South Carolina General Assembly
113th Session, 1999-2000

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Bill 399


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COMMITTEE REPORT

February 4, 1999

S. 399

Introduced by Senators McConnell, Matthews, Courtney, Patterson, Hayes, Reese, Jackson, Passailaigue, Saleeby and Holland

S. Printed 2/4/99--H.

Read the first time February 2, 1999.

THE COMMITTEE ON

LABOR, COMMERCE AND INDUSTRY

To whom was referred a Bill (S. 399), to amend Section 38-73-910, as amended, Code of Laws of South Carolina, 1976, relating to public notices and public hearings for certain rate increases in insurance lines, etc., respectfully

REPORT:

That they have duly and carefully considered the same, and recommend that the same do pass:

HARRY F. CATO, for Committee.

A BILL

TO AMEND SECTION 38-73-910, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO PUBLIC NOTICES AND PUBLIC HEARINGS FOR CERTAIN RATE INCREASES IN INSURANCE LINES SO AS TO FURTHER PROVIDE FOR THESE NOTICES AND HEARINGS AND REVISE AND CLARIFY THE PUBLIC HEARING AND PUBLIC NOTICE REQUIREMENTS FOR AUTOMOBILE INSURANCE RATE FILINGS MADE PURSUANT TO ACT 154 OF 1997 WHICH REVISED THE LAWS OF THIS STATE PERTAINING TO AUTOMOBILE INSURANCE; TO EXPRESS THE INTENT OF THE GENERAL ASSEMBLY THAT SPECIFIED PROVISIONS OF ACT 154 OF 1997 APPLY TO RATE FILINGS MADE PURSUANT TO ACT 154 OF 1997 REGARDLESS OF WHETHER SUCH PRIVATE PASSENGER AUTOMOBILE INSURANCE RATE FILINGS ARE FILED WITH THE DEPARTMENT OF INSURANCE PRIOR TO MARCH 1, 1999, AND TO FURTHER PROVIDE FOR THE APPLICABILITY OF SPECIFIED PROVISIONS OF ACT 154 OF 1997.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1. Section 38-73-910 of the 1976 Code, as last amended by Act 154 of 1997, is further amended to read:

"Section 38-73-910. (A) No increase in the premium rates may be granted for automobile, workers' compensation, fire, allied lines, and homeowners' insurance, nor for any other line or type of insurance with respect to which the director or his designee has, by order, made a finding that (a) legal or other compulsion upon the part of the insured to purchase the insurance interferes with competition, or (b) under prevailing circumstances there does not exist substantial competition, unless notice is given in all newspapers of general, statewide circulation at least thirty days in advance of the insurer's proposed effective date of the increase in premium rates. The notice shall state the amount of increase, the type and line of coverage, and the proposed effective date and shall allow any insured or affected party to request within fifteen days a public hearing upon the propriety of the rate increase request before the Administrative Law Judge Division. A copy of the notice must be sent to the Consumer Advocate.

However, the requirements of public notices and public hearings in this section do not apply to applications for rate increases when the applicant insurer had earned premiums in this State in the previous calendar year of less than two million dollars for the line or type of insurance for which the rate increase is sought or, if the rate increase is sought by a rating organization, the earned premiums in this State for all members and subscribers of the organization for whom an increase is sought were less than two million dollars for the previous calendar year for the line or type of insurance for which the rate increase is sought. The two million dollars must be increased by a factor equal to the increase in the consumer price index, all items, every three years.

However, a private insurer licensed to underwrite essential property insurance as defined by Section 38-75-310(1), notwithstanding any limitations included within this title, may file and use, pursuant to the provisions of Section 38-73-1095, any rates which result in insurance premium rates of ninety percent, or less, of the insurance premium rates then approved for the South Carolina Wind and Hail Underwriting Association for use within the coastal area of South Carolina as defined by Section 38-75-310(5).

(B) Except as provided in subsection (C), overall average rate level increases or decreases, for all coverages combined, of seven percent above or below the insurer's rates then in effect may take effect without prior approval on a file and use basis with respect to rates for automobile insurance policies. The seven percent cap does not apply on an individual insured basis.

(C) Notwithstanding any other provisions of this chapter, for any policies governed by this section, filings that produce rate level changes within the limitation specified in subsection (B) become effective without prior approval; provided, that (1) no more than one rate increase within the limitation specified in subsection (B) may be implemented during any twelve-month period, and (2) no rate increase within the limitation specified in subsection (B) may be implemented until the onset of the new policy period unless the insurer, at least thirty days in advance of the end of the policy period, mails or delivers to the named insured at the address shown in the policy a written notice of its intention to change the rate. The overall statewide rate change implemented under this section must be stated in the notice.

A rate increase or decrease falling within the limitation in subsection (B) may become effective not less than thirty days after the date of the filing with the director. The filing is deemed to meet the requirements of this chapter. The director may find that such a filing is not in compliance with this chapter. In the event of such a finding, the director shall issue a written order specifying in detail the provisions with which the insurer has not complied and state a reasonable period thereafter in which the filing shall be deemed no longer effective. Any order by the director pursuant to this section that is issued more than thirty days from the date on which the director received the rate filing shall be on a prospective basis only and shall not affect any contract issued or made prior to the effective date of the order.

Rate filings falling outside the limitation specified in subsection (B) are subject to the prior approval of the director. The director shall approve or disapprove these filings in accordance with the provisions of Sections 38-73-960 and 38-73-990.

(D) Individual automobile insurance companies and member companies of an affiliated group of automobile insurers may utilize different filed rates for automobile insurance coverages in accordance with rating plans filed with and approved by the director. These rating plans may provide for different rates, rating tiers, and rating plans among affiliated companies. For the purpose of this subsection, an affiliated group of automobile insurers includes a group of automobile insurers under common ownership, management, or control.

(E) The Director of the Department of Insurance or his designee shall promulgate regulations to implement the provisions of this section.

(F) On or before March 31, 2004, the Director of the Department of Insurance or his designee shall report to the General Assembly on the effectiveness of flexible rating for automobile insurance policies. The report may not include data regarding a specific insurer or insurer group, except data that is in the public record, and must analyze the impact of flexible rating on:

(1) the extent and nature of competition;

(2) size and significance of coverage;

(3) level and range of rates and rate changes among insurers;

(4) extent of consumer complaints to the Department of Insurance;

(5) volume of cancellations and nonrenewals;

(6) changes in the number of policies by territory and by class, including age and sex, in each territory; and

(7) the number of new insured, nonrenewed insured, and business written by each insurer."

SECTION 2. To clarify ambiguities relating to public notice and public hearing requirements in regard to Act 154 of 1997, the General Assembly provides and stipulates that rate or rule filings filed with the South Carolina Department of Insurance pursuant to the requirements of Act 154 of 1997, creating a new automobile insurance delivery system, are not subject to the public notice and public hearing requirements of Section 38-73-910 or Section 38-73-457, or both, of the 1976 Code regardless of whether the rate or rule filing is filed after Act 154 of 1997 was signed by the Governor on July 2, 1997, and prior to March 1, 1999. It is the intent of the General Assembly that the provisions of Act 154 of 1997 apply to any rate or rule filing made pursuant to Act 154 of 1997, even if the automobile insurance rate or rule filing was or is filed with the Department of Insurance before March 1, 1999. Any filing having effective dates of March 1, 1999, and thereafter, which was or is filed before March 1, 1999, is not required to meet the public notice and public hearing requirements of Section 38-73-910 or Section 38-73-457, or both. Moreover, it is the intent of the General Assembly to have the new automobile insurance delivery system operational so that consumers will have markets and choices available when the system takes effect on March 1, 1999, pursuant to Act 154 of 1997.

SECTION 3. This act takes effect upon approval by the Governor and applies to any rate or rule filing submitted before, on, or after the effective date of this act to the Department of Insurance for premium rates in automobile insurance for use with automobile policies having coverage or policy dates beginning on or after March 1, 1999. Any rate or rule filing filed on or before March 1, 1999, in compliance with the new automobile insurance delivery system beginning on March 1, 1999, pursuant to Act 154 of 1997, may proceed, but without having to meet or comply with the public notice and public hearing requirements of Section 38-73-910 or Section 38-73-457, or both, in effect at the time of filing. As it may relate to any provision of law allowing for any person or agency to request that a public hearing be held: (a) the provisions of Act 154 of 1997 apply and control with respect to a private passenger automobile insurance rate or rule filing made pursuant to Act 154 of 1997 for use with private passenger automobile insurance policies with coverage or policy periods beginning on or after March 1, 1999; and (b) the request for scheduling of or the holding of a public hearing shall not stay, delay, or otherwise affect the effective date or implementation of the rate or rule filing as proposed by the insurer; and (c) any person or agency requesting a public hearing shall proceed pursuant to Section 38-73-1030 of the 1976 Code.

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