GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2011
H 1
HOUSE BILL 834*
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Short Title: Reduce Overpopulation of Reinsurance Facility. |
(Public) |
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Sponsors: |
Representative Rhyne (Primary Sponsor). For a complete list of Sponsors, see Bill Information on the NCGA Web Site. |
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Referred to: |
Insurance. |
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April 7, 2011
A BILL TO BE ENTITLED
AN ACT to reduce the excessive number of north carolina drivers insured by the North Carolina reinsurance facility by providing for file and use rate deviations for automobile liability insurance and by providing a five-year phaseout of the "Clean Risk" subclassification within the Reinsurance facility.
The General Assembly of North Carolina enacts:
SECTION 1. G.S. 58-36-30 reads as rewritten:
"§ 58-36-30. Deviations.
(a) Except as permitted by G.S. 58-36-100 for workers' compensation loss costs filings, or subsection (e) of this section for nonfleet private passenger motor vehicle liability insurance, no insurer and no officer, agent, or representative of an insurer shall knowingly issue or deliver or knowingly permit the issuance or delivery of any policy of insurance in this State that does not conform to the rates, rating plans, classifications, schedules, rules and standards made and filed by the Bureau. An insurer may deviate from the rates promulgated by the Bureau if the insurer has filed the proposed deviation with the Bureau and the Commissioner, if the proposed deviation is based on sound actuarial principles, and if the proposed deviation is approved by the Commissioner. Amendments to deviations are subject to the same requirements as initial filings. An insurer may terminate a deviation only if the deviation has been in effect for a period of six months before the effective date of the termination and the insurer notifies the Commissioner of the termination no later than 15 days before the effective date of the termination.
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(e) The provisions of this subsection apply only to the setting of rates for nonfleet private passenger motor vehicle liability insurance. An insurer may deviate from the rates promulgated by the Bureau if the insurer has filed the proposed deviation with the Bureau and the Commissioner and if the proposed deviation is based on sound actuarial principles. Rate deviations shall take effect upon filing. The Commissioner may disapprove a deviation filing submitted under this section only if the Commissioner determines that the filing is excessive, inadequate, or unfairly discriminatory. Deviations above the Bureau rate up to the applicable rates established for risks ceded to the Reinsurance Facility shall be presumed not to be excessive, inadequate, or unfairly discriminatory. If, after a hearing, the Commissioner disapproves a deviation filing, the Commissioner shall issue a written order specifying in detail the reasons the filing is excessive, inadequate, or unfairly discriminatory and stating a reasonable future date on which the filing is to be considered no longer effective. An order by the Commissioner pursuant to this subsection is prospective only and does not affect any policy that takes effect or is delivered before the effective date of the order, even if the effective date of the policy is subsequent to the effective date of the order. Amendments to deviations are subject to the same requirements as initial filings. An insurer may terminate a deviation only if the deviation has been in effect for a period of six months before the effective date of the termination and the insurer notifies the Commissioner of the termination no later than 15 days before the effective date of the termination."
SECTION 2.(a) G.S. 58-37-35 reads as rewritten:
"§ 58-37-35. The Facility; functions; administration.
…
(l) The
classifications, rules, rates, rating plans and policy forms used on motor
vehicle insurance policies reinsured by the Facility may be made by the
Facility or by any licensed or statutory statistical organization or bureau on
its behalf and shall be filed with the Commissioner. The Board of Governors
shall establish a separate subclassification within the Facility for
"clean risks". For the purpose of this Article, a "clean
risk" is any owner of a nonfleet private passenger motor vehicle as
defined in G.S. 58-40-10, if the owner, principal operator, and each
licensed operator in the owner's household have two years' driving experience
as licensed drivers and if none of the persons has been assigned any Safe
Driver Incentive Plan points under Article 36 of this Chapter during the three-year
period immediately preceding either (i) the date of application for a motor vehicle
insurance policy or (ii) the date of preparation of a renewal of a motor
vehicle insurance policy. The filings may incorporate by reference any other
material on file with the Commissioner. Rates shall be neither excessive,
inadequate nor unfairly discriminatory. If the Commissioner finds, after a
hearing, that a rate is either excessive, inadequate or unfairly
discriminatory, the Commissioner shall issue an order specifying in what
respect it is deficient and stating when, within a reasonable period thereafter,
the rate is no longer effective. The order is subject to judicial review as set
out in Article 2 of this Chapter. Pending judicial review of said order, the
filed classification plan and the filed rates may be used, charged and
collected in the same manner as set out in G.S. 58-40-45 of this Chapter.
The order shall not affect any contract or policy made or issued before the
expiration of the period set forth in the order. All rates shall be on an
actuarially sound basis and shall be calculated, insofar as is possible, to
produce neither a profit nor a loss. However, the rates made by or on behalf of
the Facility with respect to "clean risks" shall not exceed the rates
charged "clean risks" who are not reinsured in the Facility. The
Facility, except that rates for "clean risks" on policies
reinsured by the Facility that become effective on or after January 1, 2013,
shall be established on a schedule that provides that any difference between
rates charged for "clean risks" reinsured in the Facility on policies
becoming effective immediately prior to January 1, 2013, and the actuarially
sound rate for all risks reinsured by the Facility shall be eliminated over a
five-year period ending on December 31, 2017. Any difference between the
actual rate charged and the actuarially sound and self-supporting rates for
"clean risks" reinsured in the Facility may be recouped in similar
manner as assessments under G.S. 58-37-40(f). Rates shall not include any
factor for underwriting profit on Facility business, but shall provide an
allowance for contingencies. There shall be a strong presumption that the rates
and premiums for the business of the Facility are neither unreasonable nor
excessive.
.…"
SECTION 2.(b) G.S. 58-37-35, as rewritten by Section 2(a) of this act, reads as rewritten:
"§ 58-37-35. The Facility; functions; administration.
…
(l) The
classifications, rules, rates, rating plans and policy forms used on motor
vehicle insurance policies reinsured by the Facility may be made by the
Facility or by any licensed or statutory statistical organization or bureau on
its behalf and shall be filed with the Commissioner. The Board of Governors
shall establish a separate subclassification within the Facility for
"clean risks". For the purpose of this Article, a "clean
risk" is any owner of a nonfleet private passenger motor vehicle as
defined in G.S. 58-40-10, if the owner, principal operator, and each
licensed operator in the owner's household have two years' driving experience
as licensed drivers and if none of the persons has been assigned any Safe
Driver Incentive Plan points under Article 36 of this Chapter during the three-year
period immediately preceding either (i) the date of application for a motor
vehicle insurance policy or (ii) the date of preparation of a renewal of a
motor vehicle insurance policy. The filings may incorporate by reference
any other material on file with the Commissioner. Rates shall be neither
excessive, inadequate nor unfairly discriminatory. If the Commissioner finds,
after a hearing, that a rate is either excessive, inadequate or unfairly
discriminatory, the Commissioner shall issue an order specifying in what
respect it is deficient and stating when, within a reasonable period
thereafter, the rate is no longer effective. The order is subject to judicial
review as set out in Article 2 of this Chapter. Pending judicial review of said
order, the filed classification plan and the filed rates may be used, charged
and collected in the same manner as set out in G.S. 58-40-45 of this
Chapter. The order shall not affect any contract or policy made or issued
before the expiration of the period set forth in the order. All rates shall be
on an actuarially sound basis and shall be calculated, insofar as is possible,
to produce neither a profit nor a loss. However, rates for "clean
risks" on policies reinsured by the Facility that become effective on or
after January 1, 2013 shall be established on a schedule that provides that any
difference between rates charged for "clean risks" reinsured in the
Facility on policies becoming effective immediately prior to January 1, 2013
and the actuarially sound rate for all risks reinsured by the Facility shall be
eliminated over a five-year period ending on December 31, 2017. Any difference
between the actual rate charged and the actuarially sound and self-supporting
rates for "clean risks" reinsured in the Facility may be recouped in
similar manner as assessments under G.S. 58-37-40(f). Rates shall not
include any factor for underwriting profit on Facility business, but shall
provide an allowance for contingencies. There shall be a strong presumption
that the rates and premiums for the business of the Facility are neither
unreasonable nor excessive.
.…"
SECTION 3. Section 2(b) of this act becomes effective January 1, 2018. The remainder of this act becomes effective January 1, 2012.