40-954. Same; determining factors; expense provisions; classification of risks; modification for individual risks; contingencies and allowances for profit; exemptions; mandatory rating plan use.
40-954
40-954. Same; determining factors; expense provisions; classification ofrisks; modification for individual risks; contingencies and allowances forprofit; exemptions; mandatory rating plan use.In determining whether rates are not excessive or inadequate ornot unfairly discriminatory:
(a) Due consideration shall be given to:
(1) Past and prospective loss and expense experience within and outside thestate;
(2) catastrophe hazards and contingencies;
(3) trends within and outside this state;
(4) loadings for leveling premium rates over time;
(5) dividends, savings or unabsorbed premium deposits allowed or returned byinsurers to their policyholders, members, or subscribers and the investmentincome of the insurer; and
(6) all other relevant factors within and outside the state, including thejudgment of technical personnel.
(b) The expense provisions included in the rates to be used by an insurermay reflect the operating methods of the insurer, or group of insurers, and, sofar as it is credible, its own expense experience.
(c) Risks may be classified in any reasonable way for the establishment ofrates and minimum premiums, except that no classification may be based on race,color, creed or national origin and classifications in automobile insurance maynot be based on physical disability of an insured. Rates thus produced may bemodified for individual risks in accordance withrating plans, schedules, except for workers compensation, individual riskpremium modification plans and expense reduction plans that establishreasonable standardsfor measuring probable variations in experience, hazards, expenses or anycombination of those factors.
Such standards shall permit recognition of expected differences in loss orexpense characteristics, and shall be designed so that such plans arereasonable and equitable in their application, and are not unfairlydiscriminatory, violative of public policy or otherwise contrary to the bestinterests of the people of this state. This section shall not prevent thedevelopment of new or innovative rating methods which otherwise comply withthis act.
(d) Rates may be modified for individual risks, upon written application ofthe insured, stating the insured's reasons therefore, filed with and notdisapproved by the commissioner within 10 days after filings.
(e) The rates may contain provisions for contingencies and an allowancepermitting a reasonable profit. In determining the reasonableness of theprofit, consideration shall be given to the investment incomeattributable to the line of insurance.
(f) The commissioner may by rule exempt any person or class of persons,line of insurance, or any market segment from any or all of the provisions ofthis chapter, if and to the extent that the commissioner finds theirapplication unnecessary to achieve the purposes of this act.
(g) Once it has been filed, use of any rating plan shall be mandatory andsuch plan shall be applied uniformly for eligible risks in a manner that is notunfairly discriminatory.
History: L. 1997, ch. 154, § 4; July 1.