Current Status Introducing Body:House Bill Number:3637 Primary Sponsor:Felder Committee Number:26 Type of Legislation:GB Subject:Motor vehicle insurance, provisions Residing Body:House Current Committee:Labor, Commerce and Industry Computer Document Number:BBM/10221JM.93 Introduced Date:19930304 Last History Body:House Last History Date:19930304 Last History Type:Introduced, read first time, referred to Committee Scope of Legislation:Statewide All Sponsors:Felder Type of Legislation:General Bill
Bill Body Date Action Description CMN Leg Involved
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3637 House 19930304 Introduced, read first time, 26
referred to Committee
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TO AMEND SECTION 38-77-10, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE DECLARATION OF PURPOSE UNDER THE STATE'S AUTOMOBILE INSURANCE LAW, SO AS TO DELETE PROVISIONS, INCLUDING REFERENCE TO THE SOUTH CAROLINA REINSURANCE FACILITY, PROVIDE REFERENCE TO AN UNDERWRITING ASSOCIATION, AND TO MAKE CHANGES TO THE DECLARATION; TO AMEND SECTION 38-77-30, AS AMENDED, RELATING TO DEFINITIONS UNDER THE AUTOMOBILE INSURANCE LAW, SO AS TO DELETE THE DEFINITION OF "FACILITY" AND TO DEFINE "UNDERWRITING ASSOCIATION", DELETE THE DEFINITION OF "QUOTA SHARE REINSURANCE" AND TO DEFINE "SHARED RISK POOLING", PROVIDE A DEFINITION FOR "ASSOCIATION STANDARD RATE" AND "ASSOCIATION QUALIFIED RATE", CHANGE THE DEFINITION OF "SPECIALIZED INSURER", AND PROVIDE A DEFINITION FOR "CLEAN RISK SUBSIDY"; TO CHANGE THE TITLE OF ARTICLE 3, CHAPTER 77, TITLE 38 FROM "MANDATE TO WRITE AND INSURANCE COVERAGE" TO "CERTAIN REQUIREMENTS TO INSURE AND INSURANCE COVERAGE"; TO CHANGE THE TITLE OF SECTION 38-77-110 FROM "INSURERS REQUIRED TO INSURE; EXCEPTIONS" TO "PROHIBITION AGAINST DISCRIMINATORY UNDERWRITING PRACTICES", DELETE PROVISIONS OF THAT CODE SECTION, AS AMENDED, AND ADD NEW PROVISIONS, INCLUDING THE PROVISION THAT A REFUSAL TO WRITE AN AUTOMOBILE INSURANCE POLICY MUST BE IN WRITING STATING THE CAUSE OF THE REFUSAL IF REQUESTED BY THE APPLICANT; TO AMEND SECTION 38-77-112, AS AMENDED, RELATING TO THE REQUIREMENT THAT AN APPLICANT FOR AUTOMOBILE INSURANCE OR A POLICYHOLDER IS REQUIRED TO HAVE A DRIVER'S LICENSE AND EXCEPTIONS, SO AS TO DELETE THE REFERENCE TO SECTION 38-77-280 AND SECTION 38-77-920; TO AMEND SECTION 38-77-115, RELATING TO AUTOMOBILE INSURANCE AND THE PROVISION THAT SIGNS ARE REQUIRED IN AN AGENT'S PLACE OF BUSINESS, SO AS TO DELETE THE PROVISIONS OF THAT SECTION, REQUIRE THAT AUTHORIZED AGENTS FOR EVERY INSURER COVERED BY SECTION 38-77-110 SHALL POST A SIGN WHICH IS TO BE TITLED "PROHIBITION AGAINST DISCRIMINATORY UNDERWRITING PRACTICES", AND PROVIDE FOR THE CONTENTS OF THE SIGN; TO AMEND SECTION 38-77-140, RELATING TO THE BODILY INJURY AND PROPERTY DAMAGE LIMITS UNDER THE AUTOMOBILE INSURANCE LAW, SO AS TO CHANGE THE AMOUNTS OF CERTAIN OF THE LIMITS; TO AMEND SECTION 38-77-280, AS AMENDED, RELATING TO AUTOMOBILE COLLISION COVERAGE AND COMPREHENSIVE COVERAGE, SO AS TO, AMONG OTHER THINGS, DELETE CERTAIN PROVISIONS AND PROVIDE THAT NO POLICY OF INSURANCE WHICH PROVIDES AUTOMOBILE PHYSICAL DAMAGE COVERAGE ONLY MAY BE TRANSFERRED TO THE UNDERWRITING ASSOCIATION FOR SHARED RISK POOLING; TO AMEND SECTION 38-77-285, AS AMENDED, RELATING TO THE REQUIREMENT THAT ALL AUTOMOBILE COVERAGES BE IN ONE INSURANCE POLICY, SO AS TO DELETE CERTAIN LANGUAGE AND PROVIDE THAT WITH THE EXCEPTION OF PRIVATE PASSENGER PHYSICAL DAMAGE COVERAGES, ANY COVERAGE TRANSFERRED TO THE UNDERWRITING ASSOCIATION ON A POLICY OF AUTOMOBILE INSURANCE MUST BE TRANSFERRED FOR ALL AUTOMOBILES COVERED UNDER THE POLICY AND THAT THIS SECTION APPLIES ONLY TO INSURANCE POLICIES COVERING PRIVATE PASSENGER VEHICLES AND SMALL COMMERCIAL RISKS; TO CHANGE THE TITLE OF ARTICLE 5, CHAPTER 77, TITLE 38 FROM "REINSURANCE FACILITY AND DESIGNATED PRODUCERS" TO "UNDERWRITING ASSOCIATION; SERVICING CARRIERS AND PRODUCERS"; TO AMEND THE 1976 CODE BY ADDING SECTION 38-77-511 SO AS TO CREATE THE NONPROFIT, UNINCORPORATED LEGAL ENTITY KNOWN AS THE SOUTH CAROLINA AUTOMOBILE UNDERWRITERS ASSOCIATION AND PROVIDE FOR RELATED MATTERS; TO AMEND SECTION 38-77-520, RELATING TO THE REQUIREMENT THAT AUTOMOBILE INSURERS MUST BECOME MEMBERS OF THE REINSURANCE FACILITY, SO AS TO REPLACE THE REFERENCES TO THE FACILITY WITH REFERENCES TO THE UNDERWRITING ASSOCIATION; TO AMEND SECTION 38-77-530, RELATING TO THE PLAN OF OPERATION BY THE REINSURANCE FACILITY AND APPROVAL BY THE CHIEF INSURANCE COMMISSIONER, SO AS TO DELETE THE EXISTING PROVISIONS OF THE CODE SECTION AND PROVIDE INSTEAD FOR THE PLAN OF OPERATION OF THE UNDERWRITING ASSOCIATION; TO AMEND SECTION 38-77-540, RELATING TO THE DUTIES OF THE CEDING INSURER UNDER THE AUTOMOBILE INSURANCE LAWS, SO AS TO DELETE THE EXISTING PROVISIONS OF THE CODE SECTION, PROVIDE THAT THE UNDERWRITING ASSOCIATION SHALL ACCEPT THE TRANSFER OF RISK ON ANY POLICY OF AUTOMOBILE INSURANCE COVERING INDIVIDUAL PRIVATE PASSENGER AND SMALL COMMERCIAL RISKS 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 CHIEF INSURANCE COMMISSIONER, SUBJECT HOWEVER, TO SECTION 38-77-950 REGARDING REASONABLE UTILIZATION OF THE UNDERWRITING ASSOCIATION BY MEMBER COMPANIES, AND PROVIDE FOR RELATED MATTERS; TO AMEND SECTION 38-77-550, RELATING TO AUTOMOBILE INSURANCE AND THE PROVISION THAT LEGAL RIGHTS OF THE INSURED AND THE INSURER ARE NOT AFFECTED BY REINSURANCE, SO AS TO DELETE THE EXISTING PROVISIONS OF THE CODE SECTION AND PROVIDE FOR THE EFFECT OF THE TRANSFER OF RISK UNDER A POLICY OF AUTOMOBILE INSURANCE TO THE UNDERWRITING ASSOCIATION FOR SHARED RISK POOLING; TO AMEND SECTION 38-77-560, RELATING TO DEDUCTIONS TO A CEDING INSURER UNDER THE AUTOMOBILE INSURANCE LAWS, SO AS TO DELETE THE EXISTING PROVISIONS OF THE CODE SECTION AND PROVIDE THAT AN INSURER TRANSFERRING RISKS ON AUTOMOBILE INSURANCE POLICIES TO THE UNDERWRITING ASSOCIATION SHALL RECEIVE CREDIT BY WAY OF DEDUCTION FROM ITS UNEARNED PREMIUM LIABILITY AS CALCULATED IN ACCORDANCE WITH SECTION 38-9-170, BUT BUSINESS TRANSFERRED TO THE UNDERWRITING ASSOCIATION MAY NOT BE DEDUCTED FOR PURPOSES OF THE LIMITATIONS OF RISK PROVISIONS OF SECTION 38-55-30; TO AMEND SECTION 38-77-570, RELATING TO INVESTMENT AND DISTRIBUTION OF FUNDS OF THE REINSURANCE FACILITY, SO AS TO DELETE THE EXISTING PROVISIONS OF THE CODE SECTION AND PROVIDE FOR THE INVESTMENT AND DISTRIBUTION OF THE FUNDS AND RESERVES OF THE UNDERWRITING ASSOCIATION; TO AMEND SECTION 38-77-580, AS AMENDED, RELATING TO THE GOVERNING BOARD OF THE REINSURANCE FACILITY, SO AS TO DELETE REFERENCES TO THE FACILITY AND REPLACE THEM WITH REFERENCES TO THE UNDERWRITING ASSOCIATION, AND DELETE REFERENCES TO "DESIGNATED AGENTS" AND REPLACE THEM WITH REFERENCES TO "SERVICING AGENTS"; TO AMEND SECTION 38-77-585, AS AMENDED, RELATING TO ADDITIONAL BOARD MEMBERS OF THE REINSURANCE FACILITY, SO AS TO, AMONG OTHER THINGS, DELETE REFERENCES TO THE REINSURANCE FACILITY AND DESIGNATED INSURERS AND PROVIDE REFERENCES TO UNDERWRITING ASSOCIATION CONTRACTED INSURERS; TO AMEND SECTION 38-77-590, AS AMENDED, RELATING TO DESIGNATED PRODUCERS UNDER THE AUTOMOBILE INSURANCE LAWS, SO AS TO DELETE CERTAIN PROVISIONS, ADD PROVISIONS, INCLUDING THE REQUIREMENT THAT THE GOVERNING BOARD OF THE UNDERWRITING ASSOCIATION CONTRACT WITH INSURERS MEETING ELIGIBILITY REQUIREMENTS PROMULGATED BY THE BOARD TO ACT AS SERVICING CARRIERS FOR THE WRITING OF AUTOMOBILE INSURANCE THROUGH PRODUCERS ASSIGNED TO THE SERVICING CARRIER BY THE BOARD, CHANGE THE QUALIFICATIONS FOR AN APPLICANT FOR ASSIGNMENT TO A SERVICING CARRIER, AND PROVIDE FOR RELATED MATTERS; TO AMEND SECTION 38-77-630, AS AMENDED, RELATING TO POLICIES CEDED TO THE REINSURANCE FACILITY, SO AS TO DELETE REFERENCE TO THE REINSURANCE FACILITY AND REPLACE IT WITH REFERENCE TO THE UNDERWRITING ASSOCIATION, DELETE CERTAIN PROVISIONS, AND PROVIDE THAT A RISK, OTHER THAN AT RENEWAL, MAY BE TRANSFERRED TO THE UNDERWRITING ASSOCIATION ONLY WHEN THE APPLICATION IS ACCOMPANIED BY EITHER A RENEWAL NOTICE FROM ANOTHER INSURER OR A MOTOR VEHICLE REPORT (MVR) ISSUED AT THE POINT OF SALE, TOGETHER WITH THE FULL PREMIUM CORRECTLY REFLECTING THE FACTS SHOWN ON THE MVR OR CONSISTENT WITH THE PREMIUM QUOTED IN THE RENEWAL NOTICE; TO AMEND SECTION 38-77-910, RELATING TO THE AUTOMOBILE INSURANCE LAWS AND UNLAWFUL DISTINCTIONS BETWEEN POLICYHOLDERS OR APPLICANTS, SO AS TO PROVIDE, AMONG OTHER THINGS, THAT ANY VIOLATION OF THIS CODE SECTION OR THE PROHIBITION AGAINST DISCRIMINATORY UNDERWRITING PRACTICES AS DESCRIBED UNDER SECTION 38-77-110 MAY BE CAUSE FOR REVOCATION OR SUSPENSION OF THE INSURER'S OR AGENT'S LICENSE BY THE CHIEF INSURANCE COMMISSIONER; TO AMEND SECTION 38-77-920, AS AMENDED, RELATING TO THE PROVISION THAT AUTOMOBILE INSURERS AND AGENTS MAY NOT REFUSE ACCEPTANCE OF INSURANCE, THE PROPERTY RIGHTS OF CERTAIN AGENTS, AND THE RESTRICTION OF MAILINGS TO CERTAIN AREAS, SO AS TO DELETE CERTAIN PROVISIONS; TO AMEND SECTION 38-77-940, RELATING TO THE AUTOMOBILE INSURANCE LAWS, AVOIDING CERTAIN CLASSES OR TYPES OF RISKS, EXCEPTIONS, AND CANCELING AN AGENT'S REPRESENTATION, SO AS TO, AMONG OTHER THINGS, DELETE CERTAIN LANGUAGE AND PROVISIONS AND REPLACE THE REFERENCES TO THE REINSURANCE FACILITY WITH REFERENCES TO THE UNDERWRITING ASSOCIATION; TO AMEND SECTION 38-77-950, AS AMENDED, RELATING TO UNREASONABLE OR EXCESSIVE USE OF THE REINSURANCE FACILITY BY AN INSURER AND NOTICE TO A POLICYHOLDER THAT HIS POLICY IS IN THE FACILITY, SO AS TO DELETE CERTAIN PROVISIONS, REPLACE REFERENCES TO THE FACILITY WITH REFERENCES TO THE UNDERWRITING ASSOCIATION INSTEAD, AND ADD PROVISIONS, INCLUDING THE PROVISION FOR MAKING A PRIMA FACIE CASE OF EXCESSIVE OR UNREASONABLE UTILIZATION; TO AMEND SECTION 38-77-960, RELATING TO AUTOMOBILE INSURANCE AGENT'S BUSINESS, SO AS TO DELETE THE EXISTING PROVISIONS OF THAT CODE SECTION AND ADD PROVISIONS, INCLUDING THE PROVISION THAT WHEN DEALING WITH THE AGENTS OF THE COMPANY, WHO ARE LICENSED TO SELL AUTOMOBILE INSURANCE, THE COMPANY MAY NOT USE ANY BUSINESS TRANSFERRED TO THE UNDERWRITING ASSOCIATION IN DETERMINING THE PROFITABILITY OF THAT AGENT'S BUSINESS; TO AMEND SECTION 38-73-10, AS AMENDED, RELATING TO THE DECLARATION OF PURPOSE AND CONSTRUCTION OF CHAPTER 73 OF TITLE 38, DEALING WITH PROPERTY, CASUALTY, INLAND MARINE, AND SURETY RATES AND RATEMAKING ORGANIZATIONS, SO AS TO DELETE REFERENCE TO THE REINSURANCE FACILITY AND REPLACE IT WITH REFERENCE TO THE SOUTH CAROLINA AUTOMOBILE UNDERWRITERS ASSOCIATION; TO AMEND SECTION 38-73-455, AS AMENDED, RELATING TO AUTOMOBILE INSURANCE RATES, SO AS TO DELETE THE EXISTING PROVISIONS OF THAT CODE SECTION, AND ADD PROVISIONS, INCLUDING A PROVISION THAT AN AUTOMOBILE INSURER SHALL FILE AND OFFER FOR AUTOMOBILE INSURANCE A RATE AS DEFINED IN SECTION 38-73-457, WHICH RATE IS SUBJECT TO ALL SURCHARGES OR DISCOUNTS, IF ANY, APPLICABLE UNDER ANY APPROVED MERIT RATING PLAN, CREDIT OR DISCOUNT PLAN PROMULGATED OR APPROVED BY THE CHIEF INSURANCE COMMISSIONER AND IS SUBJECT TO THE APPLICATION OF THE CLEAN RISK SUBSIDY AS DEFINED IN CHAPTER 77 OF TITLE 38; TO AMEND SECTION 38-73-457, RELATING TO INSURANCE CASUALTY AND SURETY RATES, FILING INFORMATION ON BASE RATES, AND THE EFFECTIVE DATE OF RATES, SO AS TO, AMONG OTHER THINGS, DELETE CERTAIN PROVISIONS AND ADD PROVISIONS, INCLUDING A PROVISION THAT EVERY AUTOMOBILE INSURER AND RATING ORGANIZATION SHALL FILE WITH THE CHIEF INSURANCE COMMISSIONER A RATE FOR AUTOMOBILE INSURANCE BY COVERAGE CALCULATED SOLELY UPON THE EXPERIENCE GENERATED BY THE INSURER IN ITS BOOK OF BUSINESS AND WHICH MUST NOT INCLUDE EXPERIENCE GENERATED BY RISKS TRANSFERRED TO THE UNDERWRITING ASSOCIATION FOR SHARED RISK POOLING, AND INCLUDING A PROVISION THAT EFFECTIVE MARCH 1, 1994, THE COMMISSIONER SHALL DISALLOW THE FURTHER USE OF THE OBJECTIVE STANDARDS RATE PREVIOUSLY FILED IN ACCORDANCE WITH THIS SECTION; TO AMEND SECTION 38-73-460, RELATING TO INSURANCE CASUALTY AND SURETY RATES AND THE EFFECT OF GAINS AND LOSSES INCURRED BY MEMBERS ON RATES, SO AS TO DELETE THE REFERENCE TO THE REINSURANCE FACILITY AND REPLACE IT WITH REFERENCE TO THE AUTOMOBILE UNDERWRITERS ASSOCIATION; TO AMEND SECTION 38-73-520, RELATING TO INSURANCE CASUALTY AND SURETY RATES AND THE REQUIREMENT OF RATE FILINGS, SO AS TO PROVIDE FOR THE EXCEPTION OF AN INSURER'S USE OF THE RATE PLANS OF THE AUTOMOBILE UNDERWRITERS ASSOCIATION PURSUANT TO SECTIONS 38-73-455 AND 38-73-457; TO AMEND SECTION 38-73-735, AS AMENDED, RELATING TO THE STATE RATING AND STATISTICAL DIVISION AND THE PLAN FOR CREDITS AND DISCOUNTS, SO AS TO DELETE THE PROVISION THAT IF AN INSURANCE CREDIT OR DISCOUNT PLAN IS GIVEN TO AN INSURED PURSUANT TO THIS SECTION, THE POLICY MAY BE CEDED TO THE REINSURANCE FACILITY IN ACCORDANCE WITH THE FACILITY'S PLAN OF OPERATION; TO AMEND SECTION 38-73-750, AS AMENDED, RELATING TO THE STATE RATING AND STATISTICAL DIVISION, THE REQUIREMENT THAT PLANS MUST BE FILED BY INSURERS, THE PROVISION THAT CERTAIN PLANS MAY NOT BE FILED OR APPROVED, AND THE DISAPPROVAL OF PLANS BY THE CHIEF INSURANCE COMMISSIONER, SO AS TO DELETE CERTAIN LANGUAGE, INCLUDING THE REFERENCE TO THE SOUTH CAROLINA REINSURANCE FACILITY AND REPLACE THAT REFERENCE WITH A REFERENCE TO THE SOUTH CAROLINA AUTOMOBILE UNDERWRITERS ASSOCIATION; TO AMEND SECTION 38-73-760, AS AMENDED, RELATING TO THE STATE RATING AND STATISTICAL DIVISION AND UNIFORM STATISTICAL PLANS, SO AS TO DELETE CERTAIN LANGUAGE, INCLUDING REFERENCE TO THE REINSURANCE FACILITY; TO AMEND SECTION 38-73-920, RELATING TO INSURANCE RATES, RATE MAKING, RATE FILING, AND THE PROVISION THAT NO INSURANCE MAY BE ISSUED EXCEPT ON RATES FILED, SO AS TO ADD CERTAIN REFERENCES TO SECTIONS 38-73-455 AND 38-73-457 AS PERTAINING TO UTILIZATION OF THE UNDERWRITING ASSOCIATION RATE PLANS BY INSURERS; TO AMEND SECTION 38-73-1420, RELATING TO INSURANCE RATING ORGANIZATIONS, THE REQUIREMENT THAT THE BOARD OF GOVERNORS OF THE REINSURANCE FACILITY SHALL FILE THE EXPENSE COMPONENT, AND USE OF THE COMPONENT AFTER APPROVAL, SO AS TO DELETE THE EXISTING PROVISIONS OF THAT CODE SECTION AND ADD PROVISIONS, INCLUDING A PROVISION REQUIRING THE BOARD OF GOVERNORS OF THE SOUTH CAROLINA AUTOMOBILE UNDERWRITERS ASSOCIATION TO FILE AN EXPENSE COMPONENT FOR RATE OR PREMIUM CHARGES DEVELOPED UNDER RATE PLANS APPROVED BY THE CHIEF INSURANCE COMMISSIONER, AND INCLUDING A PROVISION THAT AUTOMOBILE INSURERS CONTRACTED TO THE SOUTH CAROLINA AUTOMOBILE UNDERWRITERS ASSOCIATION PURSUANT TO SECTION 38-77-590(a) AND ALL INSURERS ON POLICIES OF AUTOMOBILE INSURANCE TRANSFERRED TO THE UNDERWRITING ASSOCIATION FOR SHARED RISK POOLING SHALL UTILIZE THE FINAL RATE OR PREMIUM CHARGES UNDER THE APPLICABLE RATE PLAN APPROVED BY THE CHIEF INSURANCE COMMISSIONER FOR THE UNDERWRITING ASSOCIATION COMPRISING THESE FILED RATES; TO REQUIRE THE CHIEF INSURANCE COMMISSIONER TO CONDUCT A STUDY TO DETERMINE WHETHER THERE ARE MORE EQUITABLE TERRITORIES IN THIS STATE, WHERE PRIVATE PASSENGER AUTOMOBILE INSURERS COMPETE, THAN NOW EXIST WHICH WOULD ALLOW A GREATER DEGREE OF OPEN-MARKET COMPETITION; TO PROVIDE THAT ANY PERSON WHO SHALL OPERATE OR ALLOW AN UNINSURED MOTOR VEHICLE TO BE OPERATED SHALL SUFFER THE IMMEDIATE IMPOUNDMENT OF SUCH VEHICLE UNTIL SUCH TIME AS HE POSTS LIABILITY INSURANCE IN THE AMOUNT REQUIRED BY CHAPTER 77, TITLE 38, AND PAYS ANY STORAGE AND IMPOUNDMENT FEES, TOGETHER WITH ANY OTHER FINES OR FEES IMPOSED FOR THE OPERATION OF AN UNINSURED MOTOR VEHICLE; TO REQUIRE THE CHIEF INSURANCE COMMISSIONER BY A CERTAIN DATE TO PRESENT IN WRITING TO THE GOVERNOR AND THE GENERAL ASSEMBLY A PROPOSED UNIFORM MERIT RATING PLAN AS AUTHORIZED UNDER SECTION 38-73-760 WITH SURCHARGES COMPUTED AS A PERCENT OF THE PREMIUM, BUT IN ALL OTHER ASPECTS CONFORMING IN PRINCIPLE TO THE EXISTING MERIT RATING PLAN; AND TO REPEAL SECTIONS 38-73-1410, RELATING TO INSURANCE RATING ORGANIZATIONS AND THE PROVISION THAT THE REFILING OF FINAL RATES OR PREMIUM CHARGES PREVIOUSLY APPROVED IS NOT REQUIRED, 38-73-1425, RELATING TO INSURANCE RATING ORGANIZATIONS AND THE PROVISIONS REGARDING THE FINAL RATE OR PREMIUM CHARGE FOR PRIVATE PASSENGER AUTOMOBILE INSURANCE RISK CEDED TO THE REINSURANCE FACILITY, 38-77-111, RELATING TO AUTOMOBILE INSURANCE POLICIES WHICH MAY BE CEDED TO THE REINSURANCE FACILITY, 38-77-510, RELATING TO THE REINSURANCE FACILITY, 38-77-595, RELATING TO THE REINSURANCE FACILITY AND CONDITIONS FOR DESIGNATION OF OTHERWISE INELIGIBLE APPLICANTS FOR DESIGNATION, 38-77-600, RELATING TO THE REINSURANCE FACILITY RECOUPMENT CHARGE, 38-77-605, RELATING TO THE REQUIREMENT THAT THE FACILITY RECOUPMENT CHARGE BE DISPLAYED, 38-77-610, RELATING TO AUTOMOBILE INSURANCE AND THE FILING OF RECOUPMENT CHARGES, 38-77-620, RELATING TO THE INCLUSION OF RECOUPMENT CHARGES IN AUTOMOBILE INSURANCE RATES, AND 38-77-625, RELATING TO AUTOMOBILE INSURANCE AND THE PROVISION THAT THERE SHALL BE NO INCREASE IN THE RECOUPMENT CHARGE UNDER CERTAIN CONDITIONS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 38-77-10 of the 1976 Code is 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 classification of risk and territory under the applicable risk and territorial classification plan promulgated by the Commissioner 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; To provide that automobile insurance risks may not be rejected, canceled, or non-renewed based on anything other than objective criteria.
(2) To provide a Reinsurance Facility an Underwriting Association 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 Association 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 Association by the several insurers of automobile insurance and to provide prohibitions or penalties in respect to excessive utilization of the Facility Association.
(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 To provide prohibitions and penalties in respect to unfairly discriminatory or unfairly competitive practices. (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 2. Section 38-77-30(5) of the 1976 Code is amended to read:
"(5) "Facility" means the unincorporated, nonprofit, legal entity created by this chapter to reinsure policies of automobile insurance known as the South Carolina Reinsurance Facility. `Underwriting Association' means the unincorporated, nonprofit, legal entity created by this chapter for shared risk pooling of policies of automobile insurance known as the South Carolina Automobile Underwriters Association."
SECTION 3. Section 38-77-30(9) of the 1976 Code is amended to read:
"(9) "Quota share reinsurance" means that form of reinsurance in which the reinsurer assumes a fixed percentage of the insured risk. `Shared risk pooling' means that method used by member insurers of the Underwriting Association in accordance with the plan of operation to transfer risks via a one hundred percent quota share reinsurance agreement to a common pool of shared market consumers."
SECTION 4. Section 38-77-30 of the 1976 Code is amended by adding:
"(9.5) `Association standard rate' means the final rate or premium charge for private passenger automobile insurance, including applicable safe driver discount for drivers with no merit rating plan points, determined by increasing the pure loss component filed by the insurance services office (ISO) twenty-five percent and adding the resultant pure loss component to the expense component filed by the Board of Governors of the Underwriting Association.
(10.5) `Association qualified rate' means the final rate or premium charge, including applicable safe driver discount for drivers with no merit rating plan points, determined by calculating the average of the pure loss components filed for private passenger automobile insurance by the ten largest writers of that type of insurance in South Carolina and adding the expense component filed by the governing board of the underwriting association. Private passenger automobile insurance transferred by an insurer to the underwriting association shall not be included when determining the ten largest writers of that type of insurance for the purpose of this calculation; and additionally, in situations where an insurer which is determined to be one of the ten largest writers has multiple rate filings, only the lowest pure loss component shall be used in the calculation."
SECTION 5. Section 38-77-30(12) of the 1976 Code is amended to read:
"(12) `Specialized insurer' means an insurer which specializes in certain types of business such as, but without limitation on the generality, commercial automobile business, and which may be relieved, with the approval of the commissioner, of the obligation to write types of business inconsistent with this specialty, such as private passenger automobile business. However, no insurer may be approved as a specialized insurer or continue to be so approved unless it accepts all insurable risks falling within the types of business to which it confines its writings without distinctions among applicants or policyholders as to policy forms, terms, rates, or services other than as the distinctions are reflected in the approved rating plan for the classification of risks. No insurer may be approved as a specialized insurer because it specializes in or purports to specialize in select or preferred risks. A specialized insurer may not cede risks to the Reinsurance Facility and thus does not recoup losses of the Facility A specialized insurer may not transfer risks to the Underwriting Association and is exempt from participating as a member company. Specialized insurers may be excused from using the merit rating plan and the uniform classification and territorial plans upon approval by the commissioner."
SECTION 6. Section 38-77-30 of the 1976 Code is amended by adding:
"(15) `Clean risk subsidy' means (1) the amount, not to exceed forty dollars, determined annually by the Board of Governors of the Underwriting Association to be added and included in the final rate or premium charge per insured vehicle, which is collected by an insurer for payment to the underwriting association on all individual private passenger automobile risks and small commercial risks underwritten by the insurer in South Carolina, and (2) on risks to which one or more merit rating plan points apply, the inclusion of an additional amount necessary to cover or recover net losses of the underwriting association in accordance with the plan of operation which amount is determined as a percent of the final rate or premium charge earned per vehicle."
SECTION 7. The title of Article 3, Chapter 77, Title 38 of the 1976 Code is amended to read:
"MANDATE TO WRITE AND INSURANCE COVERAGE CERTAIN REQUIREMENTS TO INSURE AND INSURANCE COVERAGE".
SECTION 8. The title of Section 38-77-110 of the 1976 Code is amended to read:
"Insurers required to insure; exceptions Prohibition against discriminatory underwriting practices."
SECTION 9. Section 38-77-110 of the 1976 Code, as last amended by Act 148 of 1989, is further amended to read:
"Section 38-77-110. (A) Automobile insurers other than insurers designated and approved as specialized insurers by the commissioner may not refuse to write or renew automobile insurance policies for individual private passenger automobiles or small commercial risks. These policies may not be canceled except for reasons which had they existed or been known when the policy was written would have rendered the risk not an insurable risk. Every automobile insurance risk constitutes an insurable risk unless the operator's permit of the named insured has been revoked or suspended and is at the time of application for insurance so revoked or suspended. However, no insurer is required to write or renew automobile insurance on any risk if there exists a valid and enforceable outstanding judgment secured by an insurer, an agent, or licensed premium service company on account of automobile insurance premiums which the applicant or insured or any principal operator who is a member of the named insured's household has failed or refused to pay unless the applicant or insured pays in advance the entire premium for the full term of the policy sought to be issued or renewed or the annual premium, whichever is the lesser. With the exception of insurers designated and approved as specialized insurers by the commissioner, no automobile insurer or agent may refuse to write, cancel, or nonrenew any policy, coverage, or endorsement of automobile insurance for individual private passenger automobile risks and small commercial risks as defined in Section 38-77-30 solely because of the age, sex, marital status, race, religion, national origin, type of employment, or place of residence of any applicant for insurance or any existing insured. A refusal to write an automobile insurance policy must be in writing stating the cause of the refusal if requested by the applicant. An insurer is not precluded from effecting cancellation of an automobile insurance policy, either upon its own initiative or at the instance of an agent or licensed premium service company, because of the failure of any named insured or principal operator to pay when due any automobile insurance premium or any installment payment. However, notice of cancellation for nonpayment of premium notifies the person to whom the notice is addressed that the notice is void and ineffective if payment of the full amount of the premium or premium indebtedness, whichever is the greater, is made to the insurer, agent, or licensed premium service company named in the notice by the otherwise effective date of cancellation; except that in circumstances of non-payment of the premium, or payment as part of an installment or premium finance plan, made to the insurer, agent, or premium service company where the insurer, agent, or premium service company has notified the person by first class, certified mail of its inability to collect said premium or payment utilizing the financial instrument provided by the person, the notice of cancellation notifies the person by reason of the above that the policy and coverage is canceled at the date and time such premium or payment was due. This notice of cancellation is not considered ineffective for being conditional, ambiguous, or indefinite.
(B) Notwithstanding subsection (A) of this section, no insurer is required to write private passenger automobile insurance with higher limits of coverage than:
(1) two hundred fifty thousand dollars, for bodily injury liability to one person in one accident,
(2) subject to the limit for one person, five hundred thousand dollars because of bodily injury to two or more persons in one accident,
(3) fifty thousand dollars because of injury to or destruction of property of others in any one accident,
(4) five hundred thousand dollars combined single limits for either or both bodily injury and property damage, if any applicant or existing policyholder, on renewal, for a motor vehicle customarily operated by an individual, either the named insured or any other operator not excluded in accordance with Section 38-77-340 and who resides in the same household, has one or more of the conditions or factors prescribed in Section 38-73-455(A) existing and if an insurer, at its option, writes such a policy, the policy may not be ceded to the Reinsurance Facility Notwithstanding Section 38-77-110(A), an automobile insurance policy which has been in effect for less than sixty days and is not a renewal of a previously existing policy, may be canceled for any objective reason by furnishing to the insured at least thirty days written notice of cancellation, except where the reason for cancellation is nonpayment of premium in which case not less than ten days written notice must be furnished. This section does not apply to policies transferred to the underwriting association for shared risk pooling.
(C) With regard to any coverage not required to be written by an insurer under the mandate to write, no insurer may refuse to write such policy, coverage, or endorsement of automobile insurance because of the race, color, creed, national origin, or ancestry of anyone who seeks to become insured The provisions of Article 9 of Chapter 75 regarding cancellation, non-renewal and renewal of insurance policies which are not inconsistent with the purposes of this chapter, and specifically Sections 38-77-10, 38-77-110, and 38-77-590, shall be applicable."
SECTION 10. Section 38-77-112 of the 1976 Code, as last amended by Act 148 of 1989, is further amended to read:
"Section 38-77-112. Notwithstanding Sections Section 38-77-110, 38-77-920, and 38-77-280, no automobile insurer is required to write coverage for automobile insurance as defined in Section 38-77-30 for any applicant or existing policyholder who does not at the time of application or renewal possess a valid South Carolina motor vehicle or special restricted driver's license. This section does not apply to an individual who is handicapped and who owns a vehicle in this State but who does not have a valid driver's license. If an automobile is principally garaged and operated in this State, the owner of the vehicle must be offered coverage thereon regardless of whether or not he possesses a valid South Carolina driver's license if he designates to the insurer who the principal operator of the vehicle will be and this person has a valid South Carolina driver's license or otherwise meets the requirements of this section. This requirement does not apply to personnel of the Armed Forces of the United States on active duty and officially stationed in this State who possess a valid motor vehicle driver's license issued by another state or territory of the United States or the District of Columbia. This requirement is waived ninety days for individuals who move into South Carolina with the intent of making South Carolina their place of residence if they possess a valid driver's license issued by another state or territory of the United States or the District of Columbia."
SECTION 11. Section 38-77-115 of the 1976 Code is amended to read:
"Section 38-77-115. The authorized agents for every insurer covered by the provisions of Section 38-77-110 shall post in a conspicuous location in their office or place of business a sign containing language to be required by regulation of the Chief Insurance Commissioner that stipulates that insurer and agent may not refuse to write or renew that type of insurance, that tactics designed to avoid writing or renewing that type of insurance are not permissible including unreasonable delays in meeting with applicants, and that violations of the above should be reported to the commission for appropriate action. The authorized agents for every insurer covered by the provisions of Section 38-77-110 shall post in a conspicuous location in their office or place of business a sign which is to be titled `Prohibition Against Discriminatory Underwriting Practices' and to read as follows:
`NO INSURER OR AGENT MAY REFUSE TO WRITE, CANCEL, OR NONRENEW ANY POLICY, COVERAGE, OR ENDORSEMENT OF AUTOMOBILE INSURANCE FOR INDIVIDUAL PRIVATE PASSENGER AUTOMOBILE RISKS BECAUSE OF THE AGE, SEX, MARITAL STATUS, RACE, RELIGION, NATIONAL ORIGIN, EMPLOYMENT, OR PLACE OF RESIDENCE OF ANY APPLICANT FOR INSURANCE OR ANY EXISTING POLICYHOLDER. A REFUSAL TO WRITE AN AUTOMOBILE INSURANCE POLICY MUST BE IN WRITING STATING THE CAUSE OF THE REFUSAL IF REQUESTED BY THE APPLICANT.'"
SECTION 12. Section 38-77-140 of the 1976 Code is amended to read:
"Section 38-77-140. No automobile insurance policy may be issued or delivered in this State to the owner of a motor vehicle or may be issued or delivered by an insurer licensed in this State upon any motor vehicle then principally garaged or principally used in this State, unless it contains a provision insuring the persons defined as insured against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of these motor vehicles within the United States or Canada, subject to limits exclusive of interest and costs, with respect to each motor vehicle, as follows: fifteen ten thousand dollars because of bodily injury to one person in any one accident, and, subject to the limit for one person, thirty twenty thousand dollars because of bodily injury to two or more persons in any one accident, and five thousand dollars because of injury to or destruction of property of others in any one accident. Nothing in this article prevents an insurer from issuing, selling, or delivering a policy providing liability coverage in excess of these requirements."
SECTION 13. Section 38-77-280 of the 1976 Code, as last amended by Act 113 of 1991, 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 make collision coverage and either comprehensive or fire, theft, and combined additional coverage available to an insured or qualified applicant who requests the coverage.
Collision coverage 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.
Comprehensive coverage or fire, theft, and combined additional coverages 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 Chief Insurance Commissioner. An insurer may offer insureds lower collision and comprehensive 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 any applicant or existing policyholder, on renewal, for a motor vehicle customarily operated by an individual, either the named insured or any other 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 any applicant or existing policyholder, on renewal, who has collected benefits provided under any 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. No policy of insurance which provides automobile physical damage coverage only may be transferred to the Underwriting Association for shared risk pooling.
(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. Insurers of automobile insurance may charge an additional rate for private passenger physical damage insurance coverages which rate is different from that provided for in Sections 38-73-455, 38-73-457, and 38-77-540, if the physical damage coverage rate is filed and approved by the Chief Insurance Commissioner.
(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 those provided for in Section 38-73-457 if the rates are filed and approved by the Chief Insurance Commissioner. 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.
(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 may select an additional deductible in appropriate increments up to one thousand dollars. However, the mandatory deductible does not apply to safety glass."
SECTION 14. Section 38-77-285 of the 1976 Code, as last amended by Act 146 of 1991, is further amended to read:
"Section 38-77-285. All automobile insurance coverages written by an insurer for an insured's automobile must be written in the same policy except that all automobile insurance policies in effect on the effective date of this section may continue in force until the expiration date of the policy. This section applies only to insurance policies covering vehicles eligible to be ceded to the Reinsurance Facility. With the exception of private passenger physical damage coverages, any coverage transferred to the underwriting association on a policy of automobile insurance must be transferred for all automobiles covered under the policy. This section applies only to insurance policies covering private passenger vehicles and small commercial risks."
SECTION 15. The title of Article 5, Chapter 77, Title 38 of the 1976 Code is amended to read:
"REINSURANCE FACILITY AND DESIGNATED PRODUCERS UNDERWRITING ASSOCIATION; SERVICING CARRIERS AND PRODUCERS".
SECTION 16. The 1976 Code is amended by adding:
"Section 38-77-511. There is created a nonprofit, unincorporated legal entity known as the South Carolina Automobile Underwriters Association which is subject to regulations and orders promulgated by the commissioner which are not inconsistent with the purposes of this chapter. The Underwriting Association shall accept at the option of the automobile insurer, and subject to the provisions of this chapter, the risk covered under any policy of automobile insurance. Except as provided under Section 38-77-285, an insurer transferring a risk to the Underwriting Association shall transfer the risk as a unit and may not transfer certain coverages while retaining others. No insurer may transfer private passenger automobile insurance to the Underwriting Association with higher limits of coverage than: (1)two hundred fifty thousand dollars, for bodily injury liability to one person in one accident, (2) subject to the limit for one person, five hundred thousand dollars because of bodily injury to two or more persons in one accident, (3) one hundred thousand dollars because of injury to or destruction of property of other in any one accident, and (4) five hundred thousand dollars combined single limits for either or both bodily injury and property damage.
At the effective date of this section, the Underwriting Association shall assume all assets, liabilities, accounts, and contracts of the former South Carolina Reinsurance Facility, and its prior rules and regulations are adopted and effective until any relevant changes are approved by the governing board of the Underwriting Association. Additionally, the governing board members of the former Reinsurance Facility at the effective date of this section immediately become the members of the governing board of the Underwriting Association to serve until the expiration of their prior appointment. Insurers who were members of the former Reinsurance Facility at the effective date of this section immediately become participating members of the Underwriting Association as required under Section 38-77-520 with any and all obligations to the former Reinsurance Facility to continue with the Underwriting Association.
Any assumed, outstanding operating deficit of the former South Carolina Reinsurance Facility at the effective date of this section must be recouped as provided by law and regulation prior to the effective date of this section, with the exception that the governing board of the Underwriting Association may develop and implement a plan to level remaining recoupment charges and extend the recoupment period. The recoupment amount shall continue to be displayed separately on policies and premium notices but with the addition of a statement determined by the governing board of the anticipated date that recoupment of losses of the former South Carolina Reinsurance Facility will terminate. Any assumed operating surplus will be retained by the Underwriting Association."
SECTION 17. Section 38-77-520 of the 1976 Code is amended to read:
"Section 38-77-520. No automobile insurer may be licensed to transact automobile insurance in this State unless it becomes a participating member of the Facility Underwriting Association with respect to automobile insurance and thereafter continues participation so long as it transacts automobile insurance in this State. Every member is bound by the plan of operation of the Facility Underwriting Association as approved or promulgated by the commissioner and by any rules the governing board of the Facility Underwriting Association lawfully prescribes.
If the authority of an insurer to transact automobile insurance in this State terminates for any reason its obligations as a member of the Facility Underwriting Association nevertheless continue until all obligations have been fulfilled and the commissioner has so found and certified to the governing board of the Facility Underwriting Association.
If an insurer merges into or consolidates with another insurer authorized to transact automobile insurance in this State, or another insurer authorized to transact automobile insurance in this State has reinsured the insurer's entire automobile insurance business in this State, both the insurer and its successor or the assuming reinsurer, as the case may be, are liable for the insurer's obligations in respect to the Facility Underwriting Association.
Any unsatisfied net liability to the Facility Underwriting Association of an insolvent insurer which is a member of the Facility Underwriting Association must be assumed by and apportioned among the remaining members in the same manner in which assessments or gain and loss are apportioned. The Facility Underwriting Association thereupon acquires and has all rights and remedies allowed by law in behalf of the remaining members against the estate or funds of the insolvent insurer for sums due the Facility Underwriting Association."
SECTION 18. Section 38-77-530 of the 1976 Code is amended to read:
"Section 38-77-530. The plan of operation of the Facility is subject to the Commissioner's approval which may be granted only if the plan provides for equitable apportionment of the operating expenses and profits or losses among the members. The plan may, if the Commissioner considers it feasible and equitable, make provision for separate apportionments between private passenger automobile insurance business and commercial automobile insurance business, or, alternatively or in addition to that division, the plan may make provision for separate apportionments between automobile liability insurance business, including medical payments and uninsured motorist insurance, and automobile physical damage insurance business. Any such apportionments shall give consideration to a comparison between the writings or car-year exposures of each insurer of automobile insurance and the total writings or car-year exposures of all automobile insurers or, in the case of any separate apportionments approved by the Commissioner, a comparison between the writings or car-year exposures of each insurer within the applicable division of automobile insurance and the writings or car-year exposures of all insurers within that division.
In connection with his approval of the plan, the Commissioner may require that the plan make provision for such comparisons for a one-year period or for a longer period not to exceed five years and may provide for weighting the experience so as to attach a greater weight to the more recent experience.
In connection with the approval of the plan's provisions respecting equitable apportionment of the operating expenses or gains or losses of the Facility, the Commissioner may require that the plan make provision for a comparison between each insurer's percentage of the aggregate written premiums or car-year exposures respecting automobile insurance or any such division thereof and the insurer's percentage of total cessions to the Facility of such insurance or division thereof so as to provide that the insurer's portion of the operating expenses or gains or losses must be the average of the two percentages; or the Commissioner may approve or require any other similar or comparable provision for the apportionment of the expenses or gains or losses of the Facility which relates insurers' shares to their respective utilization of the Facility.
The plan of operation of the Underwriting Association is subject to the commissioner's approval which may be granted only if the plan provides for equitable apportionment of the operating expenses and profits or losses among the members, including servicing carriers. The plan may, if the commissioner considers it feasible and equitable, make provision for separate apportionments between private passenger automobile insurance business and commercial automobile insurance business. Any such plan of apportionment of operating expenses, gains, or losses shall give consideration between the writings and car-year exposures of each insurer of automobile insurance in South Carolina, including servicing carriers. In connection with his approval of the plan, the commissioner may require that the plan make provision for such comparisons for a one-year period or for a longer period not to exceed five years and may provide for weighting the experience so as to attach a greater weight to the more recent experience. The commissioner may approve or require a provision for the apportionment of the expenses or gains or losses of the Underwriting Association which relates to insurers respective utilization of the Underwriting Association so as to increase the apportionment to insurers who over utilize the Underwriting Association, while disallowing the insurer's recovery of such increased apportionment through the clean risk subsidy.
Concurrent with the effective date of this section, the clean risk subsidy as defined in this chapter less commission, premium tax expenses and time value of money considerations shall be collected and paid to the Underwriting Association by all members and servicing carriers and applied as operating income in determining the experience of applicable individual private passenger automobile insurance risks within the Underwriting Association. Any net gains of the Underwriting Association shall be used to reduce the clean risk subsidy applying first as a reduction to the level, base amount portion which is collected on all private passenger and small commercial risks, but only to the extent that the additional portion collected on risks with merit rating plan points does not exceed thirty percent of the remaining clean risk subsidy after considering the development of the final rate or premium charges under Section 38-77-540(C). Only net losses of the Underwriting Association attributed to the experience with individual private passenger automobile insurance under Section 38-77-540(A) and (B) shall be recovered by an increase in the clean risk subsidy. The annual calculation of the clean risk subsidy by the Board of Governors and approval by the insurance commissioner shall take into consideration expected underwriting and investment income results using accepted actuarial methods and with an upward adjustment for premium taxes, commissions, and the time value of money. The clean risk subsidy shall be included in the final rate or premium charge in effect for each automobile insurer and the Underwriting Association on all private passenger automobile and small commercial risks underwritten in South Carolina. The clean risk subsidy is subject to normal cancellation procedure, and the level, base amount portion which is collected on all private passenger and small commercial risks shall be pro-rated on policy terms of less than twelve months."
SECTION 19. 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 Underwriting Association shall accept the transfer of risk on any policy of automobile insurance covering individual private passenger and small commercial risks 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 commissioner, subject, however, to Section 38-77-950 regarding reasonable utilization of the Underwriting Association by member companies. The rate plans for the Underwriting Association are subject to the commissioner's approval which may be granted only if the plan is consistent with and provides for the following:
(A) The final rate or premium charge on policies of private passenger automobile insurance which meets each of the following requirements shall be the association qualified rate as defined in this chapter:
(1) all drivers have less than two merit rating plan points; and
(2) all drivers have held a valid drivers license for three or more years; and
(3) upon application for insurance, the applicant can show valid proof of twelve months prior, continuous automobile liability insurance coverage on vehicles owned by the applicant at the date of application with any lapse of coverage not to exceed five days; and
(4) for the twelve months prior to application or policy renewal, no driver has been involved in an automobile accident in which the driver, or insurer on behalf of the driver, has paid or is required to pay bodily injury or property damages to another; and
(5) for the twelve months prior to application or policy renewal, an insurer of the applicant, insured or driver has not paid to or on behalf of the applicant, insured or driver any amount as settlement of a claim for benefits under an automobile insurance policy with the exception of:
(a) not more than one claim for benefits under physical damage coverages excluding collision coverage;
(b) all claims for benefits under uninsured motorist coverages;
(c) all claims for benefits under underinsured motorist coverages; and
(d) all glass coverage claims.
The safe driver discount is applicable to drivers with no merit rating plan points under this section. Drivers within the applicant's or insured's household which are specifically excluded from coverage by the insurer's endorsement of the policy with the applicant's or insured's consent in writing shall not be considered in determining the requirements of this section.
(B) The final rate or premium charge for drivers of private passenger automobiles subject to the merit rating plan who have less than two merit rating plan points and for whom Section 38-77-540(A) is not applicable shall be the association standard rate as defined in this chapter.
The safe driver discount is applicable to drivers with no merit rating plan points under this section.
(C) The final rate or premium charge for drivers of private passenger automobiles subject to the merit rating plan who have two or more merit rating plan points shall be determined by the actual experience of the Underwriting Association with such drivers and with an upward adjustment to achieve a twenty five percent reduction in the total clean risk subsidy.
(D) The final rate or premium charge for small commercial risks shall be the applicable Insurance Service Office (ISO) rates approved by the department. Where ISO has filed only the pure loss costs component, the governing board shall file an expense component for use in developing a final rate.
The Underwriting Association shall make applicable rate filings annually with the exception of the self-sustaining rate plan for multiple point drivers which rate revisions may be filed every six months at the option of the governing board. An insurer may elect to utilize the rate plans of the Underwriting Association for an applicant or for an existing policyholder, on renewal, in lieu of the insurer's own individually filed and approved rates and not transfer the risk under that policy of automobile insurance to the Underwriting Association.
An insurer shall transfer or credit to the Underwriting Association on any policy of automobile insurance transferred to the Underwriting Association for shared risk pooling the pure loss component of the rate or premium charge as determined under the Underwriting Association's rating plan as filed with the department. The insurer, unless contracted pursuant to Section 38-77-590, shall retain as and for its commission the lesser of either the allocated loss adjustment expense and expense component of the rate or premium charge under the Underwriting Association's rating plan as filed with the department or an amount equal to the insurer's own filed allocated loss adjustment expense component and expense component with any remainder transferred or credited to the Underwriting Association. Insurers contracted pursuant to Section 38-77-590 shall retain as and for its commission the allocated loss adjustment expense component and expense component of the rate or premium charge under the Underwriting Association's rating plan as filed with the department."
SECTION 20. Section 38-77-550 of the 1976 Code is amended to read:
"Section 38-77-550. Reinsurance of a policy of automobile insurance with the Facility does not create a privity of contract or any other direct relationship between the policyholder of the reinsured policy and the Facility. The contractual or other legal rights of the insured and insurer are not affected by the reinsurance. The transfer of risk under a policy of automobile insurance to the Underwriting Association for shared risk pooling does not create a privity of contract or any other direct relationship between the policyholder and the Underwriting Association. The contractual or other legal rights of the insured and insurer are not affected by the transfer."
SECTION 21. Section 38-77-560 of the 1976 Code is amended to read:
"Section 38-77-560. An insurer ceding reinsurance to the Facility on automobile insurance policies shall receive credit by way of deduction from its unearned premium liability as calculated in accordance with Section 38-9-170. However, reinsurance with the Facility may not be deducted for purposes of the limitations-of-risk provisions of Section 38-55-30. An insurer transferring risks on automobile insurance policies to the Underwriting Association shall receive credit by way of deduction from its unearned premium liability as calculated in accordance with Section 38-9-170. However, business transferred to the Underwriting Association may not be deducted for purposes of the limitations of risk provisions of Section 38-55-30."
SECTION 22. Section 38-77-570 of the 1976 Code is amended to read:
"Section 38-77-570. The funds and reserves of the Facility must be invested in lawful investments permitted to property and casualty insurers under the laws and regulations governing investments of property and casualty insurers. In determining the net profit or loss resulting from the operations of the Facility, all investment income and profits must be taken into consideration. No distribution of the funds, assets, property, or profits of the Facility may be made except pursuant to the Commissioner's written order. The funds and reserves of the Underwriting Association must be invested in lawful investments permitted to property and casualty insurers under the laws and regulations governing investments of property and casualty insurers. In determining the net profit or loss resulting from the operations of the Underwriting Association all investment income and profits must be taken into consideration. No distribution of the funds, assets, property, or profits of the Underwriting Association may be made except pursuant to the commissioner's written order unless otherwise permitted under this chapter."
SECTION 23. Section 38-77-580 of the 1976 Code, as last amended by Act 248 of 1991, is further amended to read:
"Section 38-77-580. The operations and affairs of the facility Underwriting Association are under the direction and control of a governing board of nineteen persons of whom four must be residents of South Carolina appointed by the Governor of South Carolina to represent consumers. The commissioner shall appoint eight persons to represent the insurance industry; in appointing these persons, the commissioner shall select two from a list of not less than five nominated by the American Insurance Association from the officers or employees of insurers licensed in South Carolina and which are members or subscribers of that organization; he shall select two from a list of not less than five persons nominated by the American Mutual Insurance Alliance from the officers or employees of insurers licensed in South Carolina and which are members or subscribers of that organization; he shall select two from a list of not less than five persons nominated by the National Association of Independent Insurers from the officers or employees of insurers licensed in South Carolina and which are members or subscribers of that organization; he shall select two persons, one of whom must be an officer or employee of a stock insurer licensed in South Carolina and not a member or subscriber of any of these organizations, and one of whom must be an officer or employee of a nonstock insurer licensed in South Carolina and not a member or subscriber of any of these organizations; however, of the eight persons appointed to represent the insurance industry, not less than five must be residents of South Carolina and those who are not residents of South Carolina must have job responsibilities that include the supervision over South Carolina operations; not less than two must be officers or employees of insurers licensed to transact automobile insurance in South Carolina and domiciled therein. The commissioner shall appoint four persons to represent producers, all of whom must be residents of South Carolina; he shall select two such persons from a list of not less than five nominated by the stock agents' association and two from a list of not less than five persons nominated by the mutual agents' association. The commissioner shall appoint two persons to represent the designated servicing agents, one of whom must be an officer of a premium service finance company and the other of whom must be a designated servicing agent and both of whom must be residents of South Carolina. In addition the Consumer Advocate is an ex-officio member of the governing board of the Reinsurance Facility Underwriting Association. No person who is associated with any business within the meaning of Section 8-13-20, which is either subject to regulation by the Department of Insurance or which provides goods or services to the facility Association for compensation, is eligible for appointment to the board to represent consumers, except that any person serving on the board representing consumers on the effective date of this provision who would otherwise be disqualified from serving based on this provision may continue to serve for the remainder of his current term.
The commissioner is chairman of the board, ex officio, but has no vote except in the case of a tie. The commissioner, or his designated representative, shall preside over all meetings which must be held not less than quarterly in South Carolina at the times and places the commissioner designates. However, upon the filing with the commissioner of a request for a meeting signed by not fewer than five members of the board and specifying the subjects to be discussed at the proposed meeting, the commissioner shall call a special meeting of the board to be held not less than fifteen nor more than thirty days after receipt of the request. Notice, in writing, of the special meeting must be provided members of the board.
Members of the board shall serve one year or until their successors are appointed and have qualified.
Amendment of the plan of operation may be made only at the annual meeting of the board or at a special meeting called by the commissioner for that purpose and so specified in the notice of meeting. Amendments of the plan require the affirmative vote of two-thirds of all the board members and are subject to the commissioner's approval. The commissioner may approve amendments only if they are consistent with the purposes of this chapter. If the consumer-representative members of the board unanimously dissent from a proposed amendment and specify their reasons for dissent in writing, the commissioner may not approve the amendment until after a public hearing addressed to the reasons for the dissent.
The commissioner may make provision for voting by proxy at meetings.
The commissioner may propose to the board any amendment to or modification of the plan that the commissioner considers to be necessary to render the plan reasonable or consistent with the purposes of this chapter, specifying in writing the reasons for any proposed amendment or modification. In the event that the board fails to adopt his proposed amendment or modification, the commissioner may, after notice and public hearing addressed to the reasons for the proposed amendment or modification, promulgate the amendment or modification considered necessary to render the plan reasonable or consistent with the purposes of this chapter."
SECTION 24. Section 38-77-585 of the 1976 Code, as added by Act 557 of 1990, is amended to read:
"Section 38-77-585. Any insurer designated contracted pursuant to Section 38-77-590(a) is entitled to appoint an officer or employee to the governing board of the Reinsurance Facility Underwriting Association if not otherwise represented on the governing board pursuant to Section 38-77-580. Any member of the governing board representing an insurer so designated contracted must abstain from casting a vote on any matter which would have a material effect on the operations of that insurer as it relates to the affairs of the insurer acting as a designated contracted insurer for the Reinsurance Facility Underwriting Association."
SECTION 25. 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 Underwriting Association 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. An insurer may apply for servicing carrier status prior to the effective date of this section and shall be contracted with on the same terms and conditions as servicing carriers of the former South Carolina Reinsurance Facility. The governing board may establish reasonable nondiscriminatory standards which all servicing carriers must meet for contract renewal. The servicing carriers shall not be subject to the statutory provisions or regulations regarding excessive utilization of the Underwriting Association for shared risk pooling of policies produced by its assigned servicing agents. The servicing carrier shall transfer the risk on every policy of automobile insurance produced by its assigned servicing agents to the Underwriting Association. 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 non-payment of premium, failure to possess a valid drivers license, or any other valid reason promulgated by the commissioner which is not inconsistent 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. The governing board of the Underwriting Association shall assume the contracts of servicing carriers previously contracted with the former South Carolina Reinsurance Facility prior to the creation of the South Carolina Automobile Underwriters Association. 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 former 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 Underwriting Association or until the assignment is terminated and transferred to another carrier upon non-renewal 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 private passenger and commercial automobile insurance business, the net premiums on which exceeded seventy-five thousand dollars of potential cedeable automobile insurance during any one of the previous five calendar years preceding the application; At the time of application the applicant is servicing and owns the renewals on private passenger and commercial automobile insurance business, the net premiums on which exceeded one hundred thousand dollars 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 two 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 cedeable 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) A designated servicing carrier who fails a claims audit shall have no new designated producer servicing agent assignments until the time it passes a reaudit within a reasonable time prescribed by the governing board. If this carrier fails two claims audits, including a reaudit, within any three-year period that carrier is disqualified for renewal of its contract with the facility association upon expiration of its existing contract.
(h) The governing board of the Underwriting Association 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, non-discriminatory basis promulgated by the governing board. Insurers, other than servicing carriers, shall not transfer risks to the Underwriting Association 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, transfer risks to the Underwriting Association 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 26. Section 38-77-630 of the 1976 Code, as last amended by Act 148 of 1989, is further amended to read:
"Section 38-77-630. (A) A policy, other than a renewal policy, may be ceded to the South Carolina Reinsurance Facility only when the application is accompanied by either a renewal notice from another insurer or a motor vehicle report (MVR), issued at the point of sale, together with the full premium correctly reflecting the facts shown on the MVR or consistent with the premium quoted in the renewal notice. A risk, other than at renewal, may be transferred to the Underwriting Association only when the application is accompanied by either a renewal notice from another insurer or a motor vehicle report (MVR) issued at the point of sale, together with the full premium correctly reflecting the facts shown on the MVR or consistent with the premium quoted in the renewal notice.
(B) To facilitate compliance with this requirement, a carrier shall require an applicant other than a renewal applicant, to obtain the MVR or a renewal notice from the insurance carrier who provided the insurance coverage then in effect and present it to the agent upon making an application. In those cases, the applicant must be credited for the amount paid for the MVR.
(C) In the case of an applicant who holds a valid driver's license from another state but is not yet licensed in this State, a copy of this out-of-state driver's license may be submitted with the application in lieu of the MVR or renewal notice above required in this section. The MVR, renewal notice, or copy of the applicant's driver's license, as applicable, must be kept with the application by the carrier in the manner the facility Underwriting Association requires.
SECTION 27. Section 38-77-910 of the 1976 Code is amended by adding:
"Any violation of this section or the prohibition against discriminatory underwriting practices as described under Section 38-77-110 may be cause for revocation or suspension of the insurer's or agent's license by the commissioner. Upon a complaint being filed alleging discrimination, the complaint shall be referred to the Office of the Consumer Advocate who shall investigate it and report his findings to the commissioner for appropriate action."
SECTION 28. Section 38-77-920 of the 1976 Code, as last amended by Act 148 of 1989, is further amended to read:
"Section 38-77-920. Except as provided for in Section 38-77-110 and as is specifically provided for otherwise by law, no automobile insurer may refuse acceptance of automobile insurance for an insurable risk from any applicant nor require that certain classes or types of risks be placed through some particular agent or employee. This section is not intended to preclude any insurer from recognizing and giving effect to the property rights of agents in expirations or renewals.
No agent who represents more than one insurer of automobile insurance may refuse to accept in behalf of an insurer represented by him automobile insurance for an insurable risk where the applicant for insurance designates by name or description the insurer of his choice. If the applicant relies upon the skill and judgment of the agent to place the risk in any insurer represented by the agent, the agent may place the risk in the insurer which he considers appropriate. No insurer may agree, collude, or conspire with an agent or give, offer, or promise an agent anything of value to place any risk or any class or type of risk under such circumstances in another insurer. Every such agreement is utterly void and every act of collusion or conspiracy constitutes an act of unfair competition by both the insurer and agent which, if proved, must result in the suspension or revocation of the license of each for not less than one year, in addition to any other penalties or liabilities applicable.
No automobile insurer authorized to transact automobile insurance in this State which offers automobile insurance through the mails or uses the mails in transacting automobile insurance on insurable risks situate in this State may restrict its mailings or offerings to certain counties, areas, or zip-code territories of this State. The commissioner is directed to examine an insurer's records at any time the commissioner considers it necessary to determine that the insurer is not so restricting or limiting its offerings."
SECTION 29. 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 transfer to the Underwriting Association; 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 transferable 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 Underwriting Association 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 prohibition against discriminatory underwriting practices described in Section 38-77-110.
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 prohibition against discriminatory underwriting practices nor because of the amount of the agent's automobile insurance business which the insurer has considered it necessary to reinsure in the Facility transfer to the Underwriting Association."
SECTION 30. Section 38-77-950 of the 1976 Code, as last amended by Act 113 of 1991, is further amended to read:
"Section 38-77-950. It is the intent of this chapter that the facility Underwriting Association must not be excessively nor unreasonably utilized by automobile insurers for unfairly competitive purposes or for purposes of unfairly discriminating against certain classes or types of automobile insurance risks having the same or similar objective risk characteristics as other risks in the same class under the rating plan for the classification of risks promulgated by the department, nor for the purpose of discriminating against the risks or risks in certain rating territories. The commissioner shall prohibit unreasonable or excessive utilization of the facility Underwriting Association.
A prima facie case of excessive or unreasonable utilization is established upon a showing that an automobile insurance insurer or a group of insurers under the same management has ceded or is about to cede more than thirty-five percent of total direct cedeable written premiums on South Carolina automobile insurance as reported in the most recently filed annual statement of the insurer or group.
A prima facie case of excessive or unreasonable utilization shall be established upon a showing that an automobile insurance insurer or group of such insurers under the same management has transferred or is about to transfer to the Underwriting Association for shared risk pooling policies whose combined premiums are more than thirty-five percent of total direct written premiums on South Carolina automobile insurance as reported in the most recently filed annual statements of such insurer or group.
Upon the written request of the policyholder, insurance companies doing business in this State shall give written notice to the policyholder informing him whether or not he and a driver under the policy is in the facility. Insurers shall give written notice to the policyholder of a risk ceded to the facility which does not qualify for the safe driver discount in Section 38-73-760(e)."
SECTION 31. Section 38-77-960 of the 1976 Code is amended to read:
"Section 38-77-960. When dealing with the agents of the company, who are licensed to sell automobile insurance, the company may not use any of the business placed in the facility in determining the profitability of that agent's business. Further, the company shall not ask any agent that agent's business. Further, the company shall not ask any agent not to write any kind of automobile business or hold the Facility business against any agent in any manner which could be construed as being detrimental to the agent.
When dealing with the agents of the company, who are licensed to sell automobile insurance, the company may not use any business transferred to the Underwriting Association in determining the profitability of that agent's business. Further, the company shall not hold the business transferred to the Underwriting Association against any agent in any manner which could be construed as being detrimental to the agent."
SECTION 32. Section 38-73-10(a)(3) of the 1976 Code is amended to read:
"(3) provide that investment income accruing to automobile insurers is taken into consideration in the approval of rates or premium charges and in the determination of any net loss incurred by the South Carolina Reinsurance Facility South Carolina Automobile Underwriters Association and to make provision for the securing by the department of all necessary or appropriate financial data for purposes of ascertaining and determining the investment income and the profits from realized and unrealized capital gains of each automobile insurer doing business in this State."
SECTION 33. Section 38-73-455 of the 1976 Code, as last amended by Act 113 of 1991, is further amended to read:
"Section 38-73-455. An automobile insurer shall offer two different rates for automobile insurance, a base rate as defined in Section 38-73-457 and an objective standards rate which is twenty-five percent above the base rate. Both of these rates are subject to all surcharges or discounts, if any, applicable under any approved merit rating plan, credit or discount plan promulgated or approved by the Commissioner.
Applicants, or a current policyholder, seeking automobile insurance with an insurer must be written at the base rate, unless one of the conditions or factors in subitems (1) through (8) of item (A) is present.
(A) The named insured or any operator who is not excluded in accordance with Section 37-77-340 and who resides in the same household or customarily operates an automobile insured under the same policy, individually:
(1) has obtained a policy of automobile insurance or continuation thereof through material misrepresentation within the preceding thirty-six months; or
(2) has had convictions for driving violations on three or more separate occasions within the thirty-six months immediately preceding the effective date of coverage as reflected by the motor vehicle record of each insured driver as maintained by the Department of Highways and Public Transportation; or
(3) has had two or more "chargeable" accidents within the thirty-six months immediately preceding the effective date of coverage. A "chargeable" accident is defined as one resulting in bodily injury to any person in excess of three hundred dollars per person, death, or damage to the property of the insured or other person in excess of seven hundred fifty dollars. Accidents occurring under the circumstances enumerated below are not considered chargeable.
(a) The automobile was lawfully parked. An automobile rolling from a parked position is not considered as lawfully parked but is considered as operated by the last operator.
(b) The applicant or other operator or owner was reimbursed by or on behalf of a person responsible for the accident or has a judgment against this person.
(c) The automobile of an applicant or other operator was struck in the rear by another vehicle and the applicant or other operator has not been convicted of a moving traffic violation in connection with the accident.
(d) The operator of the other automobile involved in the accident was convicted of a moving traffic violation and the applicant or other operator was not convicted of a moving traffic violation in connection therewith.
(e) An automobile operated by the applicant or other operator is damaged as a result of contact with a "hit and run" driver, if the applicant or other operator so reports the accident to the proper authority within twenty-four hours or, if the person is injured, as soon as the person is physically able to do so.
(f) Accidents involving damage by contact with animals or fowl.
(g) Accidents involving physical damage, limited to and caused by flying gravel, missiles, or falling objects.
(h) Accidents occurring as a result of the operation of any automobile in response to an emergency if the operator at the time of the accident was responding to a call of duty as a paid or volunteer member of any police or fire department, first aid squad, or any law enforcement agency. This exception does not include an accident occurring after the emergency situation ceases or after the private passenger motor vehicle ceases to be used in response to the emergency; or
(4) has had one "chargeable" accident and two convictions for driving violations, all occurring on separate occasions, within the thirty-six months immediately preceding the effective date of coverage as reflected by the motor vehicle record of each insured driver as maintained by the Department of Highways and Public Transportation; or
(5) has been convicted of or forfeited bail during the thirty-six months immediately preceding the effective date of coverage for operating a motor vehicle while in an intoxicated condition or while under the influence of drugs; or
(6) has been convicted or forfeited bail during the thirty-six months immediately preceding the effective date for:
(a) any felony involving the use of a motor vehicle,
(b) criminal negligence resulting in death, homicide, or assault arising out of the operation of a motor vehicle,
(c) leaving the scene of an accident without stopping to report,
(d) theft or unlawful taking of a motor vehicle,
(e) operating during a period of revocation or suspension of registration or license,
(f) knowingly permitting an unlicensed person to drive,
(g) reckless driving,
(h) the making of material false statements in the application for licenses or registration,
(i) impersonating an applicant for license or registration or procuring a license or registration through impersonation, whether for himself or another,
(j) filing of a false or fraudulent claim or knowingly aiding or abetting another in the presentation of such a claim,
(k) failure to stop a motor vehicle when signaled by means of a siren or flashing light by a law enforcement vehicle; or
(7) has for thirty or more consecutive days during the twelve months immediately preceding the effective date of coverage, owned or operated the automobile to be insured (or if newly acquired, the automobile it replaces) without liability coverage in violation of the laws of this State; or
(8) has used the insured automobile as follows or if the insured automobile is:
(a) used in carrying passengers for hire or compensation, except that the use of an automobile for a car pool must not be considered use of an automobile for hire or compensation,
(b) used in the business of transportation of flammables or explosives,
(c) used in illegal operation, or
(d) no longer principally used and garaged within the State, but not to include students who are operating a motor vehicle registered in this State while attending an institution located in another state.
(B) In the event that one or more of the conditions or factors prescribed in items (1) through (8) of subsection (A) exist, the motor vehicle customarily operated by that individual must be written at the objective standards rate.
(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 pursuant to Section 38-77-590(a), for automobile insurance risks written by them through producers designated 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. 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.
(D) An automobile insurance policy may be endorsed at any time during the policy period to reflect the correct rate or premium applicable by reason of the factors or conditions described in subsection (A) which existed prior to the commencement of the policy period in which the endorsement is made, regardless of whether the factors or conditions were known or disclosed to the insurer at the commencement of the policy period. However, no policy may be endorsed during a policy period to reflect factors or conditions occurring during that policy period. A policy may be endorsed during a policy period to recognize the addition or deletion of an operator or vehicle.
(E) For purposes of determining the applicable rates to be charged an insured, an automobile insurer shall obtain and review an applicant's motor vehicle record.
An automobile insurer shall file and offer for automobile insurance a rate as defined in Section 38-73-457, which rate is subject to all surcharges or discounts, if any, applicable under any approved merit rating plan, credit or discount plan promulgated or approved by the commissioner and is subject to the application of the clean risk subsidy as defined in Chapter 77 of this title. Additionally, an automobile insurer may utilize and offer at its option on policies not transferred to the South Carolina Automobile Underwriters Association for shared risk pooling the final rate or premium charges approved by the commissioner for rating plans of the Underwriting Association which are also subject to the discount or surcharge plans promulgated or approved by the Commissioner and the clean risk subsidy.
An individual insurer or member companies of an affiliated group of automobile insurers may not utilize different filed rates for automobile insurance with the exception that an insurer or different member company of an affiliated group of insurers may utilize the Underwriting Association rate or premium charges pursuant to this section. For the purpose of this section, an affiliated group of automobile insurers includes any group of automobile insurers under common ownership, management, or control. Those automobile insurers contracted pursuant to Section 38-77-590(A), for automobile insurance risks written by them through producers assigned by the governing board of the Underwriting Association pursuant to that same section, shall utilize the rates or premium charges by coverage filed and authorized for use by the Underwriting Association pursuant to Section 38-73-1420. However, those automobile insurers 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 duly authorized agents not assigned pursuant to Section 38-77-590 on policies not transferred to the Underwriting Association for shared risk pooling.
No policy may be endorsed during a policy period to reflect factors or conditions occurring during that policy period. A policy may be endorsed during a policy period to recognize the addition or deletion of an operator or vehicle.
For purposes of determining the applicable rates to be charged an insured on new applications, an automobile insurer shall obtain and review an applicant's motor vehicle record."
SECTION 34. Section 38-73-457 of the 1976 Code is amended to read:
"Section 38-73-457. Notwithstanding Sections 38-73-920 and 38-73-1210, every automobile insurer and rating organization shall, prior to October 1, 1987, file with the Commissioner a base rate, which is defined as a rate by coverage calculated solely upon the experience generated by the risk for each class and territory
retained by the insurer in its voluntary book of business and which must not include experience generated by risks ceded or assumed from the Reinsurance Facility established under Section 38-73-1030. An objective standards rate by coverage must also be filed which is twenty-five percent above the base rate previously described for each class and territory. The base rate must be calculated by removing from the rate or premium charge, then in effect for the automobile insurer, that portion of the rate or premium charge attributable to the net gain or loss of the insurer as a result of participation in the operating results of the Facility as required by Section 38-77-760. In determining the base rate and objective standards rate, by coverage, the Commissioner, in order that no extra premium revenue is generated by this section, shall require that the insurer's average rate, by coverage, on October 1, 1987, (computed as a weighted average of the base rate and objective standards rate, by coverage, as determined by the Commissioner), not exceed the insurer's average rate, by coverage, prior to October 1, 1987, as determined by the Commissioner. The provisions of the Administrative Procedures Act apply to any court appeal of a base rate or objective standards rate brought thereunder. The base rate or objective standards rate approved by the Commissioner may be put into effect under bond in a similar manner that a public utility may put a proposed rate increase into effect under bond as provided by law. No insurer may file a base rate for any class or territory which is higher than the rate or premium charge, exclusive of that portion required by Section 38-73-460, approved by the Commissioner for use on October 1, 1987. As a result of this section, no insured may receive an increase in rates for other than an increase in coverage or due to the provisions of Section 38-77-280, 38-77-610, or 38-73-455, unless the insurer files additional rates in accordance with this title.
The base rate and objective standards rate filed by each insurer of automobile insurance are effective if they meet the requirements of this section, on or after July 1, 1988, for all eligible applicants and upon the renewal date, on or after July 1, 1988, for all eligible existing policyholders. If the base rate and objective standards rate filed by an automobile insurer do not meet the requirements of this section, the Commissioner shall suspend the authority of that insurer to write automobile insurance until the deficiencies are corrected.
After July 1, 1988, no rate or premium charge, exclusive of the Facility recoupment charge approved or established pursuant to Section 38-77-610 may be approved for an insurer of automobile insurance unless that rate or premium charge is calculated in accordance with this section and meets the other applicable requirements of this title pertaining to the approval of rates or premium charges.
Notwithstanding Sections 38-73-920 and 38-73-1210, every automobile insurer and rating organization shall file with the commissioner a rate for automobile insurance by coverage calculated solely upon the experience generated by the insurer in its book of business and which must not include experience generated by risks transferred to the Underwriting Association for shared risk pooling. Additionally, an automobile insurer may utilize and offer at its option on policies not transferred to the Underwriting Association for shared risk pooling the final rate or premium charges approved by the commissioner for rating plans of the Underwriting Association.
The Consumer Advocate, upon request to the commissioner, must be provided by him with a copy of any base rate filed with the commissioner along with any supporting materials, documents, or studies utilized to support the filed base rate. In addition, every automobile insurer and rating organization shall promptly respond to requests for information and data requested by the Consumer Advocate relating to the filed base rate. The Consumer Advocate must be afforded an opportunity for a hearing before the commissioner on any filed base rate before it takes effect that he believes does not meet the requirements of this section. Final decisions of the commissioner regarding this hearing are subject to the provisions of the State Administrative Procedures Act.
Effective March 1, 1994, the commissioner shall disallow the further use of the objective standards rate previously filed in accordance with this section; however, upon the effective date of this section nothing herein should be construed to require a rating organization, its members or subscribers, or an individual insurer to immediately refile final rates or premium charges previously approved by the commissioner and referred to as the base rate for automobile insurance coverages. Members or subscribers of a rating organization or individual insurers are authorized to continue to use those base rates approved before the effective date of this section."
SECTION 35. Section 38-73-460 of the 1976 Code is amended to read:
"Section 38-73-460. In the making and approval of rates for automobile insurance, consideration must be given to the net gains or losses incurred by insurers as a result of participation in the operating results and expenses, respectively, of the South Carolina Reinsurance Facility Automobile Underwriters Association." SECTION 36. Section 38-73-520 of the 1976 Code is amended to read:
"Section 38-73-520. With the exception of an insurer's use of the rate plans of the South Carolina Automobile Underwriters Association pursuant to Sections 38-73-455 and 38-73-457, Every every insurer shall file with the commissioner every manual of classifications, rules, and rates, every rating plan, and every modification of any of the foregoing which it proposes to use. Every filing shall state the proposed effective date thereof and shall indicate the character and extent of the coverage contemplated."
SECTION 37. Section 38-73-735 of the 1976 Code, as last amended by Act 148 of 1989, 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 commissioner 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 commissioner 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 is given to an insured pursuant to this section, the policy may be ceded to the Reinsurance Facility in accordance with the facility's plan of operation."
SECTION 38. Section 38-73-750 of the 1976 Code, as last amended by Act 148 of 1989, is further amended to read:
"Section 38-73-750. Automobile insurers shall file with the State Rating and Statistical Division their plans or systems for allocating expenses and profit as respects the various kinds or types of automobile insurance risks and the classes of risks thereunder. However, no plan or system may be filed which is inconsistent with the classification of risks promulgated by the commissioner. No plan or system may be filed or approved if the purpose or effect is to discriminate unfairly or unreasonably in respect to the allocation of expenses or profit between classes of risks or if the purpose or effect is to impose a burden or detriment upon the South Carolina Reinsurance Facility or to secure to the insurer using the plan or system an unfair or unreasonable competitive advantage to the detriment of the South Carolina Reinsurance Facility or the South Carolina Automobile Underwriters Association or other insurers. The commissioner after due notice and hearing, shall disapprove and disallow the further use of an inconsistent, discriminatory, burdensome, or competitively unfair plan or system for the allocation of expenses and profit."
SECTION 39. Section 38-73-760(b) of the 1976 Code, as last amended by Act 148 of 1989, is further amended to read:
"(b) The statistical plan may be promulgated so as to provide for any and all statistical and financial data necessary or appropriate to the implementation of the policy of this chapter or Chapter 77 of this title or to yield statistical data reasonably and fairly related to any of the purposes of this article, including, but not limited to, the fixing, establishing, and promulgating of risk and territorial classification plans for automobile insurance; determining the pure loss rate level indications for automobile insurance in South Carolina based upon all South Carolina loss experience and assisting in the translating of this information into usable form for insurance consumers in terms of the final rates or premium charges of each insurer of automobile insurance, determining the reasonability of loss adjustment expenses, other expenses and profit factors applied by insurers to their pure loss components in arriving at their final rates or premium charges for automobile insurance both for purposes of ensuring that the final rates or premium charges are adequate, not excessive, and not unfairly discriminatory and for ensuring that improper and undue burdens are not imposed upon the South Carolina Reinsurance Facility by way of excessive ceding commissions to ceding insurers; determining the amount, validity, and propriety of class and territorial differentials applied to the general pure loss rate levels and testing not less than annually the appropriateness of the existing differentials in the light of the most recent available loss experience data; determining the amount, validity, and propriety of surcharges and discounts referable to any uniform merit rating plan or system which may have been promulgated by the commissioner or which may be under consideration for promulgation, the appropriateness of the surcharges and discounts in the light of the most recent available loss experience data; determining the propriety or validity of any plan for the classification of risks which may be in effect or under consideration based upon the propensities of motor vehicles or classes or types of motor vehicles or their equipment to shield occupants from death or serious injury as a result of crash or based upon the relative invulnerability of the motor vehicles or classes or types of motor vehicles to extensive damage as a result of crash or their repairability at modest expense; or obtaining data relevant to studies being made or to be made by the State Rating and Statistical Division in connection with any of the foregoing or in connection with means and methods for providing appropriate rates for insurance consumers or fostering and encouraging competition among insurers."
SECTION 40. Section 38-73-920 of the 1976 Code is amended to read:
"Section 38-73-920. No insurer may make or issue a contract or policy except in accordance with the filings which are in effect for the insurer as provided in this chapter or in accordance with Section 38-73-1060 or Sections 38-73-455 and 38-73-457, as pertaining to utilization of the Underwriting Association rate plans by insurers. Notwithstanding Section 38-73-10, item (2) of Section 38-73-330, and item (4) of Section 38-73-430, filings for property and casualty rate increases may not be approved for any insurer or rating organization for any line, sub-line, or otherwise identifiable property and casualty insurance coverage for which a rate increase has previously been granted within the immediately preceding twelve months. However, if satisfactory evidence is presented to the commissioner by an insurer or rating organization that the continued use of the previously approved rates for the line, sub-line, or otherwise identifiable property and casualty insurance coverage may result in the insolvency of an insurer, more frequent rate increases may be approved. This section does not apply to contracts or policies for inland marine risks as to which filings are not required."
SECTION 41. 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 automobile insurance rate or premium charges after the rating organization with the largest number of members or subscribers has filed a pure loss component for private passenger automobile insurance with the commissioner. Upon the approval of such components, those automobile insurers designated pursuant to Section 38-77-590(A), for risks written by them through producers designated pursuant to that same section, shall utilize these final rate or premium charges. Automobile insurers designated 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 pursuant to Section 38-77-590.
The board of governors of the South Carolina Automobile Underwriters Association shall file an expense component for rate or premium charges developed under rate plans approved by the commissioner for the Underwriting Association. The board of governors shall file a pure loss component to use in developing the association standard rate and a pure loss component to use in developing the association qualified rate as defined in Chapter 77 of this title. The board of governors shall file a pure loss component based on the experience of underwriting multiple point drivers of individual private passenger automobile insurance risks within the shared risk pool of the Underwriting Association to use in developing rate or premium charges for that group pursuant to Section 38-77-540(C).
Automobile insurers contracted to the South Carolina Automobile Underwriters Association pursuant to Section 38-77-590(a) and all insurers on policies of automobile insurance transferred to the Underwriting Association for shared risk pooling shall utilize the final rate or premium charges under the applicable rate plan approved by the commissioner for the Underwriting Association comprising these filed rates. Automobile insurers contracted to the Underwriting Association pursuant to Section 38-77-590(a) are not required to use the rate or premium charges under the rate plans approved for the Underwriting Association by the commissioner for risks not transferred to the Underwriting Association."
SECTION 42. The Chief Insurance Commissioner shall conduct a study not to exceed twelve months in duration to determine whether there are more equitable territories in this State, where private passenger automobile insurers compete, than now exist which would allow a greater degree of open-market competition. The commissioner shall present his findings and conclusions, in writing, to the Governor and the General Assembly not later than ninety days after the study is concluded in accordance with this section.
SECTION 43. Notwithstanding any other provision of law, any person who shall operate or allow an uninsured motor vehicle to be operated shall suffer the immediate impoundment of such vehicle until such time as he posts liability insurance in the amount required by Chapter 77, Title 38 of the 1976 Code of Laws and pays any storage and impoundment fee, together with any other fines or fees imposed for the operation of an uninsured motor vehicle.
SECTION 44. The Chief Insurance Commissioner, not later than December 1, 1993, shall present, in writing, to the Governor and the General Assembly a proposed uniform merit rating plan as authorized under Section 38-73-760 of the 1976 Code with surcharges computed as a percent of the premium, but in all other aspects conforming in principle to the existing merit rating plan.
SECTION 45. Sections 38-73-1410, 38-73-1425, 38-77-111, 38-77-510, 38-77-595, 38-77-600, 38-77-605, 38-77-610, 38-77-620, and 38-77-625 of the 1976 Code are repealed.
SECTION 46. This act takes effect March 1, 1994.