H 3925 Session 111 (1995-1996)
H 3925 General Bill, By Richardson
A Bill to amend Section 38-73-455(C), as amended, Code of Laws of South
Carolina, 1976, relating to automobile insurance rates, so as to provide,
among other things, that rating plans may provide for different rates and
rating plans among affiliated companies.-short title
04/05/95 House Introduced and read first time HJ-6
04/05/95 House Referred to Committee on Labor, Commerce and
Industry HJ-9
A BILL
TO AMEND SECTION 38-73-455(C), AS AMENDED, CODE OF
LAWS OF SOUTH CAROLINA, 1976, RELATING TO
AUTOMOBILE INSURANCE RATES, SO AS TO PROVIDE,
AMONG OTHER THINGS, THAT RATING PLANS MAY
PROVIDE FOR DIFFERENT RATES AND RATING PLANS
AMONG AFFILIATED COMPANIES; TO AMEND SECTION
38-73-455(E), AS AMENDED, RELATING TO REVIEW OF AN
APPLICANT'S MOTOR VEHICLE RECORD, SO AS TO
PROVIDE THAT THIS REVIEW BY AN INSURER TO
DETERMINE THE APPLICABLE RATE MUST OCCUR FOR
EACH APPLICANT, EXISTING POLICYHOLDERS ON
RENEWAL, AND EACH OPERATOR OF AN INSURED
VEHICLE; TO AMEND SECTION 38-73-735, AS AMENDED,
RELATING TO AUTOMOBILE INSURANCE, THE STATE
RATING AND STATISTICAL DIVISION, AND PLAN FOR
CREDITS AND DISCOUNTS, SO AS TO DELETE CERTAIN
LANGUAGE AND PROVIDE, AMONG OTHER THINGS, THAT
IF AN INSURANCE CREDIT OR DISCOUNT PLAN, OTHER
THAN THAT PROMULGATED BY THE DIRECTOR OR HIS
DESIGNEE, IS GIVEN TO AN INSURED PURSUANT TO THIS
SECTION, THE POLICY MAY NOT BE CEDED TO THE
REINSURANCE FACILITY; TO AMEND SECTION 38-73-760,
AS AMENDED, RELATING TO THE STATE RATING AND
STATISTICAL DIVISION AND UNIFORM STATISTICAL
PLANS, SO AS TO, AMONG OTHER THINGS, DELETE
CERTAIN PROVISIONS, GRANT A SAFE DRIVER DISCOUNT
BASED UPON THE INSURED'S THREE YEAR DRIVING
RECORD OF NO LESS THAN TEN PERCENT SAFE DRIVER
DISCOUNT AND REQUIRE NO LESS THAN TWENTY
PERCENT SAFE DRIVER DISCOUNT FOR DRIVERS HAVING
NO CHARGEABLE ACCIDENTS OR VIOLATIONS FOR FIVE
YEARS RATHER THAN REQUIRE NO LESS THAN TWENTY
PERCENT SAFE DRIVER DISCOUNT FOR THOSE ALL
ELIGIBLE; TO AMEND SECTION 38-73-1420, AS AMENDED,
RELATING TO THE BOARD OF GOVERNORS OF THE
SOUTH CAROLINA REINSURANCE FACILITY, SO AS TO
DELETE CERTAIN LANGUAGE, AND PROVIDE AMONG
OTHER THINGS, THAT THE EXPENSE COMPONENT FILED
BY THE FACILITY FOR PREMIUMS FOR PRIVATE
PASSENGER AUTOMOBILE INSURANCE WRITTEN IN
SOUTH CAROLINA SHALL REFLECT THE ACTUAL
EXPENSES OF THE FACILITY FOR USE WITH THE PURE
LOSS COMPONENT OF ALL CEDED RISKS AND THAT ALL
RISKS CEDED TO THE FACILITY SHALL USE THE STATE
UNIFORM RATE AND FACILITY PHYSICAL DAMAGE RATE;
TO AMEND SECTION 38-73-1425, AS AMENDED, RELATING
TO THE FINAL RATE ON PREMIUM CHARGE FOR PRIVATE
PASSENGER AUTOMOBILE INSURANCE RISK CEDED TO
THE REINSURANCE FACILITY, SO AS TO DELETE CERTAIN
PROVISIONS, AND PROVIDE, AMONG OTHER THINGS,
THAT IN CALCULATING THE FINAL RATE OR PREMIUM
CHARGE, IT MUST BE BASED UPON THE STATE UNIFORM
RATE OR THE COMPANY'S APPROVED RATE, WHICHEVER
IS GREATER, THAT A UNIFORM RATE FOR CEDED RISKS
HAVING NO MERIT RATING POINTS IS ESTABLISHED
OVER TWO YEARS, AND THAT A FACILITY PHYSICAL
DAMAGE RATE FOR CEDED RISKS IS ESTABLISHED OVER
TWO YEARS; TO AMEND SECTION 38-77-10, RELATING TO
THE DECLARATION OF THE PURPOSES OF CHAPTER 77 OF
TITLE 38 ON AUTOMOBILE INSURANCE, SO AS TO
DELETE AND PROVIDE, AMONG OTHER THINGS, CERTAIN
LANGUAGE AND PROVISIONS, INCLUDING THE STATED
PURPOSE TO PROVIDE MEDICAL, SURGICAL, FUNERAL,
AND DISABILITY INSURANCE BENEFITS WITHOUT
REGARD TO FAULT TO BE OFFERED UNDER AUTOMOBILE
INSURANCE POLICIES THAT PROVIDE BODILY INJURY
AND PROPERTY DAMAGE LIABILITY INSURANCE, OR
OTHER SECURITY, FOR MOTOR VEHICLES REGISTERED IN
THIS STATE; TO AMEND SECTION 38-77-30, AS AMENDED,
RELATING TO DEFINITIONS FOR PURPOSES OF CHAPTER
77 OF TITLE 38 ON AUTOMOBILE INSURANCE, SO AS TO
DEFINE "CEDE" OR "CESSION",
"STATE UNIFORM RATE", AND "FACILITY
PHYSICAL DAMAGE RATE"; TO AMEND SECTION
38-77-280, AS AMENDED, RELATING TO AUTOMOBILE
INSURANCE AND COLLISION AND COMPREHENSIVE
COVERAGES, SO AS TO DELETE CERTAIN PROVISIONS
AND LANGUAGE, AND PROVIDE, AMONG OTHER THINGS,
AUTOMOBILE INSURERS, INCLUDING THOSE COMPANIES
WRITING PRIVATE PASSENGER PHYSICAL DAMAGE
COVERAGES ONLY, MAY, RATHER THAN
"SHALL", MAKE COLLISION COVERAGE AND
EITHER COMPREHENSIVE OR FIRE, THEFT, AND
COMBINED ADDITIONAL COVERAGE AVAILABLE TO AN
INSURED OR QUALIFIED APPLICANT WHO REQUESTS THE
COVERAGE, HOWEVER, ASSIGNED PRODUCERS
"SHALL OFFER" AND "MAKE"
COLLISION COVERAGE AND EITHER COMPREHENSIVE OR
FIRE, THEFT, AND COMBINED ADDITIONAL COVERAGE
AVAILABLE TO AN INSURED OR QUALIFIED APPLICANT
WHO REQUESTS THE COVERAGE, AND THAT ALL
PHYSICAL DAMAGE COVERAGES ARE CEDED AT THE
FACILITY PHYSICAL DAMAGE RATE; TO AMEND SECTION
38-77-540, RELATING TO THE DUTIES OF A CEDING
INSURER, SO AS TO CHANGE THE SECTION'S TITLE AND
DELETE CERTAIN LANGUAGE AND PROVIDE, AMONG
OTHER THINGS, THAT THE FACILITY SHALL ACCEPT
CESSIONS AT THE STATE UNIFORM RATE INCLUDING,
WHEN APPLICABLE COVERAGES CONTAINED IN POLICY,
THE FACILITY PHYSICAL DAMAGE RATE; TO AMEND
SECTION 38-77-600, AS AMENDED, RELATING TO THE
REINSURANCE FACILITY RECOUPMENT CHARGE, SO AS
TO, AMONG OTHER THINGS, REVISE THE FORMULA USED
TO CALCULATE RECOUPMENT FOR ALL PRIVATE
PASSENGER AUTOMOBILE INSURANCE POLICIES ISSUED
OR RENEWED JUNE 30, 1995; TO AMEND SECTION
38-77-910, RELATING TO AUTOMOBILE INSURANCE AND
UNLAWFUL DISTINCTIONS BETWEEN POLICYHOLDERS
OR APPLICANTS, SO AS TO PROVIDE FOR FACILITY
RATING PLANS; TO AMEND SECTION 38-77-940, AS
AMENDED, RELATING TO THE PROHIBITION OF AN
INSURER TO USE INDIRECT MEANS TO PENALIZE AN
AGENT FOR COMPLIANCE WITH LAW, SO AS TO DELETE
CERTAIN PROVISIONS AND LANGUAGE PROHIBITING ANY
INSURER FROM DIRECTLY OR INDIRECTLY PROVIDING
AN AGENT WITH A LIST OF THE TYPES OF RISKS WHICH
IT CONSIDERS NECESSARY TO REINSURE IN THE
FACILITY; AND TO REQUIRE ALL INSURERS SUBJECT TO
THE PROVISIONS OF SECTION 38-77-280 TO SUBMIT RATE
FILINGS TO THE DIRECTOR OF THE DEPARTMENT OF
INSURANCE NO LATER THAN OCTOBER 1, 1996, WHICH
FILINGS MUST REFLECT THE RATE DECREASES, IF ANY,
ATTRIBUTABLE TO THE PASSAGE OF THIS ACT.
Be it enacted by the General Assembly of the State of South
Carolina:
SECTION 1. 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 in accordance with rating plans filed with and approved
by the director. These rating plans may provide for different rates
and rating plans among affiliated companies. The director shall
approve the rating plans if the rates are not excessive, inadequate,
or unfairly discriminatory. For the purpose of this section, an
affiliated group of automobile insurers includes a group of
automobile insurers under common ownership, management, or
control. Each member of a group of affiliated insurers shall not
be considered a separate insurer for purposes of compliance with
the laws governing the writing, cancellation, or renewal of an
automobile insurance policy. Therefore, if one company which is a
member of a group of affiliated companies refuses to write, cancels,
or refuses to renew a policy but, at the same time, offers to arrange
insurance for the applicant or insured with another member of the
same group, there has not been a refusal to write, a cancellation, or
a refusal to renew by the first company. However, no insurer shall
take such action unless it does so on the basis of underwriting
guidelines filed with the director. The movement of a policy from
one company to another within a group of affiliated companies
resulting in a different rate for the insured may only occur on the
renewal date of the policy. 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, 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 applicable for policies ceded to the facility.
However, those automobile insurers designated
contracted 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 policies not ceded to the facility."
SECTION 2. Section 38-73-455(E) of the 1976 Code, as last
amended by Act 113 of 1991, is further amended to read:
"(E) For purposes of determining the applicable rates to
be charged an insured, an automobile insurer shall obtain and
review an applicant's a motor vehicle record for
an applicant or an existing policyholder, on renewal, and each
operator of an insured vehicle."
SECTION 3. Section 38-73-735 of the 1976 Code, as last
amended by Section 783 of Act 181 of 1993, is further amended to
read:
"Section 38-73-735. In addition to risk and territorial
classification plans promulgated or approved under Section
38-73-730, the department may promulgate plans to afford credits
or discounts to automobile insureds, or he may approve the credit
or discount plans filed with him by insurers of automobile
insurance. No automobile insurance credit or discount plan may be
promulgated or approved by the director or his designee unless:
(1) the criteria for determining eligibility for credits or discounts
under the plan are objective, clear, and unequivocal;
(2) the criteria are based upon factually or statistically supported
data; and
(3) the credits or discounts provided under the plan will be
afforded by the insurer on a nondiscriminatory basis to all insureds
who are eligible therefor. If an insurance credit or discount
plan, other than that promulgated by the director or his
designee, is given to an insured pursuant to this section, the
policy may not be ceded to the Reinsurance Facility in
accordance with the facility's plan of operation."
SECTION 4. Section 38-73-760(e) of the 1976 Code, as last
amended by Section 783 of Act 181 of 1993, is further amended to
read:
"(e) The director or his designee shall require all insurers
transacting automobile insurance business in this State to assess
surcharges and grant safe driver discounts upon reviewing a
three year motor vehicle record in accordance with Section
38-73-455. These insurers shall grant safe driver discounts of
no less than twenty percent unless the private passenger
automobile insurance risk is written by insurers contracted pursuant
to Section 38-77-590(a) or is ceded to the facility. If an private
passenger automobile risk is written by insurers contracted pursuant
to Section 38-77-590(a) or is ceded to the facility, the driver having
no surcharge of points under the Uniform Merit Rating Plan shall
receive:
(1) upon reviewing a three year motor vehicle record, a safe
driver discount of no less than ten percent;
(2) upon reviewing a five year motor vehicle record, a safe
driver discount of no less than twenty percent."
SECTION 5. The 1976 Code is amended by adding:
"Section 38-73-780. (A) The state rating and statistical
division shall develop and file a loss component for private
passenger automobile insurance coverages based on the total
experience of all insurers in this State including risks ceded to the
facility. Due consideration must be given to actual loss experience
within this State for the most recent three-year period for which
such information is available; to prospective loss experience with
this State; and to all other relevant factors within this State;
provided, however, that countrywide loss experience and other
countrywide data may be considered only where credible South
Carolina experience or data is not available.
(B) The loss component developed under this section is
applicable to the risk and territorial classification plan promulgated
and approved by the director or his designee.
(C) The state rate and statistical division shall annually review
the loss component to determine if it is proper and supported by
statistical evidence and make appropriate filings for approval of
rates as required under this chapter."
SECTION 6. Section 38-73-1420 of the 1976 Code, as added by
Act 148 of 1989 and as last amended by Section 783 of Act 181 of
1993, is further 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 as defined under Section
38-73-1400(2) for private passenger automobile insurance rate
or premium charges which must accurately reflect the actual
expenses of the South Carolina Reinsurance Facility without profit
and for use with after the rating organization with the
largest number of members or subscribers has filed a
the pure loss component for private passenger automobile
insurance coverage developed under Section 38-73-780
with the director or his designee. Upon the approval of
such component by the director or his designee, those automobile
insurers designated contracted pursuant to Section
38-77-590(A), for risks written by them through producers
designated assigned pursuant to that same section,
and, subject to the provisions of Section 38-73-1425, all
insurers on all risks ceded to the facility, shall utilize these
final rate or premium charges as required under Section
38-77-540. Automobile insurers designated
contracted pursuant to Section 38-77-590(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 7. Section 38-73-1425 of the 1976 Code, as added by
Act 113 of 1991, is amended to read:
"Section 38-73-1425. The final rate or premium charge
for a private passenger automobile insurance risk ceded to the
facility which does not qualify for the safe driver discount in
Section 38-73-760(e) is the final rate or premium charge
required by Section 38-73-1420 38-77-540 or the
final rate or premium charge approved for use by the insurer,
whichever is greater.
(A) The establishing of a uniform rate for risks having no
merit rating plan points currently ceded to the facility by insurers
having company filed rates in effect on October 1, 1995 which are
less than the state uniform rate shall be accomplished within a
two-year period such that one-half of the current differential of the
lower company filed rate and the state uniform rate shall be added
on renewals effective on or after October 1, 1995, and, on renewals
effective on or after October 1, 1996, such risks shall be ceded at
the final rate or premium charge required by Section 38-77-540.
(B) On private passenger automobile insurance coverages ceded
to the facility, effective for the period beginning October 1, 1995
through September 30, 1996 the loss component portion of the state
uniform rate under Section 38-73-780 shall not be more than ten
percent greater than the loss component for private passenger
automobile insurance coverages filed with the director or his
designee by the Insurance Services Office (ISO). On private
passenger automobile insurance coverages ceded to the facility,
effective for the period beginning October 1, 1996 through
September 30, 1997 the loss component portion of the state uniform
rate under Section 38-73-780 shall not be more than fifteen percent
greater than the loss component for private passenger automobile
insurance coverage filed with the director or his designee by the
Insurance Services Office (ISO).
(C) The establishment of the facility physical damage rate as
defined in Chapter 77 and required under Section 38-77-540(b)
shall be accomplished within a two-year period, beginning
September 10, 1996."
SECTION 8. Section 38-77-10 of the 1976 Code, as last
amended by Section 801 of Act 181 of 1993, is further amended to
read:
"Section 38-77-10. In order to effect a complete reform
of automobile insurance and insurance practices in South Carolina,
the purposes of this chapter are:
(1) To provide that every automobile insurance risk which is
insurable on the basis of the criteria established in this chapter is
entitled to automobile insurance from the automobile insurer of the
applicant's choice on the basis of the same rates, policy forms,
claims service, and other services provided by the insurer to all
other applicants or insureds falling within the same
classification of risk and territory under the applicable risk and
territorial classification plan promulgated by the department or
the facility rate plans. so long as all these applicants or
insureds have satisfied the same objective standards as established
in Sections 38-77-280 and 38-73-455;
(2) To provide a Reinsurance Facility for automobile insurers in
which all automobile insurers must participate to the end that the
operating expenses and net profit or loss of the Facility may be
shared equitably by all the insurers transacting automobile insurance
business in this State giving appropriate consideration to degrees of
utilization of the Facility by the several insurers of automobile
insurance and to provide prohibitions or penalties in respect to
excessive utilization of the Facility.
(3) To provide prohibitions and penalties in respect to unfairly
discriminatory or unfairly competitive practices having as their
purpose or effect evasion of the statutory mandate of coverage
provided in this chapter or imposing an undue or unfair burden
upon other automobile insurers through excessive utilization of the
Facility.
(4) To provide medical, surgical, funeral, and disability
insurance benefits without regard to fault to be offered under
automobile insurance policies that provide bodily injury and
property damage liability insurance, or other security, for motor
vehicles registered in this State."
SECTION 9. Section 38-77-30 of the 1976 Code, as last
amended by Section 802 of Act 181 of 1993, is further amended by
adding:
"(15) `Cede' or `cession' means the act of transferring the
risk of loss from the individual insurer to all member insurers of
the South Carolina Reinsurance Facility through the operation of the
facility.
(16) `State uniform rate' means the final rate or premium charge
established by adding the loss component developed under Section
38-73-780 to the expense component filed by the governing board
of the facility under Section 38-73-1420.
(17) `Facility physical damage rate' means the state uniform rate
after application of an experience modification factor of no less
than one such that no operating loss is attributable to the facility's
experience with private passenger automobile physical damage
coverages [Ex: state uniform rate X 1.00; state uniform rate X 1.14;
etc.]."
SECTION 10. Section 38-77-280 of the 1976 Code, as last
amended by Section 810 of Act 181 of 1993, is further amended to
read:
"Section 38-77-280. (A) Except as provided in subsection
(B), all automobile insurers, including those insurance companies
writing private passenger physical damage coverages only,
shall may make collision coverage and either
comprehensive or fire, theft, and combined additional coverage
available to an insured or qualified applicant who requests the
coverage. Automobile insurers contracted pursuant to Section
38-77-590 for risks written by them through producers assigned by
the facility governing board pursuant to that section shall offer and
make available collision coverage and comprehensive or fire, theft
and combined additional coverage to an insured or qualified
applicant who requests the coverage.
If collision coverage is offered or provided, it
must have a mandatory deductible of two hundred fifty dollars, but
an insured or qualified applicant, at his option, may select an
additional deductible in appropriate increments up to one thousand
dollars.
If comprehensive coverage or fire, theft, and combined
additional coverages are offered or provided, it must have a
mandatory deductible of two hundred fifty dollars, but an insured,
at his option, may select an additional deductible in appropriate
increments up to one thousand dollars. This deductible does not
apply to auto safety glass. It is an unfair trade practice, as
described in Sections 38-57-30 and 38-57-40, for an insurer or an
agent to sell collision insurance, comprehensive coverage, or fire,
theft, and combined additional coverages unless the insured is
notified at the time of application of the savings which may be
realized if the applicant or the insured selects a higher deductible.
This notice is required only at the time of the initial sale and must
be in a form approved by the director or his designee. An insurer
may offer insureds lower deductibles at the insurer's option.
(B) Notwithstanding subsection (A) and Sections 38-77-110
and 38-77-920, automobile insurers may refuse to write automobile
physical damage insurance coverage, including automobile
comprehensive physical damage, collision, fire, theft, and combined
additional coverage, for an applicant or existing policyholder, on
renewal, for a motor vehicle customarily operated by an individual,
either the named insured or another operator not excluded in
accordance with Section 38-77-340 and who resides in the same
household, where one or more of the conditions or factors
prescribed in Section 38-73-455 exist. In addition, automobile
insurers may refuse to write physical damage insurance coverage to
an applicant or existing policyholder, on renewal, who has collected
benefits provided under automobile insurance physical damage
coverage during the thirty six months immediately preceding the
effective date of coverage, for two or more total fire losses or two
or more total theft losses. Automobile insurers may refuse to write
for private passenger automobiles physical damage insurance
coverage, including automobile comprehensive physical damage,
collision, fire, theft, and combined additional coverage, for an
applicant or existing policyholder, on renewal, for a motor vehicle
customarily operated by an individual, either the named insured or
another operator not excluded in accordance with Section 38-77-340
and who resides in the same household, which does not qualify for
the safe driver discount in Section 38-73-760c.
All insurers subject to the provisions of this section writing
single interest collision coverage shall provide an applicant for the
insurance at the time of his application a notice separate and apart
from any other form used in the application. The notice must be
signed by the applicant evidencing his acknowledgement of having
read the notice. The notice must contain the following language
printed in bold face type:
`NOTICE: THE INSURANCE COVERAGE YOU ARE
HEREBY PURCHASING IS SINGLE INTEREST COLLISION
COVERAGE. THE AMOUNT OF INSURANCE DECREASES
AS YOU PAY OFF THE AMOUNT OF YOUR INDEBTEDNESS.
YOU MAY NOT RECEIVE ANY INSURANCE PROCEEDS
OVER AND ABOVE THE AMOUNT OF THE OUTSTANDING
BALANCE ON YOUR LOAN.'
(C) Notwithstanding Section 38-77-110, automobile
physical damage coverage in an automobile insurance policy may
be canceled at any time during the policy period by reason of the
factors or conditions described in Section 38-73-455(A) or
Section 38-77-280(B) which existed before the
commencement of the policy period and which were not disclosed
to the insurer at the commencement of the policy period.
(D) No policy of insurance which provides automobile physical
damage coverage only may be ceded to the facility.
(E) Insurers of automobile insurance may charge a rate for
physical damage insurance coverages different than
from those provided for in Section 38-73-457 if the rates
are filed with the department and approved by the director or his
designee. Any applicant or existing policyholder, to be charged
this different rate, must be denied the coverage pursuant to
subsection (B) at the rate provided in Section 38-73-457.
However, automobile physical damage coverages ceded to the
facility by an insurer or servicing carrier shall be at the rate
provided for in accordance with Section 38-77-540.
(F) A carrier may not cede collision coverage, comprehensive
coverage, or fire, theft, and combined additional coverages with a
deductible of less than two hundred fifty dollars. An insured or
qualified applicant my select an additional deductible in appropriate
increments up to one thousand dollars. However the mandatory
deductible does not apply to safety glass. In determining the
premium rates to be charged on automobile insurance, it is unlawful
to consider race, color, creed, religion, national origin, ancestry,
location of residence, occupation, or economic status. If the
Director of Insurance makes a finding that the insurer is
participating in discriminatory practices, the director may impose a
fine on the insurer of up to two hundred thousand
dollars."
SECTION 11. The title of Section 38-77-540 of the 1976 Code is
amended to read:
"Duties of Ceding Insurer
Facility Rate Plans"
SECTION 12. 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 rate or
premium charge together with the profit and contingency
component of the rate or premium charge as determined under its
rating plan or system as filed with the Department. 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 rating plan or system as filed with the
Department. 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. The facility shall accept cessions on a
policy of private passenger automobile insurance at the option of an
insurer but only at the rate or premium charge as determined under
the rating plans established by the governing board and approved by
the director or his designee, subject, however, to Section 38-77-950
regarding reasonable utilization of the facility by member
companies. The rate plans for the facility are subject to the
director's or his designee's approval which may be granted only if
the plan is consistent with and provides for the following:
(A) The rate or premium charge for drivers of private passenger
automobiles shall be the state uniform rate as defined in this
chapter.
(B) Beginning on October 1, 1996, the rate or premium charge
for private passenger automobile physical damage coverage shall be
the facility physical damage rate as defined in this chapter.
(C) The rate plans of the facility shall use the applicable risk
and territorial classification plan promulgated by the director or his
designee including merit rating plan surcharges and discounts as
provided for in Section 38-73-760(e), and all rates or premium
charges shall likewise be subject to objective standard surcharges as
provided in Section 38-73-455.
(D) The ceding insurer shall transfer or credit to the facility on a
policy of automobile insurance reinsured by the facility the pure
loss component of the applicable uniform rate together with the
contingent component of such rate. 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 applicable uniform rate. 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 13. Section 38-77-600 of the 1976 Code, as last
amended by Section 826 of Act 181 of 1993, is further amended to
read:
"Section 38-77-600. The rate or premium charged by
insurers of private passenger automobile insurance must include a
facility recoupment charge, which must be added to the appropriate
base rate or objective standards rate prescribed in Sections
38-73-455 and 38-73-457. The operating losses of the facility for a
twelve-month period must be recouped in the subsequent
twelve-month period.
(1) Prior to Before December first of each
year, the governing board of the facility shall calculate the
recoupment amount, by coverage, by dividing the net facility
operating loss, adjusted to reflect prudently incurred expenses,
consistent with the provisions of Section 38-73-465,
industry average expenses and the time value of money, by
mandated coverage, for the preceding facility
accounting year, by the total number of earned car years, in
South Carolina, by coverage, for the same period of time. .386
multiplied by the recoupment is to be borne by risks having zero
surcharge points under the Uniform Merit Plan promulgated by the
department. The remainder of the recoupment (.614 multiplied by
the recoupment)This dollar amount represents R in the
formula, P(1)X + 2P(2)X + 3P(3)X + 4P(4)X + 5P(5)X +
6P(6)X + 7P(7)X + 8P(8)X + 9P(9)X + 10P(1)+I0X = R
P0X + 2P1X + 3P2X + 4P3X + 5P4X = R. In this formula to
be utilized in determining the facility recoupment charge:
(a) P0 is the percentage of risks which have zero surcharge
points under the Uniform Merit Rating Plan promulgated by the
director or his designee;
(a) P(1) (b) P1 is the percentage of risks
which have one surcharge point under the Uniform Merit Rating
Plan;
(b) P(2) (c) P2 is the percentage of risks
which have two surcharge points under the Uniform Merit Rating
Plan;
(c) P(3) (d) P3 is the percentage of risks
which are subject to a surcharge of three to eight points
under the Uniform Merit Rating Plan;
(d) P(4) (e) P4 is the percentage of risks
which are subject to a surcharge of four nine or
more points under the Uniform Merit Rating Plan;
(e) P(5) is the percentage of risks subject to a surcharge of
five points under the Uniform Merit Rating Plan;
(f) P(6) is the percentage of risks subject to a surcharge of
six points under the Uniform Merit Rating Plan;
(g) P(7) is the percentage of risks subject to a surcharge of
seven points under the Uniform Merit Rating Plan;
(h) P(8) is the percentage of risks subject to a surcharge of
eight points under the Uniform Merit Rating Plan;
(i) P(9) is the percentage of risks subject to a surcharge of
nine points under the Uniform Merit Rating Plan;
(j) P(1)+I0 or more is the percentage of risks subject to a
surcharge of ten or more points under the Uniform Merit Rating
Plan;
(k)(f) X is the dollar amount by coverage, to
be charged all risks having one zero surcharge
point points under the Uniform Merit Rating Plan
promulgated by the department director or his
designee. This dollar amount, by coverage, is the facility
recoupment charge to be added to the base rate or objective
standards rate prescribed in Sections 38-73-455 and 38-73-457 for
all risks which have one zero surcharge
point points.
(2) The facility recoupment charge by coverage to be added to
the base rate or objective standards rate for all risks which have one
surcharge point under the Uniform Merit Rating Plan is calculated
by multiplying X by a factor of one two.
(3) The facility recoupment charge by coverage to be added to
the base rate or objective standards rate for all risks which have two
surcharge points under the Uniform Merit Rating Plan is calculated
by multiplying X by a factor of two three.
(4) The facility recoupment charge by coverage to be added to
the base rate or objective standards rate for all risks which are
subject to a surcharge of three to eight points under the
Uniform Merit Rating Plan is calculated by multiplying X by a
factor of three four.
(5) The facility recoupment charge by coverage to be added to
the base rate or objective standards rate for all risks which are
subject to a surcharge of four nine or more points
under the Uniform Merit Rating Plan is calculated by multiplying X
by a factor of four five.
(6) The facility recoupment charge by coverage to be added
to the base rate or objective standards rate for all risks which are
subject to a surcharge of five points under the Uniform Merit
Rating Plan is calculated by multiplying X by a factor of five.
(7) The facility recoupment charge by coverage to be added to
the base rate or objective standards rate for all risks which are
subject to a surcharge of six points under the Uniform Merit Rating
Plan is calculated by multiplying X by a factor of six.
(8) The facility recoupment charge by coverage to be added to
the base rate or objective standards rate for all risks which are
subject to a surcharge of seven points under the Uniform Merit
Rating Plan is calculated by multiplying X by a factor of seven.
(9) The facility recoupment charge by coverage to be added to
the base rate or objective standards rate for all risks which are
subject to a surcharge of eight points under the Uniform Merit
Rating Plan is calculated by multiplying X by a factor of eight.
(10) The facility recoupment charge by coverage to be added to
the base rate or objective standards rate for all risks which are
subject to a surcharge of nine points under the Uniform Merit
Rating Plan is calculated by multiplying X by a factor of nine.
(11) The facility recoupment charge by coverage to be added to
the base rate or objective standards rate for all risks which are
subject to a surcharge of ten or more points under the Uniform
Merit Rating Plan is calculated by multiplying X by a factor of ten.
(12)(6) In determining the number of surcharge
points a risk has for the purposes of this section, no surcharge
points assigned under the Uniform Merit Rating Plan because the
principal operator of the automobile has not been licensed in any
state for at least one year immediately preceding the writing of the
risk or as a result of a failure of any motor vehicle equipment
requirement may be considered.
(13)(7) This section applies to all private
passenger automobile insurance policies issued or renewed after
June 30, 1989 1996. However, insurers unable
to comply with the provisions of this section and renewal provisions
required by law may comply with this section at any time after June
30, 1989, but in no event later than October 1, 1989."
SECTION 14. Section 38-77-910 of the 1976 Code, as last
amended by Section 828 of Act 181 of 1993, is further amended to
read:
"Section 38-77-910. It is an act of unlawful discrimination
for an automobile insurer to make any distinction between
automobile insurance policyholders or applicants for automobile
insurance with respect to coverage, rates, claims, or other services
except as the distinctions are provided for in the rating plans for the
classification of risks and territories promulgated by the department
and the facility rate plans."
SECTION 15. Section 38-77-940 of the 1976 Code is amended
to read:
"Section 38-77-940. No insurer of automobile insurance
shall directly or indirectly by offer or promise of reward or
imposition or threat of penalty or through any artifice or device
whatsoever, confer any benefit upon any agent or impose any
detriment upon any such agent for the purpose of avoiding any
class or type of automobile insurance risk which the insurer
considers it necessary to reinsure in the Facility; nor shall any offer
or promise of reward or imposition or threat of penalty in
connection with any other line or type of insurance be so tied to
automobile insurance as to have a tendency to induce the agent to
avoid any such class or type of automobile insurance risk; nor
shall any insurer of automobile insurance provide to agents, directly
or indirectly, orally or in writing, any listing of classes or types of
automobile insurance risks which it considers necessary to reinsure
in the Facility; nor shall any insurer of automobile insurance
terminate its insurance business with any one agent over the writing
of certain classes or types of automobile insurance risks without
also pulling out of the entire State or terminating its similar
insurance business with all other agents in the State at the same
time for a period of time of at least 365 days, except that if the
insurer reinstates the agent within thirty days of the determination
that the termination was unlawful, then this provision shall not
apply; nor shall any insurer of automobile insurance do anything
unfair, or unfairly fail to do anything, which has the effect of, or
which results in, causing any ceded insurance business to have a
detrimental effect on any incentive bonuses paid by the insurer to
agents. Any act in violation of this section constitutes an act of
unlawful discrimination and unfair competition which, if wilful,
shall result in the suspension or revocation of the insurer's
certificate of authority for not less than twelve months. Any
agreement made in violation of this section shall be void.
Nothing in this section may be considered to preclude or impair
agreements between insurers and their agents or some of their
agents to pay contingency commissions or a profit-sharing bonus
based upon the quality of business; nor shall the insurers, in any
manner, use that business placed in the Facility when determining
the quality bonus; nor may it be considered to preclude an
agreement between any agent and an insurer of automobile
insurance to exclude from any profit-sharing or contingency
arrangement automobile insurance business coming unsolicited to
the agent and written by him solely because of the mandate of
coverage provided in this chapter.
No insurer of automobile insurance shall cancel its representation
by an agent primarily because of the volume of automobile
insurance placed with it by the agent on account of the statutory
mandate of coverage nor because of the amount of the agent's
automobile insurance business which the insurer has considered it
necessary to reinsure in the Facility."
SECTION 16. No later than October 1, 1996, all insurers subject
to the provisions of Section 38-77-280 of the 1976 Code shall
submit rate filings to the Director of the Department of Insurance.
These filings must reflect the rate decreases, if any, attributable to
the passage of this act.
SECTION 17. Section 10 of this act takes effect October 1, 1996.
SECTION 18. Except as otherwise specifically provided in this
act, this act takes effect October 1, 1995.
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