Sec. 38a-686. (Formerly Sec. 38-201v). Standards for the making and use of rates re personal risk insurance. Regulations.
Sec. 38a-686. (Formerly Sec. 38-201v). Standards for the making and use of
rates re personal risk insurance. Regulations. The following standards, methods and
criteria shall apply to the making and use of rates pertaining to personal risk insurance:
(a) Rates shall not be excessive, inadequate or unfairly discriminatory.
(1) A rate in a competitive market is not excessive. A rate in a noncompetitive
market including a rate for insurance provided pursuant to sections 38a-328, 38a-329
and 38a-670 is excessive if it is unreasonably high for the insurance provided.
(2) No rate shall be held inadequate unless (A) it is unreasonably low for the insurance provided, and (B) continued use of it would endanger solvency of the insurer, or
unless (C) such rate is unreasonably low for the insurance provided and the use of such
rate by the insurer using same has, or, if continued will have, the effect of destroying
competition or creating a monopoly.
(b) In determining whether rates comply with the excessiveness standard in a noncompetitive market under subdivision (1) of subsection (a) of this section, the inadequacy standard under subdivision (2) of subsection (a) of this section and the requirement
that rates not be unfairly discriminatory, the following criteria shall apply:
(1) Consideration may be given, to the extent possible, to past and prospective loss
experience within and outside this state, to conflagration and catastrophe hazards, to a
reasonable margin for underwriting profit and contingencies, to past and prospective
expenses both country-wide and those specially applicable to this state, to investment
income earned or realized by insurers both from their unearned premium and loss reserve
funds, and to all other factors, including judgment factors, deemed relevant within and
outside this state and in the case of fire insurance rates, consideration may be given to
the experience of the fire insurance business during the most recent five-year period for
which such experience is available. Consideration may be given in the making and use
of rates to dividends, savings or unabsorbed premium deposits allowed or returned by
insurers to their policyholders, members or subscribers.
(2) The systems of expense provisions included in the rates for use by an insurer
or group of insurers may differ from those of other insurers or groups of insurers to
reflect the operating methods of any such insurer or group with respect to any kind of
insurance, or with respect to any subdivision or combination thereof.
(3) Risks may be grouped by classifications for the establishment of rates and minimum premiums, provided that with respect to private passenger nonfleet automobile
insurance, any change in territorial classifications shall be subject to prior approval by
the Insurance Commissioner, and provided no surcharge on any motor vehicle liability
or physical damage insurance premium may be assigned for (A) any accident involving
only property damage of one thousand dollars or less, or (B) the first accident involving
only property damage of more than one thousand dollars which would otherwise result
in a surcharge to the policy of the insured, within the experience period set forth in the
insurer's safe driver classification plan, or (C) any violation of section 14-219 unless
such violation results in the suspension or revocation of the operator's license under
section 14-111b, or (D) less than three violations of section 14-218a within any one-year period, or (E) any accident caused by an operator other than the named insured, a
relative residing in the named insured's household, or a person who customarily operates
the insured vehicle, or (F) the first or second accident within the current experience
period in relation to which the insured was not convicted of a moving traffic violation
and was not at fault, or (G) any motor vehicle infraction. Subparagraph (G) of this
subdivision shall not be applicable to any plan established pursuant to section 38a-329.
Classification rates may be modified to produce rates for individual risks in accordance
with rating plans which provide for recognition of variations in hazards or expense
provisions or both. Such rating plans may include application of the judgment of the
insurer and may measure any differences among risks that can be demonstrated to have
a probable effect upon losses or expenses.
(4) Each rating plan shall establish appropriate eligibility criteria for determining
significant risks which are to qualify under the plan. Rating plans which comply with
the provisions of this subdivision shall be deemed to produce rates which are not unfairly
discriminatory.
(c) Notwithstanding the provisions of subsections (a) and (b) of this section, no
rate shall include any adjustment designed to recover underwriting or operating losses
incurred out-of-state.
(d) The commissioner may adopt regulations in accordance with the provisions of
chapter 54 concerning rating plans to effectuate the provisions of this section.
(P.A. 82-353, S. 5, 26; P.A. 84-165, S. 2; P.A. 85-45, S. 1; P.A. 86-254; P.A. 88-73, S. 4; P.A. 89-114, S. 2; 89-192,
S. 2; 89-193, S. 2.)
History: P.A. 82-353, S. 5, effective July 1, 1983; P.A. 84-165 amended Subsec. (b)(3) to increase minimum damage
requirement for premium surcharges from $300 to $600; P.A. 85-45 amended Subsec. (b)(3) to prohibit any premium
surcharge based on an accident caused by someone other than the named insured, a resident relative or a customary operator
of the vehicle; P.A. 86-254 added Subsec. (b)(3)(E), prohibiting surcharge for "any motor vehicle infraction", provided
such prohibition shall not apply to plan established pursuant to Sec. 38-185l; P.A. 88-73 amended Subsec. (b)(3) to increase
minimum property damage requirement for premium surcharges from $600 to $1,000; P.A. 89-114 added Subsec. (c)
providing that no rate shall include any adjustment designed to recover underwriting or operating losses incurred out-of-state and redesignated former Subsec. (b)(5) as Subsec. (d); P.A. 89-192 added a new Subpara. in Subsec. (b)(3) providing
that no surcharge may be assigned on an automobile insurance policy for the first or second accident within the current
experience period in which the insured was not convicted of a moving traffic violation and was not at fault and relettered
the remaining Subparas.; P.A. 89-193 added new Subpara. Subsec. (b)(3) providing that no surcharge on an automobile
insurance policy may be assigned for the first accident involving only property damage of more than $1,000 which would
otherwise result in a surcharge to the policy of the insured, within a certain experience period and relettered the remaining
Subparas.; Sec. 38-201v transferred to Sec. 38a-686 in 1991 (Revisor's note: In 1995 in Subsec. (a)(1) the word "sections"
was substituted editorially by the Revisors for the word "section" before the reference to "38a-328, 38a-329 and 38a-670"
for consistency of statutory reference).
See Sec. 38a-665 re standards for the making and use of rates for commercial risk insurance.
Subdiv. (b):
Subpara. (1) cited. 36 CA 587.