Connecticut Seal

General Assembly

 

Raised Bill No. 1212

January Session, 2007

 

LCO No. 4221

 

*04221_______INS*

Referred to Committee on Insurance and Real Estate

 

Introduced by:

 

(INS)

 

AN ACT CONCERNING HOMEOWNERS INSURANCE POLICIES.

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

Section 1. Section 38a-688 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2007):

(a) The following procedures shall apply with respect to rates pertaining to personal risk insurance and residual markets:

(1) In a competitive market, every insurer shall file with the commissioner all rates and supplementary rate information to be used in this state, provided that such rates and information need not be filed for inland marine risks which by general custom of the business are not written according to manual rules or rating plans. No such filings may be made by a rating organization on behalf of any insurer. Such rates and supplementary rate information shall be filed by the effective date of the filing or the date that premium billing notices reflecting the new rates are sent to insureds or agents, whichever is earlier. In a competitive market, if the commissioner finds, after a hearing, that an insurer's rates require closer supervision because of the insurer's financial condition or unfairly discriminatory rating practices, the insurer shall file with the commissioner at least thirty days before the effective date, all such rates and such supplementary rate information and supporting information as prescribed by the commissioner. Upon application by the filer, the commissioner may authorize an earlier effective date for the filing.

(2) In a noncompetitive market, every insurer shall file with the commissioner all rates and supplementary rate information for that market and such supporting information as is required by the commissioner. For purposes of subsection (d) of section 7-479e, sections 38a-341, 38a-387, 38a-665, subsection (b) of section 38a-672, and sections 38a-673, 38a-675, 38a-676 and 38a-686 to 38a-694, inclusive, residual markets, title insurance and credit property insurance are deemed to be noncompetitive markets. All rates and supplementary rate information and such supporting information as is required by the commissioner, shall also be filed with the commissioner for insurance provided pursuant to section 38a-328, 38a-329 or 38a-670. Such rates and supplementary rate information and supporting information required by the commissioner shall be on file with the commissioner for a waiting period of thirty days before it becomes effective, which period may be extended by the commissioner for an additional period not to exceed thirty days if the commissioner gives written notice within such waiting period to the insurer or rating organization which made the filing that the commissioner needs such additional time for the consideration of such filing. Upon written application by such insurer or rating 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 sections 38a-663 to 38a-696, inclusive, unless disapproved by the commissioner within the waiting period or any extension thereof. If, within the waiting period or any extension thereof, the commissioner finds that a filing does not meet the requirements of sections 38a-663 to 38a-696, inclusive, the commissioner shall send to the insurer or rating organization which made such filing written notice of disapproval of such filing, specifying therein in what respects the commissioner finds such filing fails to meet the requirements of sections 38a-663 to 38a-696, inclusive, and stating that such filing shall not become effective. Such finding of the commissioner shall be subject to review as provided in section 38a-19.

(3) An insurer may file rates by reference, with or without deviation, to rates charged by another insurer which were filed and are in effect if the insurer's direct written premium for the applicable line of insurance is less than one-half of one per cent of the total state-wide direct written premium for that line, as determined from the annual statements filed by insurers licensed to do business in this state and as calculated by the National Association of Insurance Commissioners from its data base. Supporting information shall not be required for rates filed by reference pursuant to this subsection. For purposes of this subdivision the term "insurer" shall include two or more admitted insurers having a common ownership or operating in this state under common management or control.

(4) Rates filed pursuant to this section shall be filed in such form and manner as is prescribed by the commissioner. Whenever a filing made pursuant to subdivision (1) or (2) of subsection (a) of this section is not accompanied by the information upon which the insurer supports such filing and the commissioner does not have sufficient information to determine whether such filing meets the requirements of sections 38a-663 to 38a-696, inclusive, the commissioner shall require such insurer to furnish the information upon which it supports such filing and in such event the waiting period shall commence as of the date such information is furnished. The information furnished in support of a filing may include (A) the experience or judgment of the insurer making the filing, (B) its interpretation of any statistical data it relies upon, (C) the experience of other insurers, or (D) any other relevant factors.

(5) All rates, supplementary rate information and any supporting information for risks filed under subsection (d) of section 7-479e, sections 38a-341, 38a-387, 38a-665, subsection (b) of section 38a-672, and sections 38a-673, 38a-675, 38a-676 and 38a-686 to 38a-694, inclusive, shall, as soon as filed, be open to public inspection at any reasonable time. Copies may be obtained by any person on request and upon payment of a reasonable charge.

(b) Rates for insurance described in subsection (a) of this section shall be subject to review as follows:

(1) Rates subject to prefiling under subdivision (1) or (2) of subsection (a) of this section may be reviewed and disapproved before their effective date, except that rates for insurance provided pursuant to section 38a-328, 38a-329 and 38a-670 shall not be effective until approved by the commissioner. Any rate may be reviewed and disapproved subsequent to its effective date.

(2) The commissioner may disapprove a rate if the insurer fails to comply with the filing requirements of this section. The commissioner shall disapprove a rate for use in a competitive market if he finds that the rate is inadequate or unfairly discriminatory under subsection (a) of section 38a-686. The commissioner shall disapprove a rate for use in a noncompetitive or residual market if he finds the rate is excessive, inadequate or unfairly discriminatory under subsection (a) of section 38a-686.

(3) If the commissioner finds that a reasonable degree of competition does not exist in a market in accordance with section 38a-687, he may require that the insurers in that market file supporting information with respect to existing rates. If the commissioner believes that such rates may violate any of the requirements of subsection (d) of section 7-479e, sections 38a-341, 38a-387, 38a-665, subsection (b) of section 38a-672, or sections 38a-673, 38a-675, 38a-676, or 38a-686 to 38a-694, inclusive, he may proceed as provided in section 38a-678. If the commissioner believes that rates in a competitive market violate the inadequacy or unfair discrimination standards in section 38a-686 or any other applicable requirement of subsection (d) of section 7-479e, section 38a-341, 38a-387, 38a-665, subsection (b) of section 38a-672, or sections 38a-673, 38a-675, 38a-676, or 38a-686 to 38a-694, inclusive, he may require the insurers in that market to file supporting information with respect to existing rates. If after reviewing the supporting information, the commissioner continues to believe that such rates may violate these requirements, he may proceed as provided in section 38a-678. The commissioner may disapprove, without hearing, rates prefiled pursuant to subdivision (1) or (2) of subsection (a) of this section that have not become effective, provided that the insurer whose rates have been disapproved shall be given a hearing pursuant to section 38a-19.

(4) If the commissioner disapproves a rate, he shall issue an order specifying the respects in which it fails to meet the requirements of subsection (d) of section 7-479e, section 38a-341, 38a-387, 38a-665, subsection (b) of section 38a-672, and sections 38a-673, 38a-675, 38a-676, and 38a-686 to 38a-694, inclusive. For rates in effect at the time of the disapproval, the commissioner shall state, within a reasonable period of time, when the further use of such rate in contracts of insurance made thereafter shall be prohibited. The order shall be issued within thirty days after the hearing or within such reasonable time extension as the commissioner may determine. Such order may include a provision for premium adjustment for the period after the effective date of the order for policies in effect on such date.

(5) Whenever an insurer has no legally effective rates as a result of the commissioner's disapproval of rates or other act, the commissioner shall specify interim rates. Upon appeal from any such order of the commissioner the court may, upon request of the appealing insurer, stay such order, provided that the insurer places in an escrow account the difference, as received, between the disapproved rates and the interim rates specified by the commissioner. When new rates become legally effective, the commissioner shall order the escrowed funds to be distributed appropriately, with interest at the legal rate as provided in section 37-1, except that minimal refunds to policyholders are not required to be distributed.

(c) Notwithstanding the provisions of subdivision (1) of subsection (a) of this section and subdivisions (1) and (2) of subsection (b) of this section, the commissioner shall disapprove a rate with respect to homeowners insurance policies in this state if the commissioner finds that such rate is excessive, inadequate or unfairly discriminatory.

Sec. 2. Subdivision (1) of section 38a-841 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2007):

(1) Said association shall: (a) Be obligated to the extent of the covered claims existing prior to the determination of insolvency and arising within thirty days after the determination of insolvency, or before the policy expiration date if less than thirty days after the determination, or before the insured replaces the policy or causes its cancellation, if he does so within thirty days of such determination, provided such obligation shall be limited as follows: (i) With respect to covered claims for unearned premiums, to one-half of the unearned premium on any policy, subject to a maximum of two thousand dollars per policy; (ii) with respect to covered claims other than for unearned premiums, such obligation shall include only that amount of each such claim which is in excess of one hundred dollars and is less than [three] five hundred thousand dollars, except that said association shall pay the full amount of any such claim arising out of a workers' compensation policy, provided in no event shall (A) said association be obligated to any claimant in an amount in excess of the obligation of the insolvent insurer under the policy form or coverage from which the claim arises, or (B) said association be obligated for any claim filed with the association after the expiration of two years from the date of the declaration of insolvency unless such claim arose out of a workers' compensation policy and was timely filed in accordance with section 31-294c; (b) be deemed the insurer to the extent of its obligations on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent; (c) allocate claims paid and expenses incurred among the three accounts, created by section 38a-839, separately, and assess member insurers separately (i) in respect of each such account for such amounts as shall be necessary to pay the obligations of said association under subdivision (a) of subsection (1) of this section subsequent to an insolvency; (ii) the expenses of handling covered claims subsequent to an insolvency; (iii) the cost of examinations under section 38a-846; and (iv) such other expenses as are authorized by sections 38a-836 to 38a-853, inclusive. The assessments of each member insurer shall be in the proportion that the net direct written premiums of such member insurer for the calendar year preceding the assessment on the kinds of insurance in such account bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment on the kinds of insurance in such account. Each member insurer shall be notified of its assessment not later than thirty days before it is due. No member insurer may be assessed in any year on any account an amount greater than two per cent of that member insurer's net direct written premiums for the calendar year preceding the assessment on the kinds of insurance in said account, provided if, at the time an assessment is levied on the "all other insurance" account, as defined in subdivision (c) of section 38a-839, the board of directors finds that at least fifty per cent of the total net direct written premiums of a member insurer and all its affiliates, for the year on which such assessment is based, were from policies issued or delivered in Connecticut, on risks located in this state, such member insurer shall be assessed only on such member insurer's net direct written premium that is attributable to the kind of insurance that gives rise to each covered claim. If the maximum assessment, together with the other assets of said association in any account, does not provide in any one year in any account an amount sufficient to make all necessary payments from that account, the funds available may be prorated and the unpaid portion shall be paid as soon thereafter as funds become available. Said association may defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance provided that during the period of deferment, no dividends shall be paid to shareholders or policyholders. Deferred assessments shall be paid when such payment will not reduce capital or surplus below the minimum amounts required for a certificate of authority. Such payments shall be refunded to those insurers receiving greater assessments because of such deferment or, at the election of the insurer, be credited against future assessments. Each member insurer serving as a servicing facility may set off against any assessment, authorized payments made on covered claims and expenses incurred in the payment of such claims by such member insurer if they are chargeable to the account in respect of which the assessment is made; (d) investigate claims brought against said association and adjust, compromise, settle, and pay covered claims to the extent of said association's obligations, and deny all other claims. The association shall pay claims in any order it deems reasonable, including but not limited to, payment in the order of receipt or by classification. It may review settlements, releases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases and judgments may be properly contested; (e) notify such persons as the commissioner may direct under subdivision (a) of subsection (2) of section 38a-843; (f) handle claims through its employees or through one or more insurers or other persons designated by said association as servicing facilities, provided such designation of a servicing facility shall be subject to the approval of the commissioner, and may be declined by a member insurer; (g) reimburse each such servicing facility for obligations of said association paid by such facility and for expenses incurred by such facility while handling claims on behalf of said association and shall pay such other expenses of said association as are authorized by sections 38a-836 to 38a-853, inclusive.

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

Section 1

October 1, 2007

38a-688

Sec.

October 1, 2007

38a-841(1)

Statement of Purpose:

To authorize the Insurance Commissioner to disapprove rates for homeowners insurance policies that are excessive, inadequate or unfairly discriminatory and to increase from three hundred thousand dollars to five hundred thousand dollars coverage by the Connecticut Insurance Guaranty Association with respect to covered property and casualty claims.

[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.]