Connecticut Seal

General Assembly

 

Raised Bill No. 5151

February Session, 2008

 

LCO No. 150

 

*00150_______INS*

Referred to Committee on Insurance and Real Estate

 

Introduced by:

 

(INS)

 

AN ACT PROHIBITING THE USE OF CREDIT RATINGS TO SET MOTOR VEHICLE INSURANCE PREMIUMS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 38a-686 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2008):

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) Notwithstanding the provisions of subsections (a) and (b) of this section, no rate for private passenger nonfleet automobile vehicles shall be based, in whole or in part, on information contained in an applicant's credit history or credit rating.

[(d)] (e) The commissioner may adopt regulations in accordance with the provisions of chapter 54 concerning rating plans to effectuate the provisions of this section.

Sec. 2. Section 38a-358 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2008):

The declination, cancellation or nonrenewal of a policy for private passenger nonfleet automobile insurance is prohibited if the declination, cancellation or nonrenewal is based: (1) On the race, religion, nationality or ethnicity of the applicant or named insured; (2) solely on the lawful occupation or profession of the applicant or named insured, except that this provision shall not apply to any insurer which limits its market to one lawful occupation or profession or to several related lawful occupations or professions; (3) on the principal location of the insured motor vehicle unless such decision is for a business purpose which is not a mere pretext for unfair discrimination; (4) solely on the age, sex or marital status of an applicant or an insured, except that this subdivision shall not apply to an insurer in an insurer group if one or more other insurers in the group would not decline an application for essentially similar coverage based upon such reasons; (5) on the fact that the applicant or named insured previously obtained insurance coverage through a residual market; (6) on the fact that another insurer previously declined to insure the applicant or terminated an existing policy in which the applicant was the named insured; [or] (7) on the first or second accident within the current experience period in relation to which the applicant or insured was not convicted of a moving traffic violation and was not at fault; or (8) in whole or in part, on information contained in an applicant's credit history or credit rating.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2008

38a-686

Sec. 2

October 1, 2008

38a-358

Statement of Purpose:

To prohibit the use of an applicant's credit rating or credit history as a factor in setting motor vehicle insurance premiums.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]