H 3690 Session 110 (1993-1994)
H 3690 General Bill, By G. Brown
Similar(H 3637, H 4972)
A Bill to amend the title of Article 5, Chapter 77, Title 38, Code of Laws of
South Carolina, 1976, by changing it from "Reinsurance Facility and Designated
Producers" to "Reinsurance Facility; Servicing Carriers and Producers"; to
amend the title of Section 38-77-590 by changing it from "Designating
Producers" to "Servicing Carriers and Producers"; to amend Section 38-77-590,
as amended, relating to designated producers under the automobile insurance
laws, so as to, among other things, delete various provisions, add provisions,
and provide that, among other things, the governing board of the Reinsurance
Facility shall contract with insurers meeting eligibility requirements
promulgated by the governing board to act as servicing carriers for the
writing of automobile insurance through producers assigned to the servicing
carrier by the governing board; to amend Section 38-73-455, as amended,
relating to automobile insurance rates, so as to delete "designated" and
replace it with "contracted" or "assigned" and to add certain other language;
to amend Section 38-73-1420, relating to the requirement that the Board of
Governors of the South Carolina Reinsurance Facility shall file an expense
component and the use of the component after approval, so as to, among other
things, delete certain language, add certain language, and provide, among
other things, that the Board of Governors of the Reinsurance Facility shall
file an expense component for private passenger and commercial automobile
insurance rate or premium charges for use with the pure loss components for
private passenger automobile insurance and small commercial risks filed with
the Commissioner by the rating organization with the largest number of members
or subscribers; to amend Section 38-77-540, relating to automobile insurance
and the duties of a ceding insurer, so as to add certain language, including
references to Section 38-73-1420, and delete certain language and provisions,
including the provision that no ceding insurer may include in the agents'
commissions component of its underwriting expenses any amount greater than it
has actually paid its agent as commission on the reinsured risk; and to repeal
Section 38-73-1425, relating to the final rate or premium charge for private
passenger automobile insurance risk ceded to the Reinsurance Facility.
03/11/93 House Introduced and read first time HJ-9
03/11/93 House Referred to Committee on Labor, Commerce and
Industry HJ-10
04/20/93 House Tabled in committee
A BILL
TO AMEND THE TITLE OF ARTICLE 5, CHAPTER 77, TITLE 38,
CODE OF LAWS OF SOUTH CAROLINA, 1976, BY CHANGING IT
FROM "REINSURANCE FACILITY AND DESIGNATED
PRODUCERS" TO "REINSURANCE FACILITY;
SERVICING CARRIERS AND PRODUCERS"; TO AMEND
THE TITLE OF SECTION 38-77-590 BY CHANGING IT FROM
"DESIGNATED PRODUCERS" TO "SERVICING
CARRIERS AND PRODUCERS"; TO AMEND SECTION
38-77-590, AS AMENDED, RELATING TO DESIGNATED
PRODUCERS UNDER THE AUTOMOBILE INSURANCE LAWS,
SO AS TO, AMONG OTHER THINGS, DELETE VARIOUS
PROVISIONS, ADD PROVISIONS, AND PROVIDE THAT, AMONG
OTHER THINGS, THE GOVERNING BOARD OF THE
REINSURANCE FACILITY SHALL CONTRACT WITH INSURERS
MEETING ELIGIBILITY REQUIREMENTS PROMULGATED BY
THE GOVERNING BOARD TO ACT AS SERVICING CARRIERS
FOR THE WRITING OF AUTOMOBILE INSURANCE THROUGH
PRODUCERS ASSIGNED TO THE SERVICING CARRIER BY THE
GOVERNING BOARD; TO AMEND SECTION 38-73-455, AS
AMENDED, RELATING TO AUTOMOBILE INSURANCE RATES,
SO AS TO DELETE "DESIGNATED" AND REPLACE IT
WITH "CONTRACTED" OR "ASSIGNED"
AND TO ADD CERTAIN OTHER LANGUAGE; TO AMEND
SECTION 38-73-1420, RELATING TO THE REQUIREMENT THAT
THE BOARD OF GOVERNORS OF THE SOUTH CAROLINA
REINSURANCE FACILITY SHALL FILE AN EXPENSE
COMPONENT AND THE USE OF THE COMPONENT AFTER
APPROVAL, SO AS TO, AMONG OTHER THINGS, DELETE
CERTAIN LANGUAGE, ADD CERTAIN LANGUAGE, AND
PROVIDE, AMONG OTHER THINGS, THAT THE BOARD OF
GOVERNORS OF THE REINSURANCE FACILITY SHALL FILE
AN EXPENSE COMPONENT FOR PRIVATE PASSENGER AND
COMMERCIAL AUTOMOBILE INSURANCE RATE OR PREMIUM
CHARGES FOR USE WITH THE PURE LOSS COMPONENTS FOR
PRIVATE PASSENGER AUTOMOBILE INSURANCE AND SMALL
COMMERCIAL RISKS FILED WITH THE COMMISSIONER BY
THE RATING ORGANIZATION WITH THE LARGEST NUMBER
OF MEMBERS OR SUBSCRIBERS; TO AMEND SECTION
38-77-540, RELATING TO AUTOMOBILE INSURANCE AND THE
DUTIES OF A CEDING INSURER, SO AS TO ADD CERTAIN
LANGUAGE, INCLUDING REFERENCES TO SECTION
38-73-1420, AND DELETE CERTAIN LANGUAGE AND
PROVISIONS, INCLUDING THE PROVISION THAT NO CEDING
INSURER MAY INCLUDE IN THE AGENTS' COMMISSIONS
COMPONENT OF ITS UNDERWRITING EXPENSES ANY
AMOUNT GREATER THAN IT HAS ACTUALLY PAID ITS AGENT
AS COMMISSION ON THE REINSURED RISK; AND TO REPEAL
SECTION 38-73-1425, RELATING TO THE FINAL RATE OR
PREMIUM CHARGE FOR PRIVATE PASSENGER AUTOMOBILE
INSURANCE RISK CEDED TO THE REINSURANCE FACILITY.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The title of Article 5, Chapter 77, Title 38 of the 1976
Code is amended to read:
"Article 5
Reinsurance Facility; Servicing Carriers and
Designated Producers".
SECTION 2. The title of Section 38-77-590 of the 1976 Code is
amended to read:
"Designated Servicing Carriers and
Producers".
SECTION 3. Section 38-77-590 of the 1976 Code, as last amended by
Act 524 of 1990, is further amended to read:
"Section 38-77-590. (a) Not more than six months after
July 9, 1974, or at an earlier time as the Commissioner considers
necessary by reason of complaints regarding want of access to
automobile insurance in particular areas or want of outlets for producers,
the Commissioner shall survey the various areas of the State to ascertain
if sufficient marketing outlets exist in all areas or are available to all
producers. Upon a finding by the Commissioner that insufficient
marketing outlets exist in particular areas or that certain producers have
been deprived of a market for risks previously serviced by them, the
Commissioner may, after consultation with the Facility, designate one
or more insurers to service the areas through agents appointed by them
or may designate the producers as the agents of any insurer. The
arrangements shall include provision for one hundred percent quota
share reinsurance through the Facility of any automobile insurance
policy marketed through the arrangements, at the option of the insurer,
and the reinsurance is not subject to the statutory provisions or
regulations regarding excessive utilization of the Facility The
Governing Board of the Reinsurance Facility shall contract with insurers
meeting eligibility requirements promulgated by the governing board to
act as servicing carriers for the writing of automobile insurance through
producers assigned to the servicing carrier by the governing board. The
contract shall include a provision for one hundred percent quota share
reinsurance through the facility of any automobile insurance policy
ceded to the facility. The governing board may establish reasonable
nondiscriminatory standards which all servicing carriers must meet for
contract renewal. The servicing carriers are not subject to the statutory
provisions or regulations regarding excessive utilization of the
Reinsurance Facility for policies produced by its assigned servicing
agents. The servicing carrier shall cede the risk on every policy of
automobile insurance produced by its assigned servicing agents for the
Reinsurance Facility. Servicing carriers and their assigned servicing
agents may not cancel, nonrenew, or refuse to write any policy of
automobile insurance for individual private passenger automobile and
small commercial risks as defined in this chapter except for nonpayment
of premium, failure to possess a valid drivers license, or any other valid
reason promulgated by the commissioner which is not consistent with
the purposes of this chapter.
(b) After the effective date of this section, those producers
previously designated by the Commissioner may continue to serve in
that capacity under the jurisdiction and control of the governing board
of the Facility, except that any change in the rate of commissions
allowed designated producers is subject to the Commissioner's
approval Producers assigned to a servicing carrier in accordance
with this section and producers previously designated to a servicing
carrier by the commissioner or the Governing Board of the Reinsurance
Facility must remain assigned to that servicing carrier until and unless
the producer's written request to change the assignment is received by
the Governing Board of the Reinsurance Facility or until the assignment
is terminated and transferred to another carrier by the governing board
upon nonrenewal or termination of that servicing carrier's contract.
(c) A producer may be designated by the governing board of the
Facility upon application for designation and is eligible for designation
upon a finding by the governing board that the applicant meets the
following qualifications A producer may apply to the governing
board for assignment to a servicing carrier and is eligible for assignment
upon a finding by the governing board that the applicant meets the
following qualifications:
(1) The applicant has been, for ten five
continuous years, a licensed resident property and casualty insurance
agent and is at the time of application an agency owner or
principal associated with an agency in South Carolina which has
been actively in business for five years with authority from one or
more licensed insurers to write liability and physical damage insurance
on private passenger automobiles; and
(2) At the time of application the applicant is servicing and owns
the renewals on South Carolina private passenger and
commercial automobile insurance business, the net premiums on which
exceeded seventy-five one hundred thousand dollars of
potential cedeable automobile insurance during any one of the previous
five calendar years preceding the application; and
(3) Neither the applicant, nor any employee of the applicant
or the applicant's corporate agency, nor any partner or shareholder in any
related insurance agency, related premium service company, or related
other business, has any direct or indirect connection with any voluntary
market outlet for the purpose of writing any type of automobile
insurance in this State except for motorcycle insurance and types not
cedeable to the facility;
(4) The applicant has not contributed to his termination as agent
by any insurer because of any illegal breach of agency agreement or
other related, improper, or unethical conduct; and
(5) The books, records, and accounts of the insurance
business of the applicant have been audited at the expense of the
applicant and found by the governing board to be indicative of a
financially sound operation.
(d) Prior to designation the assignment as a
producer, the applicant shall furnish at his expense a bond in an amount
of not less than fifty thousand dollars for the faithful performance of the
duties as a producer, executed by the applicant as principal and a
corporate surety licensed to do business in this State as surety, and shall
also have effective errors and omissions insurance by an insurer licensed
to do business in this State, with the bond and errors and omissions
insurance being subject to approval by the governing board.
(e) The governing board shall assign a specific location to each
producer designated. The governing board shall determine from the
commissioner the locations assigned by him to those producers whom
the commissioner has designated. Designated producers may not open
or maintain any other locations without the written authorization of the
governing board; provided, however, that an applicant maintaining
multiple offices on June 4, 1987, is entitled to maintain two locations as
a designated agent which he owned and operated at that time and
through which premiums in at least the amount of seventy-five thousand
dollars were written. The governing board shall terminate the
designation, and the commissioner shall revoke all agents' licenses of
any producer who does not comply with this requirement upon demand
by the governing board. Upon termination, the producer's expirations on
designated business become the property of the facility A
producer assigned to a servicing carrier may not open or maintain more
than one location at which the solicitation or transaction of any
automobile insurance business is conducted without the written
authorization of the governing board. The governing board shall
terminate the assignment of any servicing agent who does not comply
with this requirement upon demand by the governing board. Applicants
maintaining multiple offices on January 1, 1993, are entitled to maintain
two locations as a producer which the agent owned and operated at that
time and through which automobile insurance premiums in at least the
amount of one hundred and fifty thousand dollars were written by the
agent at each of the two locations.
(f) The designation of a producer by the Commissioner or the
governing board is transferable to a spouse, child, parent, brother, or
sister of the producer upon the designated producer's retirement,
incapacity, or death. The duties of a designated producer may be
performed by one or more qualified employees of the producer or the
producer's corporate agency The assignment of a producer to a
servicing carrier by the governing board is transferable to a spouse,
child, parent, brother, or sister of the producer upon the producer's
retirement, incapacity, or death. The assignment may, at the election of
the producer by written notice thereof to the governing board, be
irrevocably transferred to a corporation authorized to transact business
in South Carolina by the Secretary of State and licensed by the insurance
commissioner as an insurance agency. The duties of an individual or
corporate producer may be performed by one or more qualified
employees of the producer or the individual producer's corporate
agency.
(g) Neither a designated producer, nor any employee of a
designated producer or the producer's corporate agency, nor any partner
or shareholder in any related insurance agency, related premium service
company, or related other business, may have any direct or indirect
connection with any voluntary market outlet for the purpose of writing
any type of automobile insurance in this State except for motorcycle
insurance and types not cedable to the Facility. The governing board
shall terminate the designation of any producer, and the Commissioner
shall revoke all licenses of the producer and of any other insurance agent
and premium service company knowingly involved in this connection.
Upon termination, the producer's expirations on designated business
become the property of the Facility.
(h) (g) A designated servicing carrier
who fails a claims audit shall have no new designated producer
servicing agent assignments until the time it passes a re-audit
within a reasonable time prescribed by the governing board. If this
carrier fails two claims audits, including a re-audit, within any three-year
period, that carrier is disqualified for renewal of its contract
with the facility upon expiration of its existing contract.
(h) The Governing Board of the Reinsurance Facility shall not
contract with an insurer to act as a servicing carrier solely for the
insurer's own duly authorized and voluntarily contracted agents.
Servicing carriers shall accept assignments of servicing agents on an
equitable, nondiscriminatory basis promulgated by the governing board.
Insurers, other than servicing carriers, shall not cede risks to the
Reinsurance Facility on new or renewal policies produced by a servicing
agent but may, however, subject to the provisions of this chapter and
specifically Section 38-77-950, cede risks to the Reinsurance Facility on
new and renewal policies produced by their own duly authorized agents
who are not contracted and assigned to a servicing carrier as provided
for in this section."
SECTION 4. Section 38-73-455(C) of the 1976 Code, as last amended
by Act 113 of 1991, is further amended to read:
"(C) Member companies of an affiliated group of automobile
insurers may not utilize different filed rates for automobile insurance
coverages which they are mandated by law to write. For the purpose of
this section, an affiliated group of automobile insurers includes a group
of automobile insurers under common ownership, management, or
control. Those automobile insurers designated
contracted pursuant to Section 38-77-590(a), for automobile
insurance risks written by them through producers designated
assigned by the facility governing board pursuant to that
section, and all insurers on all risks ceded to the facility shall
utilize the rates or premium charges by coverage filed and authorized for
use by the rating organization licensed by the commissioner pursuant to
Article 11, Chapter 73 of this title, which has the largest number of
members or subscribers for automobile insurance rates. However, those
automobile insurers designated pursuant to Section 38-77-590(a) are not
required to use those same rates or premium charges described in the
preceding sentence for risks written by them through their authorized
agents not appointed pursuant to Section 38-77-590 on risks not
ceded to the facility."
SECTION 5. Section 38-73-1420 of the 1976 Code, as added by Act
148 of 1989, is amended to read:
"Section 38-73-1420. After June 30, 1989, the Board of
Governors of the South Carolina Reinsurance Facility shall file an
expense component for private passenger and commercial
automobile insurance rate or premium charges for use with
after the rating organization with the largest number of members or
subscribers has filed a the pure loss component
components for private passenger automobile insurance and
small commercial risks filed with the commissioner by the
rating organization with the largest number of members or
subscribers. Upon the approval of such component
components, those automobile insurers designated
contracted pursuant to Section 38-77-590(A)
(a), for risks written by them through producers
designated assigned pursuant to that same section,
and all insurers on all risks ceded to the facility shall utilize
these final rate or premium charges. Automobile insurers
designated contracted pursuant to Section
38-77-590(A) (a) are not required to use those same
final rates or premium charges for risks written through their agents not
appointed assigned pursuant to Section 38-77-590
on risks not ceded to the facility."
SECTION 6. Section 38-77-540 of the 1976 Code is amended to read:
"Section 38-77-540. The ceding insurer shall transfer or credit
to the facility on any policy of automobile insurance reinsured by the
facility the pure loss component of its the rate or
premium charge together with the profit and contingency component
of the rate or premium charge as determined under its
the rating plan or system as filed with the department
by the governing board of the facility in accordance with Section
38-73-1420. The ceding insurer shall retain as and for its ceding
commission the allocated loss adjustment expense component as well as
the underwriting and administrative expense components of the rate or
premium charge under ceding insurer's the rating plan
or system as filed with the department by the governing
board of the facility in accordance with Section 38-73-1420.
However, no ceding insurer may include in the agents' commissions
component of its underwriting expenses any amount greater than it has
actually paid its agent as commission on the reinsured risk."
SECTION 7. Section 38-73-1425 of the 1976 Code is repealed.
SECTION 8. This act takes effect July 1, 1993.
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