Florida Senate - 2010 CS for SB 2176 By the Committee on Banking and Insurance; and Senator Peaden 597-04417-10 20102176c1 1 A bill to be entitled 2 An act relating to commercial insurance rates; 3 amending s. 627.062, F.S.; exempting certain 4 categories or types of insurance and types of 5 commercial lines risks from certain rate requirements; 6 requiring that insurers or rating organizations 7 establish and use rates, rating schedules, or rating 8 manuals allowing for a reasonable rate of return on 9 certain insurance and risks; requiring that an insurer 10 notify the Office of Insurance Regulation of any 11 changes to rates for certain insurance and risks; 12 requiring that such notice contain certain 13 information; requiring that an insurer maintain 14 certain information; providing that such information 15 is subject to examination by the office; requiring 16 that the office consider certain rate factors and 17 standards when examining such information for the 18 purpose of determining whether the rate is excessive, 19 inadequate, or unfairly discriminatory; requiring that 20 a rating organization provide notice to the office of 21 any changes to loss cost for certain types of 22 insurance within a specified period after such change; 23 providing requirements for such notification; 24 requiring that a rating organization maintain certain 25 information; providing that such information is 26 subject to examination by the office; requiring that 27 specified rate factors and standards be used in such 28 examination; authorizing the office, when reviewing a 29 rate, to require that an insurer provide certain 30 information at the insurer’s expense; amending s. 31 627.0651, F.S.; exempting commercial motor vehicle 32 insurance from certain motor vehicle insurance rate 33 requirements; prohibiting certain insurance rates from 34 being excessive, inadequate, or unfairly 35 discriminatory; requiring that insurers or rating 36 organizations establish and use rates, rating 37 schedules, or rating manuals allowing for a reasonable 38 rate of return on certain insurance and risks; 39 requiring that an insurer notify the office of any 40 changes to rates for certain insurance and risks; 41 requiring that such notice contain certain 42 information; requiring that an insurer maintain 43 certain information; providing that such information 44 is subject to examination by the office; requiring 45 that the office consider certain rate factors and 46 standards when examining such information for the 47 purpose of determining whether the rate is excessive, 48 inadequate, or unfairly discriminatory; requiring that 49 a rating organization provide notice to the office of 50 any changes to loss cost for certain types of 51 insurance within a specified period after such change; 52 providing requirements for such notification; 53 requiring that a rating organization maintain certain 54 information; providing that such information is 55 subject to examination by the office; requiring that 56 specified rate factors and standards be used in such 57 examination; authorizing the office, when reviewing a 58 rate, to require that an insurer provide certain 59 information at the insurer’s expense; providing an 60 effective date. 61 62 Be It Enacted by the Legislature of the State of Florida: 63 64 Section 1. Paragraph (d) is added to subsection (3) of 65 section 627.062, Florida Statutes, to read: 66 627.062 Rate standards.— 67 (3) 68 (d)1. The following categories or kinds of insurance and 69 types of commercial lines risks are not subject to paragraph 70 (2)(a) or paragraph (2)(f): 71 a. Excess or umbrella. 72 b. Surety and fidelity. 73 c. Boiler and machinery and leakage and fire extinguishing 74 equipment. 75 d. Errors and omissions. 76 e. Directors and officers, employment practices, and 77 management liability. 78 f. Intellectual property and patent infringement liability. 79 g. Advertising injury and Internet liability insurance. 80 h. Property risks rated under a highly protected risks 81 rating plan. 82 i. Any other commercial lines categories or kinds of 83 insurance or types of commercial lines risks that the office 84 determines should not be subject to paragraph (2)(a) or 85 paragraph (2)(f) because of the existence of a competitive 86 market for such insurance, similarity of such insurance to other 87 categories or kinds of insurance not subject to paragraph (2)(a) 88 or paragraph (2)(f), or to improve the general operational 89 efficiency of the office. 90 2. Insurers or rating organizations shall establish and use 91 rates, rating schedules, or rating manuals to allow the insurer 92 a reasonable rate of return on insurance and risks described in 93 subparagraph 1. which are written in this state. 94 3. An insurer must notify the office of any changes to 95 rates for insurance and risks described in subparagraph 1. no 96 later than 30 days after the effective date of the change. The 97 notice must include the name of the insurer, the type or kind of 98 insurance subject to rate change, total premium written during 99 the immediately preceding year by the insurer for the type or 100 kind of insurance subject to the rate change, and the average 101 statewide percentage change in rates. Underwriting files, 102 premiums, losses, and expense statistics with regard to 103 insurance and risks described in subparagraph 1. written by an 104 insurer shall be maintained by the insurer and subject to 105 examination by the office. Upon examination, the office shall, 106 in accordance with generally accepted and reasonable actuarial 107 techniques, consider the rate factors in paragraphs (2)(b), (c), 108 and (d) and the standards in paragraph (2)(e) to determine if 109 the rate is excessive, inadequate, or unfairly discriminatory. 110 4. A rating organization must notify the office of any 111 changes to loss cost for insurance and risks described in 112 subparagraph 1. no later than 30 days after the effective date 113 of the change. The notice must include the name of the rating 114 organization, the type or kind of insurance subject to a loss 115 cost change, loss costs during the immediately preceding year 116 for the type or kind of insurance subject to the loss cost 117 change, and the average statewide percentage change in loss 118 cost. Loss and exposure statistics with regard to risks 119 applicable to loss costs for a rating organization not subject 120 to paragraph (2)(a) or paragraph (2)(f) shall be maintained by 121 the rating organization and are subject to examination by the 122 office. Upon examination, the office shall, in accordance with 123 generally accepted and reasonable actuarial techniques, consider 124 the rate factors in paragraphs (2)(b)-(d) and the standards in 125 paragraph (2)(e) to determine if the rate is excessive, 126 inadequate, or unfairly discriminatory. 127 5. In reviewing a rate, the office may require the insurer 128 to provide at the insurer’s expense all information necessary to 129 evaluate the condition of the company and the reasonableness of 130 the rate according to the applicable criteria described in this 131 section. 132 Section 2. Subsection (14) is added to section 627.0651, 133 Florida Statutes, to read: 134 627.0651 Making and use of rates for motor vehicle 135 insurance.— 136 (14)(a) Commercial motor vehicle insurance covering a fleet 137 of five or more self-propelled vehicles is not subject to 138 subsection (1), subsection (2), or subsection (9) or s. 139 627.0645. 140 (b) The rates for insurance described in this subsection 141 may not be excessive, inadequate, or unfairly discriminatory. 142 (c) Insurers shall establish and use rates, rating 143 schedules, or rating manuals to allow the insurer a reasonable 144 rate of return on commercial motor vehicle insurance written in 145 this state covering a fleet of five or more self-propelled 146 vehicles. 147 (d) An insurer must notify the office of any changes to 148 rates for type of insurance described in this subsection no 149 later than 30 days after the effective date of the change. The 150 notice shall include the name of the insurer, the type or kind 151 of insurance subject to rate change, total premium written 152 during the immediately preceding year by the insurer for the 153 type or kind of insurance subject to the rate change, and the 154 average statewide percentage change in rates. Underwriting 155 files, premiums, losses, and expense statistics for the type of 156 insurance described in this subsection shall be maintained by 157 the insurer and subject to examination by the office. Upon 158 examination, the office shall, in accordance with generally 159 accepted and reasonable actuarial techniques, consider the 160 factors in paragraphs (2)(a)–(l) and apply subsections (3)-(8) 161 to determine if the rate is excessive, inadequate, or unfairly 162 discriminatory. 163 (e) A rating organization must notify the office of any 164 changes to loss cost for the type of insurance described in this 165 subsection no later than 30 days after the effective date of the 166 change. The notice shall include the name of the rating 167 organization, the type or kind of insurance subject to a loss 168 cost change, loss costs during the immediately preceding year 169 for the type or kind of insurance subject to the loss cost 170 change, and the average statewide percentage change in loss 171 cost. Loss and exposure statistics with regard to risks 172 applicable to loss costs for a rating organization not subject 173 to subsection (1), subsection (2), or subsection (9) shall be 174 maintained by the rating organization and are subject to 175 examination by the office. Upon examination, the office shall, 176 in accordance with generally accepted and reasonable actuarial 177 techniques, consider the rate factors in paragraphs (2)(a)-(l) 178 and apply subsections (3)-(8) to determine if the rate is 179 excessive, inadequate, or unfairly discriminatory. 180 (f) In reviewing the rate, the office may require the 181 insurer to provide at the insurer’s expense all information 182 necessary to evaluate the condition of the company and the 183 reasonableness of the rate according to the applicable criteria 184 described herein. 185 Section 3. This act shall take effect January 1, 2011.