Hawaii-2012-SB2006-Introduced

SECTION 1. The legislature finds that all states have various methods designed to regulate insurance rates. Rating laws in each state govern how insurers can change rates and are categorized according to whether approval is required and when approval must be obtained before insurance premiums can be changed.

In a state with prior approval rating laws, property and casualty insurers must receive approval from the state's insurance department before changing insurance rates. File and use rating laws are similar to prior approval but require insurers to file rates with the insurance department before the rates are used. States with use and file laws allow insurers to use a new set of rates without prior approval from the insurance department, but insurers must file the new rate within a specified time.

In states with flex-rating systems, insurers are able to implement modest rate changes within a specified percentage band without approval from the insurance department. Insurance rates that fall within the pre-set percentage rate are subject to either file and use or use and file requirements, rather than strict prior approval.

The legislature finds that Hawaii is a prior approval state. In Hawaii, property and casualty insurers are not allowed to change their rates without the prior approval of the insurance commissioner. The legislature also finds that a prior approval system can lead to a less competitive marketplace, as it is more difficult for insurers to quickly respond to changing market conditions. In contrast, flex-rating systems can lessen regulatory burdens for insurers and regulators, while still maintaining sufficient consumer protection. The legislature finds that Hawaii would benefit from a general casualty and property insurance rating system that is less restrictive than the prior approval system currently in place.

The purpose of this Act is to modernize Hawaii's rate filing process for general casualty and property insurance by permitting rate change filings that fall within a specified per cent to be made on a use and file basis.

SECTION 2. Section 431:14-104, Hawaii Revised Statutes, is amended to read as follows:

"§431:14-104 Rate filings. (a) Every insurer shall file with the commissioner every manual of classifications, rules, and rates, every rating plan, every other rating rule, and every modification of any of the foregoing that it proposes to use; provided that filings with regard to specific inland marine risks, which by general custom of the business are not written according to manual rate or rating plans, and bail bonds, subject to section 804-62, shall not be required pursuant to this subsection.

Every filing shall:

(1) State its proposed effective date;

(2) Indicate the character and extent of the coverage contemplated;

(3) Include a report on investment income; and

(4) Be accompanied by a $50 fee, payable to the commissioner, to be deposited in the commissioner's education and training fund.

(b) For each filing, an insurer shall submit to the commissioner:

(1) An electronic copy of the filing; or

(2) Two printed copies of the filing.

The commissioner may also request a printed version of an electronic filing to be submitted pursuant to paragraph (1).

(c) At the same time as the filing of the rate, every insurer shall file all supplementary rating and supporting information to be used in support of or in conjunction with a rate. The insurer may satisfy its obligation to file supplementary rating and supporting information by reference to material which has been approved by the commissioner. The information furnished in support of a filing may include or consist of a reference to:

(1) The prospective loss cost filing made by a rating organization or an advisory organization and approved by the commissioner;

(2) The experience or judgment of the insurer or information filed by the rating organization or advisory organization on behalf of the insurer as permitted by section 431:14-104.5;

(3) Its interpretation of any statistical data upon which it relies;

(4) The experience of other insurers, rating organizations, or advisory organizations; or

(5) Any other relevant factors.

(d) When a filing is not accompanied by the information upon which the insurer supports the filing, and the commissioner does not have sufficient information to determine whether the filing meets the requirements of this article, the commissioner shall require the insurer to furnish additional information and, in that event, the waiting period shall commence as of the date the information is furnished. Until the requested information is provided, the filing shall not be deemed complete or filed nor available for use by the insurer. If the requested information is not provided within a reasonable time period, the filing may be returned to the insurer as not filed and not available for use.

(e) Except for rates filed in accordance with subsections (k), [~~(l), and (m),~~] (o), and (p), a filing and any supporting information shall be open to public inspection upon filing with the commissioner.

(f) Specific inland marine rates on risks specially rated, made by a rating organization, shall be filed with the commissioner.

(g) An insurer may satisfy its obligation to make the filings by becoming a member of, or a subscriber to, a licensed rating organization which makes the filings except for those lines of insurance for which the commissioner determines individual insurer rate filings shall be made. Nothing contained in this article shall be construed as requiring any insurer to become a member of or a subscriber to any rating organization.

(h) After reviewing an insurer's filing, the commissioner may require that the insurer's rates be based upon the insurer's own loss and expense information. If the insurer's loss or allocated loss adjustment expense information is not actuarially credible, as determined by the commissioner, the insurer may use or supplement its experience with information filed with the commissioner by a rating organization or advisory organization. At the commissioner's request, each insurer utilizing the services of a rating organization or advisory organization must submit with its rate filing, a description of the rationale for that use, including the insurer's own information and method of utilizing the rating or advisory organization's information.

(i) The commissioner shall review filings as soon as reasonably possible after they have been made to determine whether they meet the requirements of this article. The commissioner shall calculate the investment income and accuracy of loss reserves upon which filings are based, and the insurer shall provide the information necessary to make the calculation.

(j) Except as provided herein and in subsections (k) [~~and~~], (l), and (o) and section 431:14-120, each filing shall be on file for a waiting period of thirty days before the filing becomes effective. The period may be extended by the commissioner for an additional period not to exceed fifteen days if the commissioner gives written notice within the waiting period to the insurer, rating organization, or advisory organization that made the filing that the commissioner needs the additional time for the consideration of the filing. Upon the written application by the insurer, rating organization, or advisory organization, the commissioner may authorize a filing which the commissioner has reviewed to become effective before the expiration of the waiting period or any extension thereof. A filing shall be deemed to meet the requirements of this article unless disapproved by the commissioner within the waiting period or any extension thereof.

(k) The following rates shall become effective when filed:

(1) Specific inland marine rates on risks specially rated by a rating organization;

(2) Any special filing with respect to a surety or guaranty bond required by law or by court or executive order or by order or rule of a public body, not covered by a previous filing; and

(3) Any special filing with respect to any class of insurance, subdivision, or combination thereof which is subject to individual risk premium modification and has been agreed to by an insured under a formal or informal bid process.

The rates shall be deemed to meet the requirements of this article until the time the commissioner reviews the filing and so long as the filing remains in effect.

(l) A filing with respect to a general casualty insurance rate filing or a property insurance rate filing in which the average rate increase or decrease is no more than per cent, is deemed to meet the requirements of this article until the time the commissioner reviews the filing and so long as the filing remains in effect.

(m) An insurer must file notice of a rate change for either a general casualty insurance rate filing or a property insurance rate filing in which the average rate increase or decrease is no more than per cent with the commissioner within thirty days after implementing the rate change. The exemption provided in subsection (l) for a general casualty insurance rate change filing or property insurance rate change filing is limited to no more than one filing per calendar year, with a minimum of thirty days between filings in different calendar years.

(n) No rate increase within the limitation specified in subsection (l) may be implemented with regard to an individual existing policy, unless the increase is applied at the time of a renewal or conditional renewal of an existing policy and the insurer, at least thirty days before the end of the insured's policy period, mails or delivers to the insured, at the address shown in the policy, a written notice that clearly and conspicuously discloses its intention to change the rate. A notice of renewal or conditional renewal that clearly and conspicuously discloses the renewal premium applicable to the policy shall be deemed to be in compliance with this subsection.

[~~(l)~~] (o) The commissioner, by written order, may suspend or modify the requirement of filing as to any class of insurance, subdivision, or combination thereof, or as to classes of risks, the rates for which cannot practicably be filed before they are used. The orders shall be made known to the affected insurers and rating organizations. The commissioner may make examinations as the commissioner may deem advisable to ascertain whether any rates affected by the order meet the standards set forth in section 431:14-103(a)(1).

[~~(m)~~] (p) The commissioner may approve a rate on any specific risk in excess of that set by an applicable rate filing, provided the insured files with the commissioner a written application stating the insured's reasons for consenting to the excess rate. Upon approval by the commissioner, the rate shall be deemed effective retroactive to the date of the insured's application.

[~~(n)~~] (q) No insurer shall make or issue a contract or policy except in accordance with filings which are in effect for the insurer as provided in this article or in accordance with subsections (k), (l), [~~or (m).~~] (o), or (p). This subsection shall not apply to contracts or policies for inland marine risks as to which filings are not required."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2006
TWENTY-SIXTH LEGISLATURE, 2012
STATE OF HAWAII