GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2017
S D
SENATE BILL DRS35130-MH-46 (02/14)
|
Short Title: Depopulate Reinsurance Fac./NCRB Opt Out. |
(Public) |
|
|
Sponsors: |
Senators Meredith, Wade, and Britt (Primary Sponsors). |
|
|
Referred to: |
|
|
A BILL TO BE ENTITLED
AN ACT to provide a two‑year phaseout of the "Clean Risk" subclassification within the Reinsurance facility and establish an opt out from the rate bureau for auto insurance.
The General Assembly of North Carolina enacts:
SECTION 1. G.S. 58‑36‑30 reads as rewritten:
"§ 58‑36‑30. Deviations.
(a) Except as permitted by G.S. 58‑36‑100 for workers' compensation loss costs filings, or subsection (e) of this section for nonfleet private passenger motor vehicle liability insurance, no insurer and no officer, agent, or representative of an insurer shall knowingly issue or deliver or knowingly permit the issuance or delivery of any policy of insurance in this State that does not conform to the rates, rating plans, classifications, schedules, rules and standards made and filed by the Bureau. An insurer may deviate from the rates promulgated by the Bureau if the insurer has filed the proposed deviation with the Bureau and the Commissioner, if the proposed deviation is based on sound actuarial principles, and if the proposed deviation is approved by the Commissioner. Amendments to deviations are subject to the same requirements as initial filings. An insurer may terminate a deviation only if the deviation has been in effect for a period of six months before the effective date of the termination and the insurer notifies the Commissioner of the termination no later than 15 days before the effective date of the termination.
…
(e) The provisions of this subsection apply only to the setting of rates for nonfleet private passenger motor vehicle liability insurance. An insurer may deviate from the rates promulgated by the Bureau if the insurer has filed the proposed deviation with the Bureau and the Commissioner and if the proposed deviation is based on sound actuarial principles. Rate deviations shall take effect upon filing. The Commissioner may disapprove a deviation filing submitted under this section only if the Commissioner determines that the filing is excessive, inadequate, or unfairly discriminatory. Deviations above the Bureau rate up to the applicable rates established for risks ceded to the Reinsurance Facility shall be presumed not to be excessive, inadequate, or unfairly discriminatory. If, after a hearing, the Commissioner disapproves a deviation filing, the Commissioner shall issue a written order specifying in detail the reasons the filing is excessive, inadequate, or unfairly discriminatory and stating a reasonable future date on which the filing is to be considered no longer effective. An order by the Commissioner pursuant to this subsection is prospective only and does not affect any policy that takes effect or is delivered before the effective date of the order, even if the effective date of the policy is subsequent to the effective date of the order. Amendments to deviations are subject to the same requirements as initial filings. An insurer may terminate a deviation only if the deviation has been in effect for a period of six months before the effective date of the termination and the insurer notifies the Commissioner of the termination no later than 15 days before the effective date of the termination."
SECTION 2.(a) G.S. 58‑37‑35 reads as rewritten:
"§ 58‑37‑35. The Facility; functions; administration.
…
(l) The
classifications, rules, rates, rating plans and policy forms used on motor
vehicle insurance policies reinsured by the Facility may be made by the
Facility or by any licensed or statutory statistical organization or bureau on
its behalf and shall be filed with the Commissioner. The Board of Governors
shall establish a separate subclassification within the Facility for "clean
risks". For the purpose of this Article, a "clean risk" is any
owner of a nonfleet private passenger motor vehicle as defined in G.S. 58‑40‑10,
if the owner, principal operator, and each licensed operator in the owner's
household have two years' driving experience as licensed drivers and if none of
the persons has been assigned any Safe Driver Incentive Plan points under
Article 36 of this Chapter during the three‑year period immediately
preceding either (i) the date of application for a motor vehicle insurance
policy or (ii) the date of preparation of a renewal of a motor vehicle
insurance policy. The filings may incorporate by reference any other material
on file with the Commissioner. Rates shall be neither excessive, inadequate nor
unfairly discriminatory. If the Commissioner finds, after a hearing, that a
rate is either excessive, inadequate or unfairly discriminatory, the Commissioner
shall issue an order specifying in what respect it is deficient and stating
when, within a reasonable period thereafter, the rate is no longer effective.
The order is subject to judicial review as set out in Article 2 of this
Chapter. Pending judicial review of said order, the filed classification plan
and the filed rates may be used, charged and collected in the same manner as
set out in G.S. 58‑40‑45 of this Chapter. The order shall not
affect any contract or policy made or issued before the expiration of the
period set forth in the order. All rates shall be on an actuarially sound basis
and shall be calculated, insofar as is possible, to produce neither a profit
nor a loss. However, the rates made by or on behalf of the Facility with
respect to "clean risks" shall not exceed the rates charged "clean
risks" who are not reinsured in the Facility. The Facility,
except that rates for "clean risks" on policies reinsured by the
Facility that become effective on or after January 1, 2018, shall be
established on a schedule that provides that any difference between rates
charged for "clean risks" reinsured in the Facility on policies
becoming effective immediately prior to January 1, 2018, and the actuarially
sound rate for all risks reinsured by the Facility shall be eliminated over a two‑year
period ending on December 31, 2020. Any difference between the actual rate
charged and the actuarially sound and self‑supporting rates for "clean
risks" reinsured in the Facility may be recouped in similar manner as
assessments under G.S. 58‑37‑40(f). Rates shall not include
any factor for underwriting profit on Facility business, but shall provide an
allowance for contingencies. There shall be a strong presumption that the rates
and premiums for the business of the Facility are neither unreasonable nor
excessive.
.…"
SECTION 2.(b) G.S. 58‑37‑35, as rewritten by subsection (a) of this section, reads as rewritten:
"§ 58‑37‑35. The Facility; functions; administration.
…
(l) The
classifications, rules, rates, rating plans and policy forms used on motor
vehicle insurance policies reinsured by the Facility may be made by the
Facility or by any licensed or statutory statistical organization or bureau on
its behalf and shall be filed with the Commissioner. The Board of Governors
shall establish a separate subclassification within the Facility for "clean
risks". For the purpose of this Article, a "clean risk" is any
owner of a nonfleet private passenger motor vehicle as defined in G.S. 58‑40‑10,
if the owner, principal operator, and each licensed operator in the owner's
household have two years' driving experience as licensed drivers and if none of
the persons has been assigned any Safe Driver Incentive Plan points under
Article 36 of this Chapter during the three‑year period immediately
preceding either (i) the date of application for a motor vehicle insurance
policy or (ii) the date of preparation of a renewal of a motor vehicle
insurance policy. The filings may incorporate by reference any other
material on file with the Commissioner. Rates shall be neither excessive,
inadequate nor unfairly discriminatory. If the Commissioner finds, after a
hearing, that a rate is either excessive, inadequate or unfairly discriminatory,
the Commissioner shall issue an order specifying in what respect it is
deficient and stating when, within a reasonable period thereafter, the rate is
no longer effective. The order is subject to judicial review as set out in
Article 2 of this Chapter. Pending judicial review of said order, the filed
classification plan and the filed rates may be used, charged and collected in
the same manner as set out in G.S. 58‑40‑45 of this Chapter.
The order shall not affect any contract or policy made or issued before the
expiration of the period set forth in the order. All rates shall be on an
actuarially sound basis and shall be calculated, insofar as is possible, to
produce neither a profit nor a loss. However, the rates made by or on behalf
of the Facility with respect to "clean risks" shall not exceed the
rates charged "clean risks" who are not reinsured in the Facility,
except that rates for "clean risks" on policies reinsured by the
Facility that become effective on or after January 1, 2018, shall be
established on a schedule that provides that any difference between rates
charged for "clean risks" reinsured in the Facility on policies
becoming effective immediately prior to January 1, 2018, and the actuarially
sound rate for all risks reinsured by the Facility shall be eliminated over a two‑year
period ending on December 31, 2020. Any difference between the actual rate
charged and the actuarially sound and self‑supporting rates for "clean
risks" reinsured in the Facility may be recouped in similar manner as
assessments under G.S. 58‑37‑40(f). Rates shall not
include any factor for underwriting profit on Facility business, but shall
provide an allowance for contingencies. There shall be a strong presumption
that the rates and premiums for the business of the Facility are neither
unreasonable nor excessive.
.…"
SECTION 3.(a) G.S. 58‑37‑40(e) is amended by adding a new subdivision to read:
"(3) For insurers that cede more than seventy‑five percent (75%) of their direct written motor vehicle insurance premiums in North Carolina to the Facility, the ceding expense allowance paid to such member shall not exceed twenty percent (20%) of the total North Carolina motor vehicle insurance premiums the member writes on ceded business."
SECTION 3.(b) G.S. 58‑37‑45 reads as rewritten:
"§ 58‑37‑45. Procedure for cession provided in
plan of operation.operation; limitation.
Upon receipt by the company of a risk which it does not elect to retain, the company shall follow such procedures for ceding the risk as are established by the plan of operation. The plan of operation shall limit cession to the Facility to no more than ninety‑five percent (95%) of any company's direct written motor vehicle insurance premiums in the State unless the company has obtained the specific approval of the Commissioner."
SECTION 3.(c) G.S. 58‑37‑45, as rewritten by subsection (b) of this section, reads as rewritten:
"§ 58‑37‑45. Procedure for cession provided in plan of operation; limitation.
Upon receipt by the company of a
risk which it does not elect to retain, the company shall follow such
procedures for ceding the risk as are established by the plan of operation. The
plan of operation shall limit cession to the Facility to no more than ninety-five
percent (95%)ninety percent (90%) of any company's direct written
motor vehicle insurance premiums in the State unless the company has obtained
the specific approval of the Commissioner."
SECTION 3.(d) G.S. 58‑37‑45, as rewritten by subsections (b) and (c) of this section, reads as rewritten:
"§ 58‑37‑45. Procedure for cession provided in plan of operation; limitation.
Upon receipt by the company of a
risk which it does not elect to retain, the company shall follow such
procedures for ceding the risk as are established by the plan of operation. The
plan of operation shall limit cession to the Facility to no more than ninety
percent (90%)eighty‑five percent (85%) of any company's direct
written motor vehicle insurance premiums in the State unless the company has
obtained the specific approval of the Commissioner."
SECTION 4.(a) G.S. 58‑36‑5 reads as rewritten:
"§ 58‑36‑5.
Membership as a prerequisite for writing insurance;Membership;
governing committee; rules and regulations; expenses.
(a) Before the Commissioner
shall grant permission to any stock, nonstock, or reciprocal insurance company
or any other insurance organization to write in this State insurance against
loss to residential real property with not more than four housing units located
in this State or any contents thereof or valuable interest therein or other
insurance coverages written in connection with the sale of such property
insurance; or or, with respect to insurers electing under G.S. 58‑36‑7
to develop rates and forms under this Article, insurance against theft of
or physical damage to private passenger (nonfleet) motor vehicles; or liability
insurance for such motor vehicles, automobile medical payments insurance,
uninsured motorists coverage or other insurance coverage written in connection
with the sale of such liability insurance; or workers' compensation and
employers' liability insurance written in connection therewith; except for
insurance excluded from the Bureau's jurisdiction in G.S. 58‑36‑1(3);
it shall be a requisite that they shall subscribe to and become members of the
Bureau.
…."
SECTION 4.(b) Article 36 of Chapter 58 of the General Statutes is amended by adding two new sections to read:
"§ 58‑36‑7. Membership election for certain motor vehicle insurers.
A stock, nonstock, or reciprocal insurance company or any other insurance organization writing insurance in this State against theft of or physical damage to nonfleet private passenger motor vehicles, or liability insurance for such motor vehicles, automobile medical payments insurance, uninsured motorists coverage, or other insurance coverage written in connection with the sale of such liability insurance shall elect to develop its rates and forms pursuant to either Article 36 or Article 40 of this Chapter. The insurer shall make its election by notifying the Commissioner in a form prescribed by the Commissioner. An election shall remain in effect until revised by the insurer. An insurer that makes no election shall develop its rates and forms pursuant to Article 36 of this Chapter.
"§ 58‑36‑8. Applicability of Article 36 to motor vehicle insurers.
Notwithstanding any provision in this Chapter to the contrary, with respect to its writing of insurance in this State against theft of or physical damage to nonfleet private passenger motor vehicles, or liability insurance for such motor vehicles, automobile medical payments insurance, uninsured motorists coverage, or other insurance coverage written in connection with the sale of such liability insurance, Article 40 of this Chapter has no effect and is wholly inapplicable to an insurer that elects to develop its rates pursuant to Article 36 of this Chapter, and Article 36 has no effect and is wholly inapplicable to an insurer that elects to develop its rates pursuant to Article 40 except as otherwise specifically provided in those Articles."
SECTION 4.(c) G.S. 58‑40‑15 reads as rewritten:
"§ 58‑40‑15. Scope of application.
The provisions of this Article shall apply to all insurance on risks or on operations in this State, except for all of the following:
(1) Reinsurance, other than joint reinsurance to the extent stated in G.S. 58‑40‑60.
(2) Any policy of insurance against loss or damage to or legal liability in connection with property located outside this State, or any motor vehicle or aircraft principally garaged and used outside of this State, or any activity wholly carried on outside this State.
(3) Insurance of vessels or craft, their cargoes, marine builders' risks, marine protection and indemnity, or other risks commonly insured under marine, as distinguished from inland marine, insurance policies.
(4) Accident, health, or life insurance.
(5) Annuities.
(6) Repealed by Session Laws 1985, c. 666, s. 43.
(7) Mortgage guaranty insurance.
(8) Workers' compensation and employers' liability insurance written in connection therewith.
(9) For private Private
passenger (nonfleet) motor vehicle liability insurance, automobile medical
payments insurance, uninsured motorists' coverage and other insurance coverages
written in connection with the sale of such liability insurance. The
exclusion under this subdivision shall not apply to insurers electing under G.S. 58‑36‑7
to develop rates under this Article.
(10) Theft Insurance
against theft of or physical damage to nonfleet private passenger motor
vehicles; except this Article applies to insurance against theft of or physical
damage to motorcycles, as defined in G.S. 20‑4.01(27)d., and moped,
as defined in G.S. 20‑4.01(27)d1. The exclusion under this
subdivision shall not apply to insurers electing under G.S. 58‑36‑7
to develop rates under this Article.
(11) Insurance against loss to residential real property with not more than four housing units located in this State or any contents thereof or valuable interest therein and other insurance coverages written in connection with the sale of such property insurance. Provided, however, that this Article shall apply to insurance against loss to any of the following:
a. farm Farm dwellings, farm buildings
and their appurtenant structures, farm personal property and other coverages
written in connection with farm real or personal property;property.
b. travelTravel or camper trailers
designed to be pulled by private passenger motor vehicles unless insured
under policies covering nonfleet private passenger motor vehicles;vehicles.
c. residentialResidential real and
personal property insured in multiple line insurance policies covering business
activities as the primary insurable interest; and interest.
d. marine,Marine, general liability,
burglary and theft, glass, and animal collision insurance except when such
coverages are written as an integral part of a multiple line insurance policy
for which there is an indivisible premium.
The provisions of this Article shall not apply to hospital service or medical service corporations, investment companies, mutual benefit associations, or fraternal beneficiary associations."
SECTION 5. Sections 2(b), 3(d), and 4 of this act become effective January 1, 2020. Section 3(c) of this act becomes effective January 1, 2019. The remainder of this act becomes effective January 1, 2018.