Current Status Bill Number:3925 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:19950405 Primary Sponsor:Richardson All Sponsors:Richardson Drafted Document Number:bbm\10063jm.95 Residing Body:House Current Committee:Labor, Commerce and Industry Committee 26 HLCI Subject:Motor vehicle insurance
Body Date Action Description Com Leg Involved
______ ________ _______________________________________ _______ ____________
House 19950405 Introduced, read first time, 26 HLCI
referred to Committee
View additional legislative information at the LPITS web site.
TO AMEND SECTION 38-73-455(C), AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO AUTOMOBILE INSURANCE RATES, SO AS TO PROVIDE, AMONG OTHER THINGS, THAT RATING PLANS MAY PROVIDE FOR DIFFERENT RATES AND RATING PLANS AMONG AFFILIATED COMPANIES; TO AMEND SECTION 38-73-455(E), AS AMENDED, RELATING TO REVIEW OF AN APPLICANT'S MOTOR VEHICLE RECORD, SO AS TO PROVIDE THAT THIS REVIEW BY AN INSURER TO DETERMINE THE APPLICABLE RATE MUST OCCUR FOR EACH APPLICANT, EXISTING POLICYHOLDERS ON RENEWAL, AND EACH OPERATOR OF AN INSURED VEHICLE; TO AMEND SECTION 38-73-735, AS AMENDED, RELATING TO AUTOMOBILE INSURANCE, THE STATE RATING AND STATISTICAL DIVISION, AND PLAN FOR CREDITS AND DISCOUNTS, SO AS TO DELETE CERTAIN LANGUAGE AND PROVIDE, AMONG OTHER THINGS, THAT IF AN INSURANCE CREDIT OR DISCOUNT PLAN, OTHER THAN THAT PROMULGATED BY THE DIRECTOR OR HIS DESIGNEE, IS GIVEN TO AN INSURED PURSUANT TO THIS SECTION, THE POLICY MAY NOT BE CEDED TO THE REINSURANCE FACILITY; TO AMEND SECTION 38-73-760, AS AMENDED, RELATING TO THE STATE RATING AND STATISTICAL DIVISION AND UNIFORM STATISTICAL PLANS, SO AS TO, AMONG OTHER THINGS, DELETE CERTAIN PROVISIONS, GRANT A SAFE DRIVER DISCOUNT BASED UPON THE INSURED'S THREE YEAR DRIVING RECORD OF NO LESS THAN TEN PERCENT SAFE DRIVER DISCOUNT AND REQUIRE NO LESS THAN TWENTY PERCENT SAFE DRIVER DISCOUNT FOR DRIVERS HAVING NO CHARGEABLE ACCIDENTS OR VIOLATIONS FOR FIVE YEARS RATHER THAN REQUIRE NO LESS THAN TWENTY PERCENT SAFE DRIVER DISCOUNT FOR THOSE ALL ELIGIBLE; TO AMEND SECTION 38-73-1420, AS AMENDED, RELATING TO THE BOARD OF GOVERNORS OF THE SOUTH CAROLINA REINSURANCE FACILITY, SO AS TO DELETE CERTAIN LANGUAGE, AND PROVIDE AMONG OTHER THINGS, THAT THE EXPENSE COMPONENT FILED BY THE FACILITY FOR PREMIUMS FOR PRIVATE PASSENGER AUTOMOBILE INSURANCE WRITTEN IN SOUTH CAROLINA SHALL REFLECT THE ACTUAL EXPENSES OF THE FACILITY FOR USE WITH THE PURE LOSS COMPONENT OF ALL CEDED RISKS AND THAT ALL RISKS CEDED TO THE FACILITY SHALL USE THE STATE UNIFORM RATE AND FACILITY PHYSICAL DAMAGE RATE; TO AMEND SECTION 38-73-1425, AS AMENDED, RELATING TO THE FINAL RATE ON PREMIUM CHARGE FOR PRIVATE PASSENGER AUTOMOBILE INSURANCE RISK CEDED TO THE REINSURANCE FACILITY, SO AS TO DELETE CERTAIN PROVISIONS, AND PROVIDE, AMONG OTHER THINGS, THAT IN CALCULATING THE FINAL RATE OR PREMIUM CHARGE, IT MUST BE BASED UPON THE STATE UNIFORM RATE OR THE COMPANY'S APPROVED RATE, WHICHEVER IS GREATER, THAT A UNIFORM RATE FOR CEDED RISKS HAVING NO MERIT RATING POINTS IS ESTABLISHED OVER TWO YEARS, AND THAT A FACILITY PHYSICAL DAMAGE RATE FOR CEDED RISKS IS ESTABLISHED OVER TWO YEARS; TO AMEND SECTION 38-77-10, RELATING TO THE DECLARATION OF THE PURPOSES OF CHAPTER 77 OF TITLE 38 ON AUTOMOBILE INSURANCE, SO AS TO DELETE AND PROVIDE, AMONG OTHER THINGS, CERTAIN LANGUAGE AND PROVISIONS, INCLUDING THE STATED PURPOSE TO PROVIDE MEDICAL, SURGICAL, FUNERAL, AND DISABILITY INSURANCE BENEFITS WITHOUT REGARD TO FAULT TO BE OFFERED UNDER AUTOMOBILE INSURANCE POLICIES THAT PROVIDE BODILY INJURY AND PROPERTY DAMAGE LIABILITY INSURANCE, OR OTHER SECURITY, FOR MOTOR VEHICLES REGISTERED IN THIS STATE; TO AMEND SECTION 38-77-30, AS AMENDED, RELATING TO DEFINITIONS FOR PURPOSES OF CHAPTER 77 OF TITLE 38 ON AUTOMOBILE INSURANCE, SO AS TO DEFINE "CEDE" OR "CESSION", "STATE UNIFORM RATE", AND "FACILITY PHYSICAL DAMAGE RATE"; TO AMEND SECTION 38-77-280, AS AMENDED, RELATING TO AUTOMOBILE INSURANCE AND COLLISION AND COMPREHENSIVE COVERAGES, SO AS TO DELETE CERTAIN PROVISIONS AND LANGUAGE, AND PROVIDE, AMONG OTHER THINGS, AUTOMOBILE INSURERS, INCLUDING THOSE COMPANIES WRITING PRIVATE PASSENGER PHYSICAL DAMAGE COVERAGES ONLY, MAY, RATHER THAN "SHALL", MAKE COLLISION COVERAGE AND EITHER COMPREHENSIVE OR FIRE, THEFT, AND COMBINED ADDITIONAL COVERAGE AVAILABLE TO AN INSURED OR QUALIFIED APPLICANT WHO REQUESTS THE COVERAGE, HOWEVER, ASSIGNED PRODUCERS "SHALL OFFER" AND "MAKE" COLLISION COVERAGE AND EITHER COMPREHENSIVE OR FIRE, THEFT, AND COMBINED ADDITIONAL COVERAGE AVAILABLE TO AN INSURED OR QUALIFIED APPLICANT WHO REQUESTS THE COVERAGE, AND THAT ALL PHYSICAL DAMAGE COVERAGES ARE CEDED AT THE FACILITY PHYSICAL DAMAGE RATE; TO AMEND SECTION 38-77-540, RELATING TO THE DUTIES OF A CEDING INSURER, SO AS TO CHANGE THE SECTION'S TITLE AND DELETE CERTAIN LANGUAGE AND PROVIDE, AMONG OTHER THINGS, THAT THE FACILITY SHALL ACCEPT CESSIONS AT THE STATE UNIFORM RATE INCLUDING, WHEN APPLICABLE COVERAGES CONTAINED IN POLICY, THE FACILITY PHYSICAL DAMAGE RATE; TO AMEND SECTION 38-77-600, AS AMENDED, RELATING TO THE REINSURANCE FACILITY RECOUPMENT CHARGE, SO AS TO, AMONG OTHER THINGS, REVISE THE FORMULA USED TO CALCULATE RECOUPMENT FOR ALL PRIVATE PASSENGER AUTOMOBILE INSURANCE POLICIES ISSUED OR RENEWED JUNE 30, 1995; TO AMEND SECTION 38-77-910, RELATING TO AUTOMOBILE INSURANCE AND UNLAWFUL DISTINCTIONS BETWEEN POLICYHOLDERS OR APPLICANTS, SO AS TO PROVIDE FOR FACILITY RATING PLANS; TO AMEND SECTION 38-77-940, AS AMENDED, RELATING TO THE PROHIBITION OF AN INSURER TO USE INDIRECT MEANS TO PENALIZE AN AGENT FOR COMPLIANCE WITH LAW, SO AS TO DELETE CERTAIN PROVISIONS AND LANGUAGE PROHIBITING ANY INSURER FROM DIRECTLY OR INDIRECTLY PROVIDING AN AGENT WITH A LIST OF THE TYPES OF RISKS WHICH IT CONSIDERS NECESSARY TO REINSURE IN THE FACILITY; AND TO REQUIRE ALL INSURERS SUBJECT TO THE PROVISIONS OF SECTION 38-77-280 TO SUBMIT RATE FILINGS TO THE DIRECTOR OF THE DEPARTMENT OF INSURANCE NO LATER THAN OCTOBER 1, 1996, WHICH FILINGS MUST REFLECT THE RATE DECREASES, IF ANY, ATTRIBUTABLE TO THE PASSAGE OF THIS ACT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 38-73-455(C) of the 1976 Code, as last amended by Act 113 of 1991, is further amended to read:
"(C) Member companies of an affiliated group of automobile insurers may not utilize different filed rates for automobile insurance coverages which they are mandated by law to write in accordance with rating plans filed with and approved by the director. These rating plans may provide for different rates and rating plans among affiliated companies. The director shall approve the rating plans if the rates are not excessive, inadequate, or unfairly discriminatory. For the purpose of this section, an affiliated group of automobile insurers includes a group of automobile insurers under common ownership, management, or control. Each member of a group of affiliated insurers shall not be considered a separate insurer for purposes of compliance with the laws governing the writing, cancellation, or renewal of an automobile insurance policy. Therefore, if one company which is a member of a group of affiliated companies refuses to write, cancels, or refuses to renew a policy but, at the same time, offers to arrange insurance for the applicant or insured with another member of the same group, there has not been a refusal to write, a cancellation, or a refusal to renew by the first company. However, no insurer shall take such action unless it does so on the basis of underwriting guidelines filed with the director. The movement of a policy from one company to another within a group of affiliated companies resulting in a different rate for the insured may only occur on the renewal date of the policy. Those automobile insurers designated contracted pursuant to Section 38-77-590(a), for automobile insurance risks written by them through producers designated assigned by the facility governing board pursuant to that section, shall utilize the rates or premium charges by coverage filed and authorized for use by the rating organization licensed by the commissioner pursuant to Article 11, Chapter 73 of this title, which has the largest number of members or subscribers for automobile insurance rates applicable for policies ceded to the facility. However, those automobile insurers designated contracted pursuant to Section 38-77-590(a) are not required to use those same rates or premium charges described in the preceding sentence for risks written by them through their authorized agents not appointed pursuant to Section 38-77-590 on policies not ceded to the facility."
SECTION 2. Section 38-73-455(E) of the 1976 Code, as last amended by Act 113 of 1991, is further amended to read:
"(E) For purposes of determining the applicable rates to be charged an insured, an automobile insurer shall obtain and review an applicant's a motor vehicle record for an applicant or an existing policyholder, on renewal, and each operator of an insured vehicle."
SECTION 3. Section 38-73-735 of the 1976 Code, as last amended by Section 783 of Act 181 of 1993, is further amended to read:
"Section 38-73-735. In addition to risk and territorial classification plans promulgated or approved under Section 38-73-730, the department may promulgate plans to afford credits or discounts to automobile insureds, or he may approve the credit or discount plans filed with him by insurers of automobile insurance. No automobile insurance credit or discount plan may be promulgated or approved by the director or his designee unless:
(1) the criteria for determining eligibility for credits or discounts under the plan are objective, clear, and unequivocal;
(2) the criteria are based upon factually or statistically supported data; and
(3) the credits or discounts provided under the plan will be afforded by the insurer on a nondiscriminatory basis to all insureds who are eligible therefor. If an insurance credit or discount plan, other than that promulgated by the director or his designee, is given to an insured pursuant to this section, the policy may not be ceded to the Reinsurance Facility in accordance with the facility's plan of operation."
SECTION 4. Section 38-73-760(e) of the 1976 Code, as last amended by Section 783 of Act 181 of 1993, is further amended to read:
"(e) The director or his designee shall require all insurers transacting automobile insurance business in this State to assess surcharges and grant safe driver discounts upon reviewing a three year motor vehicle record in accordance with Section 38-73-455. These insurers shall grant safe driver discounts of no less than twenty percent unless the private passenger automobile insurance risk is written by insurers contracted pursuant to Section 38-77-590(a) or is ceded to the facility. If an private passenger automobile risk is written by insurers contracted pursuant to Section 38-77-590(a) or is ceded to the facility, the driver having no surcharge of points under the Uniform Merit Rating Plan shall receive:
(1) upon reviewing a three year motor vehicle record, a safe driver discount of no less than ten percent;
(2) upon reviewing a five year motor vehicle record, a safe driver discount of no less than twenty percent."
SECTION 5. The 1976 Code is amended by adding:
"Section 38-73-780. (A) The state rating and statistical division shall develop and file a loss component for private passenger automobile insurance coverages based on the total experience of all insurers in this State including risks ceded to the facility. Due consideration must be given to actual loss experience within this State for the most recent three-year period for which such information is available; to prospective loss experience with this State; and to all other relevant factors within this State; provided, however, that countrywide loss experience and other countrywide data may be considered only where credible South Carolina experience or data is not available.
(B) The loss component developed under this section is applicable to the risk and territorial classification plan promulgated and approved by the director or his designee.
(C) The state rate and statistical division shall annually review the loss component to determine if it is proper and supported by statistical evidence and make appropriate filings for approval of rates as required under this chapter."
SECTION 6. Section 38-73-1420 of the 1976 Code, as added by Act 148 of 1989 and as last amended by Section 783 of Act 181 of 1993, is further amended to read:
"Section 38-73-1420. After June 30, 1989, the Board of Governors of the South Carolina Reinsurance Facility shall file an expense component as defined under Section 38-73-1400(2) for private passenger automobile insurance rate or premium charges which must accurately reflect the actual expenses of the South Carolina Reinsurance Facility without profit and for use with after the rating organization with the largest number of members or subscribers has filed a the pure loss component for private passenger automobile insurance coverage developed under Section 38-73-780 with the director or his designee. Upon the approval of such component by the director or his designee, those automobile insurers designated contracted pursuant to Section 38-77-590(A), for risks written by them through producers designated assigned pursuant to that same section, and, subject to the provisions of Section 38-73-1425, all insurers on all risks ceded to the facility, shall utilize these final rate or premium charges as required under Section 38-77-540. Automobile insurers designated contracted pursuant to Section 38-77-590(A) are not required to use those same final rates or premium charges for risks written through their agents not appointed assigned pursuant to Section 38-77-590 on risks not ceded to the facility."
SECTION 7. Section 38-73-1425 of the 1976 Code, as added by Act 113 of 1991, is amended to read:
"Section 38-73-1425. The final rate or premium charge for a private passenger automobile insurance risk ceded to the facility which does not qualify for the safe driver discount in Section 38-73-760(e) is the final rate or premium charge required by Section 38-73-1420 38-77-540 or the final rate or premium charge approved for use by the insurer, whichever is greater.
(A) The establishing of a uniform rate for risks having no merit rating plan points currently ceded to the facility by insurers having company filed rates in effect on October 1, 1995 which are less than the state uniform rate shall be accomplished within a two-year period such that one-half of the current differential of the lower company filed rate and the state uniform rate shall be added on renewals effective on or after October 1, 1995, and, on renewals effective on or after October 1, 1996, such risks shall be ceded at the final rate or premium charge required by Section 38-77-540.
(B) On private passenger automobile insurance coverages ceded to the facility, effective for the period beginning October 1, 1995 through September 30, 1996 the loss component portion of the state uniform rate under Section 38-73-780 shall not be more than ten percent greater than the loss component for private passenger automobile insurance coverages filed with the director or his designee by the Insurance Services Office (ISO). On private passenger automobile insurance coverages ceded to the facility, effective for the period beginning October 1, 1996 through September 30, 1997 the loss component portion of the state uniform rate under Section 38-73-780 shall not be more than fifteen percent greater than the loss component for private passenger automobile insurance coverage filed with the director or his designee by the Insurance Services Office (ISO).
(C) The establishment of the facility physical damage rate as defined in Chapter 77 and required under Section 38-77-540(b) shall be accomplished within a two-year period, beginning September 10, 1996."
SECTION 8. Section 38-77-10 of the 1976 Code, as last amended by Section 801 of Act 181 of 1993, is further amended to read:
"Section 38-77-10. In order to effect a complete reform of automobile insurance and insurance practices in South Carolina, the purposes of this chapter are:
(1) To provide that every automobile insurance risk which is insurable on the basis of the criteria established in this chapter is entitled to automobile insurance from the automobile insurer of the applicant's choice on the basis of the same rates, policy forms, claims service, and other services provided by the insurer to all other applicants or insureds falling within the same classification of risk and territory under the applicable risk and territorial classification plan promulgated by the department or the facility rate plans. so long as all these applicants or insureds have satisfied the same objective standards as established in Sections 38-77-280 and 38-73-455;
(2) To provide a Reinsurance Facility for automobile insurers in which all automobile insurers must participate to the end that the operating expenses and net profit or loss of the Facility may be shared equitably by all the insurers transacting automobile insurance business in this State giving appropriate consideration to degrees of utilization of the Facility by the several insurers of automobile insurance and to provide prohibitions or penalties in respect to excessive utilization of the Facility.
(3) To provide prohibitions and penalties in respect to unfairly discriminatory or unfairly competitive practices having as their purpose or effect evasion of the statutory mandate of coverage provided in this chapter or imposing an undue or unfair burden upon other automobile insurers through excessive utilization of the Facility.
(4) To provide medical, surgical, funeral, and disability insurance benefits without regard to fault to be offered under automobile insurance policies that provide bodily injury and property damage liability insurance, or other security, for motor vehicles registered in this State."
SECTION 9. Section 38-77-30 of the 1976 Code, as last amended by Section 802 of Act 181 of 1993, is further amended by adding:
"(15) `Cede' or `cession' means the act of transferring the risk of loss from the individual insurer to all member insurers of the South Carolina Reinsurance Facility through the operation of the facility.
(16) `State uniform rate' means the final rate or premium charge established by adding the loss component developed under Section 38-73-780 to the expense component filed by the governing board of the facility under Section 38-73-1420.
(17) `Facility physical damage rate' means the state uniform rate after application of an experience modification factor of no less than one such that no operating loss is attributable to the facility's experience with private passenger automobile physical damage coverages [Ex: state uniform rate X 1.00; state uniform rate X 1.14; etc.]."
SECTION 10. Section 38-77-280 of the 1976 Code, as last amended by Section 810 of Act 181 of 1993, is further amended to read:
"Section 38-77-280. (A) Except as provided in subsection (B), all automobile insurers, including those insurance companies writing private passenger physical damage coverages only, shall may make collision coverage and either comprehensive or fire, theft, and combined additional coverage available to an insured or qualified applicant who requests the coverage. Automobile insurers contracted pursuant to Section 38-77-590 for risks written by them through producers assigned by the facility governing board pursuant to that section shall offer and make available collision coverage and comprehensive or fire, theft and combined additional coverage to an insured or qualified applicant who requests the coverage.
If collision coverage is offered or provided, it must have a mandatory deductible of two hundred fifty dollars, but an insured or qualified applicant, at his option, may select an additional deductible in appropriate increments up to one thousand dollars.
If comprehensive coverage or fire, theft, and combined additional coverages are offered or provided, it must have a mandatory deductible of two hundred fifty dollars, but an insured, at his option, may select an additional deductible in appropriate increments up to one thousand dollars. This deductible does not apply to auto safety glass. It is an unfair trade practice, as described in Sections 38-57-30 and 38-57-40, for an insurer or an agent to sell collision insurance, comprehensive coverage, or fire, theft, and combined additional coverages unless the insured is notified at the time of application of the savings which may be realized if the applicant or the insured selects a higher deductible. This notice is required only at the time of the initial sale and must be in a form approved by the director or his designee. An insurer may offer insureds lower deductibles at the insurer's option.
(B) Notwithstanding subsection (A) and Sections 38-77-110 and 38-77-920, automobile insurers may refuse to write automobile physical damage insurance coverage, including automobile comprehensive physical damage, collision, fire, theft, and combined additional coverage, for an applicant or existing policyholder, on renewal, for a motor vehicle customarily operated by an individual, either the named insured or another operator not excluded in accordance with Section 38-77-340 and who resides in the same household, where one or more of the conditions or factors prescribed in Section 38-73-455 exist. In addition, automobile insurers may refuse to write physical damage insurance coverage to an applicant or existing policyholder, on renewal, who has collected benefits provided under automobile insurance physical damage coverage during the thirty six months immediately preceding the effective date of coverage, for two or more total fire losses or two or more total theft losses. Automobile insurers may refuse to write for private passenger automobiles physical damage insurance coverage, including automobile comprehensive physical damage, collision, fire, theft, and combined additional coverage, for an applicant or existing policyholder, on renewal, for a motor vehicle customarily operated by an individual, either the named insured or another operator not excluded in accordance with Section 38-77-340 and who resides in the same household, which does not qualify for the safe driver discount in Section 38-73-760c.
All insurers subject to the provisions of this section writing single interest collision coverage shall provide an applicant for the insurance at the time of his application a notice separate and apart from any other form used in the application. The notice must be signed by the applicant evidencing his acknowledgement of having read the notice. The notice must contain the following language printed in bold face type:
`NOTICE: THE INSURANCE COVERAGE YOU ARE HEREBY PURCHASING IS SINGLE INTEREST COLLISION COVERAGE. THE AMOUNT OF INSURANCE DECREASES AS YOU PAY OFF THE AMOUNT OF YOUR INDEBTEDNESS. YOU MAY NOT RECEIVE ANY INSURANCE PROCEEDS OVER AND ABOVE THE AMOUNT OF THE OUTSTANDING BALANCE ON YOUR LOAN.'
(C) Notwithstanding Section 38-77-110, automobile physical damage coverage in an automobile insurance policy may be canceled at any time during the policy period by reason of the factors or conditions described in Section 38-73-455(A) or Section 38-77-280(B) which existed before the commencement of the policy period and which were not disclosed to the insurer at the commencement of the policy period.
(D) No policy of insurance which provides automobile physical damage coverage only may be ceded to the facility.
(E) Insurers of automobile insurance may charge a rate for physical damage insurance coverages different than from those provided for in Section 38-73-457 if the rates are filed with the department and approved by the director or his designee. Any applicant or existing policyholder, to be charged this different rate, must be denied the coverage pursuant to subsection (B) at the rate provided in Section 38-73-457. However, automobile physical damage coverages ceded to the facility by an insurer or servicing carrier shall be at the rate provided for in accordance with Section 38-77-540.
(F) A carrier may not cede collision coverage, comprehensive coverage, or fire, theft, and combined additional coverages with a deductible of less than two hundred fifty dollars. An insured or qualified applicant my select an additional deductible in appropriate increments up to one thousand dollars. However the mandatory deductible does not apply to safety glass. In determining the premium rates to be charged on automobile insurance, it is unlawful to consider race, color, creed, religion, national origin, ancestry, location of residence, occupation, or economic status. If the Director of Insurance makes a finding that the insurer is participating in discriminatory practices, the director may impose a fine on the insurer of up to two hundred thousand dollars."
SECTION 11. The title of Section 38-77-540 of the 1976 Code is amended to read:
SECTION 12. Section 38-77-540 of the 1976 Code is amended to read:
"Section 38-77-540. The ceding insurer shall transfer or credit to the Facility on any policy of automobile insurance reinsured by the Facility the pure loss component of its rate or premium charge together with the profit and contingency component of the rate or premium charge as determined under its rating plan or system as filed with the Department. The ceding insurer shall retain as and for its ceding commission the allocated loss adjustment expense component as well as the underwriting and administrative expense components of the rate or premium charge under ceding insurer's rating plan or system as filed with the Department. However, no ceding insurer may include in the agents' commissions component of its underwriting expenses any amount greater than it has actually paid its agent as commission on the reinsured risk. The facility shall accept cessions on a policy of private passenger automobile insurance at the option of an insurer but only at the rate or premium charge as determined under the rating plans established by the governing board and approved by the director or his designee, subject, however, to Section 38-77-950 regarding reasonable utilization of the facility by member companies. The rate plans for the facility are subject to the director's or his designee's approval which may be granted only if the plan is consistent with and provides for the following:
(A) The rate or premium charge for drivers of private passenger automobiles shall be the state uniform rate as defined in this chapter.
(B) Beginning on October 1, 1996, the rate or premium charge for private passenger automobile physical damage coverage shall be the facility physical damage rate as defined in this chapter.
(C) The rate plans of the facility shall use the applicable risk and territorial classification plan promulgated by the director or his designee including merit rating plan surcharges and discounts as provided for in Section 38-73-760(e), and all rates or premium charges shall likewise be subject to objective standard surcharges as provided in Section 38-73-455.
(D) The ceding insurer shall transfer or credit to the facility on a policy of automobile insurance reinsured by the facility the pure loss component of the applicable uniform rate together with the contingent component of such rate. The ceding insurer shall retain as and for its ceding commission the allocated loss adjustment expense component as well as the underwriting and administrative expense components of the applicable uniform rate. However, no ceding insurer may include in the agents' commissions component of its underwriting expenses any amount greater than it has actually paid its agent as commission on the reinsured risk."
SECTION 13. Section 38-77-600 of the 1976 Code, as last amended by Section 826 of Act 181 of 1993, is further amended to read:
"Section 38-77-600. The rate or premium charged by insurers of private passenger automobile insurance must include a facility recoupment charge, which must be added to the appropriate base rate or objective standards rate prescribed in Sections 38-73-455 and 38-73-457. The operating losses of the facility for a twelve-month period must be recouped in the subsequent twelve-month period.
(1) Prior to Before December first of each year, the governing board of the facility shall calculate the recoupment amount, by coverage, by dividing the net facility operating loss, adjusted to reflect prudently incurred expenses, consistent with the provisions of Section 38-73-465, industry average expenses and the time value of money, by mandated coverage, for the preceding facility accounting year, by the total number of earned car years, in South Carolina, by coverage, for the same period of time. .386 multiplied by the recoupment is to be borne by risks having zero surcharge points under the Uniform Merit Plan promulgated by the department. The remainder of the recoupment (.614 multiplied by the recoupment)This dollar amount represents R in the formula, P(1)X + 2P(2)X + 3P(3)X + 4P(4)X + 5P(5)X + 6P(6)X + 7P(7)X + 8P(8)X + 9P(9)X + 10P(1)+I0X = R P0X + 2P1X + 3P2X + 4P3X + 5P4X = R. In this formula to be utilized in determining the facility recoupment charge:
(a) P0 is the percentage of risks which have zero surcharge points under the Uniform Merit Rating Plan promulgated by the director or his designee;
(a) P(1) (b) P1 is the percentage of risks which have one surcharge point under the Uniform Merit Rating Plan;
(b) P(2) (c) P2 is the percentage of risks which have two surcharge points under the Uniform Merit Rating Plan;
(c) P(3) (d) P3 is the percentage of risks which are subject to a surcharge of three to eight points under the Uniform Merit Rating Plan;
(d) P(4) (e) P4 is the percentage of risks which are subject to a surcharge of four nine or more points under the Uniform Merit Rating Plan;
(e) P(5) is the percentage of risks subject to a surcharge of five points under the Uniform Merit Rating Plan;
(f) P(6) is the percentage of risks subject to a surcharge of six points under the Uniform Merit Rating Plan;
(g) P(7) is the percentage of risks subject to a surcharge of seven points under the Uniform Merit Rating Plan;
(h) P(8) is the percentage of risks subject to a surcharge of eight points under the Uniform Merit Rating Plan;
(i) P(9) is the percentage of risks subject to a surcharge of nine points under the Uniform Merit Rating Plan;
(j) P(1)+I0 or more is the percentage of risks subject to a surcharge of ten or more points under the Uniform Merit Rating Plan;
(k)(f) X is the dollar amount by coverage, to be charged all risks having one zero surcharge point points under the Uniform Merit Rating Plan promulgated by the department director or his designee. This dollar amount, by coverage, is the facility recoupment charge to be added to the base rate or objective standards rate prescribed in Sections 38-73-455 and 38-73-457 for all risks which have one zero surcharge point points.
(2) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which have one surcharge point under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of one two.
(3) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which have two surcharge points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of two three.
(4) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of three to eight points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of three four.
(5) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of four nine or more points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of four five.
(6) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of five points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of five.
(7) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of six points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of six.
(8) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of seven points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of seven.
(9) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of eight points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of eight.
(10) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of nine points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of nine.
(11) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of ten or more points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of ten.
(12)(6) In determining the number of surcharge points a risk has for the purposes of this section, no surcharge points assigned under the Uniform Merit Rating Plan because the principal operator of the automobile has not been licensed in any state for at least one year immediately preceding the writing of the risk or as a result of a failure of any motor vehicle equipment requirement may be considered.
(13)(7) This section applies to all private passenger automobile insurance policies issued or renewed after June 30, 1989 1996. However, insurers unable to comply with the provisions of this section and renewal provisions required by law may comply with this section at any time after June 30, 1989, but in no event later than October 1, 1989."
SECTION 14. Section 38-77-910 of the 1976 Code, as last amended by Section 828 of Act 181 of 1993, is further amended to read:
"Section 38-77-910. It is an act of unlawful discrimination for an automobile insurer to make any distinction between automobile insurance policyholders or applicants for automobile insurance with respect to coverage, rates, claims, or other services except as the distinctions are provided for in the rating plans for the classification of risks and territories promulgated by the department and the facility rate plans."
SECTION 15. Section 38-77-940 of the 1976 Code is amended to read:
"Section 38-77-940. No insurer of automobile insurance shall directly or indirectly by offer or promise of reward or imposition or threat of penalty or through any artifice or device whatsoever, confer any benefit upon any agent or impose any detriment upon any such agent for the purpose of avoiding any class or type of automobile insurance risk which the insurer considers it necessary to reinsure in the Facility; nor shall any offer or promise of reward or imposition or threat of penalty in connection with any other line or type of insurance be so tied to automobile insurance as to have a tendency to induce the agent to avoid any such class or type of automobile insurance risk; nor shall any insurer of automobile insurance provide to agents, directly or indirectly, orally or in writing, any listing of classes or types of automobile insurance risks which it considers necessary to reinsure in the Facility; nor shall any insurer of automobile insurance terminate its insurance business with any one agent over the writing of certain classes or types of automobile insurance risks without also pulling out of the entire State or terminating its similar insurance business with all other agents in the State at the same time for a period of time of at least 365 days, except that if the insurer reinstates the agent within thirty days of the determination that the termination was unlawful, then this provision shall not apply; nor shall any insurer of automobile insurance do anything unfair, or unfairly fail to do anything, which has the effect of, or which results in, causing any ceded insurance business to have a detrimental effect on any incentive bonuses paid by the insurer to agents. Any act in violation of this section constitutes an act of unlawful discrimination and unfair competition which, if wilful, shall result in the suspension or revocation of the insurer's certificate of authority for not less than twelve months. Any agreement made in violation of this section shall be void.
Nothing in this section may be considered to preclude or impair agreements between insurers and their agents or some of their agents to pay contingency commissions or a profit-sharing bonus based upon the quality of business; nor shall the insurers, in any manner, use that business placed in the Facility when determining the quality bonus; nor may it be considered to preclude an agreement between any agent and an insurer of automobile insurance to exclude from any profit-sharing or contingency arrangement automobile insurance business coming unsolicited to the agent and written by him solely because of the mandate of coverage provided in this chapter.
No insurer of automobile insurance shall cancel its representation by an agent primarily because of the volume of automobile insurance placed with it by the agent on account of the statutory mandate of coverage nor because of the amount of the agent's automobile insurance business which the insurer has considered it necessary to reinsure in the Facility."
SECTION 16. No later than October 1, 1996, all insurers subject to the provisions of Section 38-77-280 of the 1976 Code shall submit rate filings to the Director of the Department of Insurance. These filings must reflect the rate decreases, if any, attributable to the passage of this act.
SECTION 17. Section 10 of this act takes effect October 1, 1996.
SECTION 18. Except as otherwise specifically provided in this act, this act takes effect October 1, 1995.