PRINTER'S NO. 2542
No. 2072 Session of 1993
INTRODUCED BY MICHLOVIC, FAJT, VAN HORNE, KENNEY, KUKOVICH,
TRELLO, COWELL, PISTELLA, CAWLEY, BUTKOVITZ, DeLUCA, OLASZ,
CARN, CARONE, LAUB, WOGAN, CLARK, DONATUCCI AND JOSEPHS,
OCTOBER 4, 1993
REFERRED TO COMMITTEE ON INSURANCE, OCTOBER 4, 1993
AN ACT
1 Amending the act of June 11, 1947 (P.L.538, No.246), entitled
2 "An act relating to the regulation of rates for insurance
3 which may be written by stock or mutual casualty insurance
4 companies, associations or exchanges, including fidelity,
5 surety and guaranty bonds and all other forms of motor
6 vehicle insurance, and title insurance; to rating and
7 advisory organizations; conferring on the Insurance
8 Commissioner the power and duty of supervising and regulating
9 persons, associations, companies and corporations, and of
10 enforcing the provisions of this act; prescribing and
11 regulating the practice and procedure before the
12 commissioner, and procedure for review by the courts; giving
13 the Court of Common Pleas of Dauphin County exclusive
14 jurisdiction over certain proceedings; prescribing penalties
15 and providing for enforcement thereof, and repealing
16 inconsistent acts," further providing for ratemaking and for
17 rate administration.
18 The General Assembly of the Commonwealth of Pennsylvania
19 hereby enacts as follows:
20 Section 1. Section 3 of the act of June 11, 1947 (P.L.538,
21 No.246), known as The Casualty and Surety Rate Regulatory Act,
22 amended April 14, 1986 (P.L.80, No.27), is amended to read:
23 Section 3. Making of Rates.--All rates shall be made in
24 accordance with the following provisions:
1 (a) Due consideration shall be given to past and prospective
2 loss experience within and outside this Commonwealth, to
3 physical hazards, to safety and loss prevention factors, to
4 underwriting practice and judgment to the extent appropriate, to
5 catastrophe hazards, if any, to a reasonable margin for
6 underwriting profit and contingencies, to dividends, savings or
7 unabsorbed premium deposits allowed or returned by insurers to
8 their policyholders, members or subscribers, to past and
9 prospective expenses both country wide and those specially
10 applicable to this Commonwealth, and to all other relevant
11 factors within and outside this Commonwealth.
12 (b) The systems of expense provisions included in the rates
13 for use by any insurer or group of insurers may differ from
14 those of other insurers or groups of insurers to reflect the
15 requirements of the operating methods of any such insurer or
16 group with respect to any kind of insurance, or with respect to
17 any subdivision or combination thereof for which subdivision or
18 combination separate expense provisions are applicable.
19 (c) Risks may be grouped by classifications for the
20 establishment of rates and minimum premiums. Classification
21 rates may be modified to produce rates for individual risks in
22 accordance with rating plans which establish standards for
23 measuring variations in hazards or expense provisions, or both.
24 Such standards may measure any differences among risks that can
25 be demonstrated to have a probable effect upon losses or
26 expenses.
27 (d) Rates shall not be excessive, inadequate or unfairly
28 discriminatory. No rate shall be held to be unfairly
29 discriminatory unless, allowing for practical limitations, it
30 clearly fails to reflect with reasonable accuracy the
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1 differences in expected losses and expenses. A rate is not
2 unfairly discriminatory because different premiums result for
3 policyholders with like-loss exposures but different expense
4 factors, so long as the rate reflects the differences with
5 reasonable accuracy. A rate is not unfairly discriminatory if it
6 is averaged broadly among persons insured under a group,
7 franchise or blanket policy.
8 (e) This section shall not be construed to prohibit rates
9 for automobile insurance which are based, in whole or in part,
10 on factors, including, but not limited to, sex, if the use of
11 such a factor is supported by sound actuarial principles or is
12 related to actual or reasonably anticipated experience; however,
13 such factors shall not include race, religion or national
14 origin.
15 (f) For purposes of risk classification, the commissioner
16 shall, every ten (10) years, approve territories, based on loss
17 experience data categorized according to geographic area and
18 according to ZIP Code number. Only territories approved under
19 this subsection may be considered for risk classification in
20 rate making.
21 Section 2. Section 13 of the act is amended to read:
22 Section 13. Rate Administration; Authority and Duties of
23 Commissioner; Rules and Regulations.--
24 (a) Recording and Reporting of Loss and Expense Experience.
25 The commissioner shall promulgate reasonable rules and
26 statistical plans, reasonably adapted to each of the rating
27 systems on file with him, which may be modified from time to
28 time and which shall be used thereafter by each insurer in the
29 recording and reporting of its loss and countrywide expense
30 experience in order that the experience of all insurers may be
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1 made available at least annually in such form and detail as may
2 be necessary to aid him in determining whether rating systems
3 comply with the standards set forth in this act. Such rules and
4 plans may also provide for the recording and reporting of
5 expense experience items which are specially applicable to this
6 Commonwealth and are not susceptible of determination by a
7 prorating of countrywide expense experience. In promulgating
8 such rules and plans, the commissioner shall give due
9 consideration to the rating systems on file with him and, in
10 order that such rules and plans may be as uniform as is
11 practicable among the several states, to the rules and to the
12 form of the plans used for such rating systems in other states.
13 Such rules and plans shall not place an unreasonable burden of
14 expense on any insurer. No insurer shall be required to [record
15 or report its loss experience on a classification basis that is
16 inconsistent with the rating system filed by it, nor shall any
17 insurer be required to] report its experience to any agency of
18 which it is not a member or subscriber. The commissioner may
19 designate one or more rating organizations or other agencies to
20 assist him in gathering such experience and making compilations
21 thereof, and such compilations shall be made available, subject
22 to reasonable rules promulgated by the commissioner, to insurers
23 and rating organizations.
24 (b) Interchange of Rating Plan Data. Reasonable rules and
25 plans may be promulgated by the commissioner for the interchange
26 of data necessary for the application of rating plans.
27 (c) Consultation with Other States. In order to further
28 uniform administration of rate regulatory laws, the commissioner
29 and every insurer and rating organization may exchange
30 information and experience data with insurance supervisory
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1 officials, insurers and rating organizations in other states and
2 may consult with them with respect to rate making and the
3 application of rating systems.
4 (d) Authority and Duties of Commissioner; Rules and
5 Regulations. In addition to any powers hereinbefore expressly
6 enumerated in this act, the commissioner shall have full power
7 and authority, and it shall be his duty, to enforce and carry
8 out by regulations, orders, or otherwise, all and singular the
9 provisions of this act, and the full intent thereof. The
10 commissioner may make such reasonable rules and regulations, not
11 inconsistent with this act or any amendment thereof, as may be
12 necessary or proper in the exercise of his powers or for the
13 performance of his duties under this act.
14 Section 3. The addition of section 3(f) of the act shall
15 apply to rates filed for approval with the Insurance
16 Commissioner after June 30, 1995.
17 Section 4. This act shall take effect in 60 days.
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