREMIUM BECOMES EARNED IN EVEN MONTHLY AMOUNTS
20 FOR EACH ENTIRE CALENDAR MONTH OR PART THEREOF DURING WHICH A
21 POLICY IS IN FORCE, EXCEPT THAT FOR THE CALENDAR MONTHS IN WHICH
22 A PREMIUM IS WRITTEN OR EXPIRES, ONE-HALF THE EVEN MONTHLY
23 AMOUNT IS EARNED.
24 THE TERM "EVEN MONTHLY AMOUNT" SHALL MEAN THE WRITTEN PREMIUM
25 DIVIDED BY THE NUMBER OF MONTHS FOR WHICH THE PREMIUM IS
26 WRITTEN.
27 Section 3. Section 313 of the act, amended July 12, 1935
28 (P.L.956, No.305), is amended to read:
29 Section 313. Computation of Reserve.--The reserve required
30 of stock and mutual [casualty] insurance companies and exchanges
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1 for outstanding losses under insurance against loss or damage
2 from accident to, or injuries suffered by, an employe or other
3 person, and for which the insured is liable, shall be computed
4 as follows:
5 [(a) For all liability suits being defended under policies
6 written more than--
7 I. Ten years prior to the date as of which the statement is
8 made, one thousand five hundred dollars ($1500) for each suit.
9 II. Five and less than ten years prior to date as of which
10 the statement is made, one thousand dollars ($1,000) for each
11 suit.
12 III. Three and less than five years prior to the date as of
13 which the statement is made, eight hundred and fifty dollars
14 ($850) for each suit.]
15 (b) For all liability [policies written] premiums earned
16 during the three years immediately preceding the date as of
17 which the statement is made, such reserve shall be sixty per
18 centum of the earned liability premiums of each of such three
19 years, less all loss and loss expense payments made under
20 liability policies written in the corresponding years [but in
21 any event, such reserves shall, for the first of such three
22 years, be not less than seven hundred and fifty dollars ($750)
23 for each outstanding liability suit on said year's policies].
24 (c) For all compensation claims under policies written more
25 than three years prior to the date as of which the statement is
26 made, the present value, at four per centum interest, of the
27 determined and estimated future payments.
28 (d) For all compensation [claims under policies written]
29 premiums earned in the three years immediately preceding the
30 date as of which the statement is made, such reserve shall be
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1 sixty-five per centum of the earned compensation premiums of
2 each of such three years, less all loss and loss expense
3 payments made in connection with such claims under policies
4 written in the corresponding years, but, in any event, such
5 reserve shall be not less than the present value, at four per
6 centum interest, of the determined and the estimated unpaid
7 compensation claims under policies written during each of such
8 years.
9 Section 4. Sections 314 and 315 of the act are amended to
10 read:
11 Section 314. Distribution of Unallocated Liability Loss
12 Expense Payments.--[All unallocated liability loss expense
13 payments made in each of the first four calendar years in which
14 an insurer issues liability policies, shall be distributed as
15 follows: In the first calendar year, one hundred per centum
16 shall be charged to the policies written in that year; in the
17 second calendar year, fifty per centum shall be charged to the
18 policies written in that year, and fifty per centum to the
19 policies written in the preceding year; in the third calendar
20 year, forty per centum shall be charged to the policies written
21 in that year, forty per centum to the policies written in the
22 preceding year, and twenty per centum to the policies written in
23 the second year preceding; and in the fourth calendar year,
24 thirty-five per centum shall be charged to the policies written
25 in that year, forty per centum to the policies written in the
26 preceding year, fifteen per centum to the policies written in
27 the second year preceding, and ten per centum to the policies
28 written in the third year preceding.]
29 All unallocated liability loss expense payments made in a
30 given calendar year [subsequent to the first four years] in
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1 which an insurer has been issuing liability policies, shall be
2 [distributed as follows: Thirty-five per centum shall be charged
3 to the policies written in that year; forty per centum to the
4 policies written in the preceding year; ten per centum to the
5 policies written in the second year preceding; ten per centum to
6 the policies written in the third year preceding; and five per
7 centum to the policies written in the fourth year preceding]
8 made in accordance with instructions recommended and promulgated <--
9 from time to time by the National Association of Insurance
10 Commissioners for completion of Schedule P of the annual
11 statement of any insurance company, association or exchange
12 authorized to transact business in this Commonwealth. MADE IN <--
13 ACCORDANCE WITH INSTRUCTIONS SET FORTH IN THE NOTES PERTAINING
14 TO SCHEDULE P, AT PAGE 35 OF THE FIRE AND CASUALTY COMPANIES
15 (ASSOCIATION EDITION) ANNUAL STATEMENT BLANK FOR THE YEAR ENDED
16 DECEMBER 31, 1974, AS ADOPTED FOR USE IN PENNSYLVANIA BY THE
17 COMMISSIONER.
18 Section 315. Distribution of Unallocated Compensation Loss
19 Expense Payments.--[All unallocated compensation loss expense
20 payments made in each of the first three calendar years in which
21 an insurer issues compensation policies, shall be distributed as
22 follows: In the first calendar year, one hundred per centum
23 shall be charged to the policies written in that year; in the
24 second calendar year, fifty per centum shall be charged to the
25 policies written in that year, and fifty per centum to the
26 policies written in the preceding year; in the third calendar
27 year, forty-five per centum shall be charged to the policies
28 written in that year, forty-five per centum to the policies
29 written in the preceding year, and ten per centum to the
30 policies written in the second year preceding.]
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1 All unallocated compensation loss expense payments made in a
2 given calendar year [subsequent to the first three years] in
3 which an insurer has been issuing compensation policies, shall
4 be [distributed as follows: Forty per centum shall be charged to
5 policies written in that year; forty-five per centum to the
6 policies written in the preceding year; ten per centum to the
7 policies written in the second year preceding; and five per
8 centum to the policies written in the third year preceding] made
9 in accordance with instructions recommended and promulgated from <--
10 time to time by the National Association of Insurance
11 Commissioners for completion of Schedule P of the annual
12 statement of any insurance company, association or exchange
13 authorized to transact business in this Commonwealth. IN <--
14 ACCORDANCE WITH INSTRUCTIONS SET FORTH IN THE NOTE PERTAINING TO
15 SCHEDULE P, AT PAGE 35, OF THE FIRE AND CASUALTY COMPANIES
16 (ASSOCIATION EDITION) ANNUAL STATEMENT BLANK FOR THE YEAR ENDED
17 DECEMBER 31, 1974, AS ADOPTED FOR USE IN PENNSYLVANIA BY THE
18 COMMISSIONER.
19 Section 5. Section 317 of the act is repealed.
20 Section 6. This act shall take effect immediately.
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