South Carolina General Assembly
111th Session, 1995-1996

Bill 4035


Indicates Matter Stricken
Indicates New Matter


                    Current Status

Bill Number:                       4035
Type of Legislation:               General Bill GB
Introducing Body:                  House
Introduced Date:                   19950412
Primary Sponsor:                   Richardson 
All Sponsors:                      Richardson 
Drafted Document Number:           bbm\10151jm.95
Residing Body:                     House
Current Committee:                 Labor, Commerce and Industry
                                   Committee 26 HLCI
Subject:                           Motor vehicle insurance, safe
                                   driver discount



History


Body    Date      Action Description                       Com     Leg Involved
______  ________  _______________________________________  _______ ____________

House   19950412  Introduced, read first time,             26 HLCI
                  referred to Committee

View additional legislative information at the LPITS web site.


(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

A BILL

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 38-77-280, 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, THAT BEGINNING JANUARY 1, 1996, AND ANNUALLY THEREAFTER, THE FACILITY PHYSICAL DAMAGE RATE FOR A PRIVATE PASSENGER AUTOMOBILE INSURANCE RISK CEDED TO THE FACILITY MUST BE CALCULATED SO THAT THE PROJECTED LOSS RATIO FOR RISKS SUBJECT TO THE FACILITY PHYSICAL DAMAGE RATE IS NO MORE THAN ONE HUNDRED PERCENT; 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 PROVIDE, AMONG OTHER THINGS, THAT THE FACILITY SHALL ACCEPT CESSIONS OF PHYSICAL DAMAGE COVERAGES AT THE FACILITY PHYSICAL DAMAGE RATE, THAT A FACILITY PHYSICAL DAMAGE RATE FOR CEDED RISKS IS ESTABLISHED OVER TWO YEARS; 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; AND TO REQUIRE ALL INSURERS SUBJECT TO SECTION 38-77-280 TO SUBMIT RATE FILINGS TO THE DIRECTOR OF THE DEPARTMENT OF INSURANCE WITHIN TWELVE MONTHS FOLLOWING THE EFFECTIVE DATE OF THIS ACT, AND PROVIDE THAT THESE 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 38-73-760(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 2. 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 3(A). 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.

Notwithstanding any other provision of the law, beginning October 1, 1996, and annually thereafter, the facility shall accept cessions of automobile physical damage coverages on a policy of private passenger automobile insurance at the option of an insurer but only at the facility physical damage rate so that no operating loss is attributable to the facility's experience with private passenger automobile physical damage coverages. The facility physical damage rate must be calculated so that the projected loss ratio for the risk is no more than one hundred percent. The facility physical damage rate must be filed by the Reinsurance Facility with the director for approval."

(B) The provisions of Section 38-77-540, as amended by Section 3(A) of this act, are effective on January 1, 1996. This rate adjustment to a projected loss ratio of one-hundred percent or less must occur evenly over a two-year period beginning on October 1, 1996. On October 1, 1996, the first year of the two-year period begins for the rate adjustment and the two equal portions of this rate adjustment shall be based upon the losses reported by the facility on or about October 1, 1995 and other relevant information. On October 1, 1997, the beginning of the last year of the two-period, the facility physical damage rate for automobile physical damage coverages on a policy of private passenger automobile insurance risk ceded to the facility shall include the remaining portion of the rate adjustment along with, but not limited to, those adjustments, if any, for losses reported by the facility after October 1, 1995.

SECTION 4. 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 5. 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 within twelve months following the effective date of this act. These filings must reflect the rate decreases, if any, attributable to the passage of this act.

SECTION 6. Except as otherwise specifically provided in this act, this act takes effect upon approval by the Governor.

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