Current Status Bill Number:628 Type of Legislation:General Bill GB Introducing Body:Senate Introduced Date:19950309 Primary Sponsor:Banking and Insurance Committee SBI 02 All Sponsors:Banking and Insurance Committee Drafted Document Number:GJK\21540JM.95 Residing Body:House Current Committee:Labor, Commerce and Industry Committee 26 HLCI Date of Last Amendment:19950427 Subject:Motor vehicle insurance
Body Date Action Description Com Leg Involved
______ ________ _______________________________________ _______ ____________
House 19950502 Introduced, read first time, 26 HLCI
referred to Committee
Senate 19950427 Amended, read third time,
sent to House
Senate 19950426 Amended, read second time,
ordered to third reading
with notice of general amendments
Senate 19950412 Debate interrupted by adjournment
Senate 19950411 Debate interrupted by adjournment
Senate 19950405 Debate interrupted by adjournment
Senate 19950404 Debate interrupted
Senate 19950330 Debate interrupted by adjournment
Senate 19950329 Debate interrupted by adjournment
Senate 19950328 Made Special Order
Senate 19950309 Introduced, read first time,
placed on Calendar without reference
View additional legislative information at the LPITS web site.
Indicates Matter Stricken
Indicates New Matter
AS PASSED BY THE SENATE
April 27, 1995
S. 628
S. Printed 4/27/95--S.
Read the first time March 9, 1995.
TO AMEND SECTION 38-73-1420, CODE OF LAWS OF SOUTH CAROLINA, 1976, 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 COST REDUCTIONS REALIZED IN OPERATING RESULTS OF THE FACILITY SHALL BE APPLIED EXCLUSIVELY TO REDUCE THE RECOUPMENT CHARGES ON ALL POLICIES OF PRIVATE PASSENGER AUTOMOBILE INSURANCE WRITTEN IN SOUTH CAROLINA; 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 COMBINED RATIO OF ALL INSURERS CEDING PRIVATE PASSENGER AUTOMOBILE INSURANCE RISKS TO THE FACILITY; TO AMEND SECTION 38-73-455, AS AMENDED, RELATING TO AUTOMOBILE INSURANCE RATES, SO AS TO PROVIDE, AMONG OTHER THINGS, THAT RATING PLANS MAY PROVIDE FOR DIFFERENT RATES, RATING TIERS, AND RATING PLANS AMONG AFFILIATED COMPANIES; TO AMEND SECTION 38-77-950, AS AMENDED, RELATING TO UNREASONABLE OR EXCESSIVE USE OF THE REINSURANCE FACILITY BY AN INSURER, SO AS TO DELETE A REFERENCE TO "AN AUTOMOBILE INSURER"; TO AMEND THE 1976 CODE BY ADDING SECTION 38-77-596 SO AS TO PROVIDE, AMONG OTHER THINGS, THAT UPON NOTIFICATION TO THE GOVERNING BOARD OF THE REINSURANCE FACILITY, DESIGNATED PRODUCERS MAY CONTRACT WITH A VOLUNTARY MARKET OUTLET FOR ANY TYPE OF AUTOMOBILE INSURANCE CEDEABLE TO THE FACILITY; 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; TO AMEND SECTION 38-77-735, AS AMENDED, RELATING TO INSURANCE, THE STATE RATING AND STATISTICAL DIVISION, AND THE PLAN FOR CREDITS AND DISCOUNTS, SO AS TO DELETE CERTAIN LANGUAGE, AND PROVIDE THAT IF AN INSURANCE CREDIT OR DISCOUNT PLAN, OTHER THAN THAT PROMULGATED BY THE DIRECTOR OF THE DEPARTMENT OF INSURANCE OR HIS DESIGNEE, IS GIVEN TO AN INSURED PURSUANT TO THIS SECTION, THE POLICY MAY NOT BE CEDED TO THE REINSURANCE FACILITY; AND TO PROVIDE THAT RECOUPMENT FEES FOR PRIVATE PASSENGER AUTOMOBILE INSURANCE FOR THE TWELVE MONTHS ENDING JUNE 30, 1996, SHALL NOT EXCEED THE LEVEL CHARGED DURING THE TWELVE-MONTH PERIOD ENDING JUNE 30, 1995, AND THAT REINSURANCE FACILITY LOSSES UNRECOUPED DUE TO THIS PROVISION SHALL BE RECOUPED EVENLY DURING THE THREE-YEAR PERIOD BEGINNING JULY 1, 1996.
Amend Title To Conform
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 38-73-455 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"Section 38-73-455. (A) An automobile insurer shall offer two different rates for automobile insurance, a base rate one or more rates 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 which rates are subject to all surcharges or discounts, if any, applicable under any approved merit rating plan, credit or discount plan promulgated by the department or approved by the director or his designee. Additionally, an automobile insurer shall offer the applicable rates approved for policies ceded to the Reinsurance Facility.
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 38-77-340 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 Motor Vehicle Division of the Department of Revenue and Taxation; 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 Motor Vehicle Division of the South Carolina Department of Revenue and Taxation; 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) (B) 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 or his designee. 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. These guidelines shall be treated by the director or his designee as proprietary trade secrets and subject to disclosure only to the director or his designee and the consumer advocate, who shall protect and preserve their confidentiality. 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 director or his designee 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.
(D)(C) 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)(D) For purposes of determining the applicable rates rate to be charged an insured, an automobile insurer shall obtain and review an applicant's motor vehicle record."
SECTION 2. Section 38-73-457 of the 1976 Code, as last amended by Act 181 of 1993 is further 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 department a base rate one or more rates, which rates are 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 director or his designee, 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 director or his designee. The provisions of the Administrative Procedures Act apply to any appeal of a base rate or objective standards rate brought thereunder before the Administrative Law Judge Division as provided by law. The base rate or objective standards rate approved by the director or his designee 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 director or his designee 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 director or his designee 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.
The consumer advocate, upon request to the director or his designee, must be provided by him with a copy of any base rate rates filed with the director or his designee 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 director or his designee on any filed base rate before it takes effect that he believes does not meet the requirements of this section. After January 1, 1996, but not before that date, final decisions of the director or his designee regarding this hearing are subject to the provisions of the State Administrative Procedures Act and may be appealed to the Administrative Law Judge Division as provided by law.
Effective January 1, 1996, the director or his designee shall disallow the further use of the objective standards rate previously filed in accordance with this section. However, concurrently with the above effective date the director or his designee shall modify the uniform merit rating plan to the extent that surcharges are applied as a percent of the base rate, not as a flat dollar amount, incorporating into these surcharges the prior objective standards rate surcharge and criteria previously listed in Section 38-73-455 so that the overall rate levels before and after the effective date are generally the same.
Upon the effective date of this section, nothing herein shall be construed to require a rating organization, its members or subscribers, or an individual insurer to refile final rates or premium charges previously approved by the director or his designee. Members or subscribers of a rating organization or individual insurers are authorized to continue to use rates approved before the effective date of this section. Such continued use shall not require review or other action pursuant to the Administrative Procedures Act."
SECTION 3. Section 38-73-735 of the 1976 Code, as last amended by 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 and not ceded to the facility. 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 4. The 1976 Code is amended by adding:
"Section 38-73-780. (A) The South Carolina Reinsurance Facility Board of Governors annually shall develop and file a liability loss component as defined in Section 38-73-1400(1) for private passenger automobile insurance coverages based on the total experience of all insurers in this State including risks ceded to the facility. The Facility Board of Governors shall contract with independent actuarial services to develop the loss component. To expedite the implementation of this section, before January 1, 1997, the filing shall not be subject to the Administrative Procedures Act. 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 within 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.
The South Carolina Reinsurance Facility Board of Governors annually shall develop and file a physical damage 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. The Facility Board of Governors shall contract with independent actuarial services to develop the loss component. To expedite the implementation of this section, before January 1, 1997, the filing shall not be subject to the Administrative Procedures Act. 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 within 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 components 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 5. 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 and a zero percent profit and contingency provision 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. To expedite the implementation of this section, before January 1, 1997, the filing shall not be subject to the Administrative Procedures Act. 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 6. Section 38-73-1425 of the 1976 Code, as added by Act 113 of 1991, and as last amended by Act 181 of 1993 is further amended to read:
"Section 38-73-1425. Except as provided for in subsections (A), (B), and (C), 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) Insurers having company filed rates which are less than the uniform rate shall implement the following transition program for ceded risks insured by that insurer on January 1, 1996, and having no merit rating points.
Twenty percent of the current differential of the lower company filed rate shall be added on renewals effective on or after January 1, 1996, and forty percent of the current differential of the lower company filed rate and the projected state uniform rate shall be added on renewals effective on or after January 1, 1997, and sixty percent of the current differential of the lower company filed rate and the projected state uniform rate shall be added on renewals effective on or after January 1, 1998, and eighty percent of the current differential of the lower company filed rate and the projected state uniform rate shall be added on renewals effective on or after January 1, 1999, and on renewals effective on or after January 1, 2000, such risks shall be ceded at the final rate or premium charge required by Section 38-77-540. However, effective January 1, 1997, physical damage coverages on renewals shall be ceded at the facility physical damage rate as defined in Chapter 77, for insurers using transitional facility rates, the department shall promulgate a filing form and the director or his designee shall approve the rate schedule without hearing if the rates are computed in accordance with this section. Filings under this section shall not be considered company rate increases under Section 38-73-920.
(B) For the one-year period beginning January 1, 1996, the rate for risks, other than those risks under Section (A), having no merit rating plan points and ceded by insurers having company filed rates in effect on January 1, 1996, which are less than the projected state uniform rate shall be the sum of the company filed rate and twenty percent of the current differential of the lower company filed rate and the state uniform rate. Effective January 1, 1997, all private passenger automobile risks, other than those under Section (A), shall be ceded at the final rate or premium charge required by Section 38-77-540.
(C) For the one-year period beginning January 1, 1996, the rate for private passenger automobile physical damage coverages ceded to the facility on new and renewal risks having one or more merit rating plan points shall be the facility physical damage rate, as defined in Section 38-77-30(16).
SECTION 7. Section 38-77-10 of the 1976 Code, as amended by 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 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 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.; and
(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 8. 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) Notwithstanding Sections 38-77-110 and 38-77-920, and 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) the uniform merit rating plan 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. Notwithstanding Section 38-37-111, automobile physical damage coverages may be ceded to the facility. 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. Nothing in this section shall prohibit use of territorial plans and classifications approved by the director or his designee. If the Director of Insurance makes a finding that the insurer is participating in a pattern of discriminatory practices, the director may impose a fine on the insurer of up to two hundred thousand dollars."
SECTION 9. Section 38-77-30 of the 1976 Code is amended by adding:
"(15) `State uniform rate' means the final rate or premium charge for liability coverage which is to be established by adding the liability loss component developed under Section 38-73-780 to the expense component developed under Section 38-73-1420 and applying to the resulting total a modification factor of 1.10 for the two-year period beginning January 1, 1996; a modification factor of 1.125 for the two-year period beginning January 1, 1998; and a modification factor of 1.15 on or after January 1, 2000.
(16) `Facility physical damage rate' means the final rate or premium charge for physical damage coverage which is to be established by adding the physical damage loss component developed under Section 38-73-780 to the expense component developed under Section 38-73-1420."
SECTION 10. Section 38-77-600 of the 1976 Code, as last amended by 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, 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) 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. In this formula to be utilized in determining the facility recoupment charge:
(a) P(1) is the percentage of risks which have one surcharge point under the Uniform Merit Rating Plan;
(b) P(2) is the percentage of risks which have two surcharge points under the Uniform Merit Rating Plan;
(c) P(3) is the percentage of risks which are subject to a surcharge of three points under the Uniform Merit Rating Plan;
(d) P(4) is the percentage of risks which are subject to a surcharge of four 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) X is the dollar amount by coverage, to be charged all risks having one surcharge point under the Uniform Merit Rating Plan promulgated by the department. 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 surcharge point.
(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.
(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.
(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 points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of three.
(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 points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of four.
(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) 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) This section applies to all private passenger automobile insurance policies issued or renewed after June 30, 1989. 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 11. Section 38-77-620 of the 1976 Code, as last amended by Act 148 of 1989, is further amended to read:
"Section 38-77-620. The facility recoupment charges approved or established pursuant to Section 38-77-610 must be added to the approved base rate and objective standards rate in effect for each automobile insurer. The combined rate or premium charge is effective on July first of each year and the recoupment charges must remain constant until July first of the following year. The base rate and objective standards rate may change in accordance with Section 38-73-457 and the other applicable requirements of this title pertaining to the approval of rates or premium charges. Facility recoupment charges must be considered in accordance with:
(1) Any recoupment charge paid by policyholders must be considered premium for the purpose of calculating premium taxes and commissions and is subject to normal policy cancellation procedures.
(2) Any net operating gains resulting from the operation of the facility must be retained by the facility, and the gains and any investment income derived from the gains must be used to offset future operating losses.
(3) The total funds recouped by all insurers less commission and premium tax expenses and time value of money considerations must be paid to the Reinsurance reinsurance facility in accordance with the plan of operation. The governing board shall redistribute the funds to the insurers based upon each insurer's share of the Reinsurance Facility reinsurance facility losses. Recoupment must be used solely for the purpose of recovering past facility operating deficits. The plan of operation must provide that the amount ultimately received by an individual company is not more than the company's share of the Reinsurance Facility reinsurance facility losses, plus the time value of money.
(4) In the making and approval of rates for small commercial automobile risks, as defined in Section 38-77-30, consideration must be given to the net gains or losses incurred by insurers as a result of participation in the operating results and actual, prudently incurred expenses, respectively, of the facility."
SECTION 12. Section 38-77-910 of the 1976 Code, as amended by 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 13. Section 38-77-940 of the 1976 Code, as last amended by Act 181 of 1993, is further 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 14. Section 38-77-950 of the 1976 Code, as last amended by Act 104 of 1993 and Act 181 of 1993, is further amended to read:
"Section 38-77-950. It is the intent of this chapter that the facility 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 director or his designee shall prohibit unreasonable or excessive utilization of the facility. 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 forty 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 total cedeable car-year exposures, including nonowner risk exposures, as stated in the most recent calendar year report of the South Carolina Reinsurance Facility. Effective January 1, 1997, this limitation shall be forty-five percent. Effective January 1, 1998, this limitation shall be fifty percent. 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).
Total direct cedeable written premiums as used in this section do not include premiums attributable to risks ceded to the facility that do not qualify for the safe driver discount in Section 38-73-760(e) for twenty-four months following October 1, 1993 Total cedeable car-year exposures, including nonowner risk exposures as used in this section, do not include such exposures ceded to the facility which do not qualify for the safe driver discount in Section 38-73-760(e)."
SECTION 15. Notwithstanding any other provision of law, recoupment fees for private passenger automobile insurance for the twelve months ending June 30, 1996, shall not exceed the level charged during the twelve-month period ending June 30, 1995; and facility losses unrecouped due to this section shall be recouped evenly during the three-year period beginning July 1, 1996.
SECTION 16. Section 38-3-10 of the 1976 Code is amended to read:
"Section 38-3-10. (A) Effective July 1, 1995, through June 30, 1996, There there is established a separate and distinct department of this State, known as the Department of Insurance. The department must be managed and operated by a director appointed by the Governor upon the advice and consent of the Senate. The director is subject to removal by the Governor as provided in Section 1-3-240(B). The director shall be selected with special reference to his training, experience, technical knowledge of the insurance industry, and demonstrated administrative ability. The director may appoint or designate the person or persons who shall serve at the pleasure of the director to carry out the objectives or duties of the department as provided by law. Furthermore, the director may bestow upon his designee or deputy director any duty or function required of him by law in managing or supervising the Department of Insurance.
(B) Effective January 1, 1997, the department must be operated under the management and direction of a statewide officer designated as the Commissioner of Insurance. The office must be elected for a four-year term beginning with the 1996 general election. Candidates for the office of Commissioner of Insurance shall file for election and be nominated in accordance with the provisions applicable to the nomination and election of statewide constitutional officers, mutatis mutandis."
SECTION 17. Section 38-77-590 of the 1976 Code, as last amended by Section 823 of Act 181 of 1993, is further amended by adding:
"(i) Notwithstanding any other provisions of this section or of this article, the governing board of the facility shall determine an average volume of business by designated producers using a methodology designed to eliminate from the calculation extremes of low and high volume that would skew the average. Where the designated producers in an area of the State exceed this average volume, the governing board shall add additional otherwise qualified designated producers without regard to the criteria for designation provided in this section. In making these additional designations, the governing board shall survey the representation of minorities among designated producers in each area of the State and where minorities are underrepresented with respect to the population of the area, shall use the designation of these additional producers to make up for the disparity."
SECTION 18. The Joint Insurance Laws Study Committee shall review the system of automobile insurers designated pursuant to Section 38-77-590(a) of the 1976 Code. The committee shall conduct public hearings and receive public comment, as appropriate, and make a recommendation to the General Assembly regarding action which should be taken to abolish the designated agents system in this State in an orderly and appropriate manner. This recommendation must be submitted to the Speaker of the House of Representatives and to the President of the Senate not later than December 1, 1995.
SECTION 19. The title of Section 38-77-540 of the 1976 Code is amended to read:
"Duties of ceding insurer Facility rate plans."
SECTION 20. 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 company. 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 January 1, 1997, the rate or premium charge for private passenger automobile physical damage coverages 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 38-77-760(e). The facility rate plans shall not include discounts approved for individual insurers under Section 38-73-735.
The facility shall publish a uniform rate and rules manual as required by this section. This manual shall include all applicable classifications, discounts, rating rules and procedures to be utilized in connection with facility business. This manual shall be subject to annual approval by the director or his designee. The director shall resolve all subsequently arising administrative issues by the department bulletin.
(D) 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 the applicable uniform rate together with the profit and contingency component of such rate. The ceding insurer shall retain as and for its ceding commission its allocated loss adjustment expense component as well as its underwriting and administrative expense components of the applicable uniform rate as specified in the plan of operation of the South Carolina Reinsurance Facility. 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.
(E) The governing board shall assign a specific location to each producer designated. The governing board shall determine producers whom the director or his designee the locations assigned by him to those producers whom the director or his designee has designated. Except through the acquisition of an exiting designated agency as permitted in paragraph (H) of this section, 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 director or his designee shall revoke all agent's 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.
(F) The designation of a producer by the director or his designee of the governing board is transferable to the Reinsurance Facility for purposes of liquidation, or a spouse, child, parent, brother, sister, employee or partner of five years, the producer upon the designated producer's retirement, incapacity, or death. The duties of a designated producer may be performed by one of more qualified employees of the producer or the producer's corporate agency.
(G) A designated producer may have any direct or indirect connection or contract with any voluntary market outlet for the purpose of writing any type of automobile insurance in this State. Provided that the combined annual amount of net written premiums for private passenger automobile liability insurance coverages in all of the producers voluntary market outlets shall not exceed sixty-five percent of the designated producers total annual amount of net written premiums for private passenger automobile liability insurance coverages. In the event the calculated percentage exceeds sixty-five percent in eighteen months after notification during which time an appropriate reduction in voluntary market writings has not been accomplished the governing board shall terminate the designation of the producer."
SECTION 21. This act takes effect upon approval by the Governor.