Rate Regulatory Law Interpretations

PURPOSE: This rule provides procedures for filing or furnishing rates and other information with the Missouri Department of Commerce and Insurance. (1) The requirements for filing classifications, rates, rating plans, manual rules, policies and forms with the Department of Commerce and Insurance are as follows: (A) Commercial Property Insurance. Submission shall be made within ten (10) calendar days after the effective date; (B) Casualty & Surety Insurance, Except Commercial Casualty Insurance. Submission shall be made within ten (10) calendar days after the effective date; and (C) Commercial Casualty Insurance. Submission shall be made no later than ten (10) calendar days after the effective date which is requested within the filing, unless the filing produces an increase or decrease exceeding twenty-five percent (25%) annually from changes in the base rate, rating basis, rating plan, manual rules, territorial definitions or combination of these rating system components, in which case the submission shall be made sixty (60) days prior to the effective date within the filing for prior approval. (2) Definitions (A) “Commercial casualty insurance” means “commercial casualty insurance” as that term is defined in section 379.882(1), RSMo. In addition, “commercial casualty insurance” means casualty insurance for business or nonprofit interests, including policies providing liability insurance in—a) multiperil policies, b) farm policies, except farm policies issued in conjunction with or which include fire and extended coverages on owneroccupied habitational property not exceeding two (2) families, c) commercial automobile policies, d) aircraft insurance and e) any other business or commercial type policy. (B) “Expense reduction plan” means any rating plan or system whereby a base rate for property or liability insurance is reduced based upon a reduction in acquisition, underwriting or loss adjustment expense associated with the risk. (C) “Experience rating plan” means any rating plan or system whereby a base rate for commercial insurance is adjusted or modified based on the actual past loss experience of the insured. (D) “Individual risk premium modification plan” or “IRPM plan” means any rating plan or system whereby a base rate for commercial insurance is adjusted or modified based upon a schedule of debits and credits reflecting observable rating characteristics, not reflected in the base rate itself, expected to affect an individual insured’s future loss exposure. (E) “Schedule rating plan” means any rating plan or system whereby a base rate for commercial insurance is adjusted or modified based upon a schedule of debits and credits reflecting observable rating characteristics, not reflected in the base rate itself, expected to affect an individual insured’s future loss exposure. (3) The use of schedule rating plans or individual risk premium modification plans in a manner which would effectively circumvent the intent of the commercial casualty rating law, sections 379.882, 379.883, 379.884, 379.885, 379.886, 379.888, 379.889, 379.890, 379.893 and 379.895, RSMo, shall be construed to be improper and subject to the disapproval authority set forth in the law. (4) Licensed rating organizations which submit filings on behalf of their members and subscribers must comply with these provisions. Neither reference filings nor adherence to rating organization filings or deviations shall circumvent the commercial casualty insurance rating law. (5) If distributed to an insurer, rating organizations are required to submit a copy of the following to the Department of Commerce and Insurance: manuals of classifications, rules, underwriting rules and rates, rating plans, their modifications and the forms to which these rates are applicable. Rating organization circulars which pertain to future rate, rule or form filings are to be submitted to the department for informational purposes at the same time such information is sent to the member insurers. (A) A member or subscriber of a rating organization may elect in advance, by letter to the Department of Commerce and Insurance, to adopt all submissions, or the rates, rules or forms for any specific lines or sublines of insurance, of a rating organization containing a proposed effective date on that effective date. The insurer may then give notice to the Department of Commerce and Insurance that it will not adhere to any specific submission if it does so within ten (10) calendar days after the rating organization’s proposed effective date. (B) Members and subscribers of a rating organization may notify the Department of Commerce and Insurance by letter of their election to adopt by reference a specific submission or reference document of the rating organization. This election shall be received within ten (10) calendar days after the insurer’s effective date. (6) Any insurer which elects to use its own rates is required to submit to the Department of Commerce and Insurance every manual and classification, rule, underwriting rules and rates, every rating plan and every modification of them which it uses and the policies and forms to which these rates are applicable. This submission shall be made as provided by section (1) of this rule. (7) Commercial Individual Risk Premium Modification Plans and Schedule Rating Plans. (A) Classification rates may be modified to produce rates for individual risks in accordance with rating plans which establish standards for measuring variations in hazards or expense or both. Rating plans may not allow a total credit or debit of more than twenty-five percent (25%) based on risk characteristics and not more than ten percent (10%) additional credit based on reduction of expenses. (B) Subsection (7)(A) does not apply to experience rating plans. (C) It shall be impermissible for affiliated insurers within a group under common management or control to shift insurance accounts among the affiliated insurers in order to circumvent the restrictions on schedule rating provided in subsection (7)(A). (D) All debits and all credits based on individual risk characteristics, and all additional credits based on reduction of expenses shall be based on evidence that is contained in the file of the insurer at the time the debit or credit is applied. 1. Evidence supporting the basis for any rating credit or debit shall be retained by the insurer for the policy term plus AND INSURANCE two (2) calendar years, in accordance with section 374.205, RSMo. 2. Any renewal notice of a commercial casualty insurance policy as defined in section 379.882, RSMo, for any Missouri risk or portion thereof which would have the effect of increasing the premium charged to the insured due to a change in any schedule rating factor applied to the policy during the previous policy period shall contain or be accompanied by a notice to the insured containing information that any inquiry by the insured concerning the increased premium may be directed to the insurer or the insurer’s insurance producer. 3. Upon receipt of a request as described in paragraph (7)(D)2. above, the insurer, directly or through the insurer’s insurance producer, shall inform the insured in writing in terms sufficiently clear and specific of the basis for any reduction in a schedule rating credit or increase in a schedule rating debit which is applied to the policy. This response must be provided to the insured within ten (10) calendar days of the insurer or the insurer’s insurance producer receiving the request. A copy of the request from the insured and the written notice to the insured shall be contained in the file of the insurer, remaining there for not less than the duration of the policy term plus two (2) calendar years in accordance with section 374.205, RSMo. (E) This rule does not require the filing of individual risk policies by insurance companies when those policies are rated in accordance with subdivision (1) of subsection 1 of section 379.888, RSMo. AUTHORITY: sections 374.045, and 379.893, RSMo 2000.* This rule was previously filed as 4 CSR 190-16.040. This version of rule filed Dec. 5, 1969, effective Dec. 15, 1969. Amended: Filed June 20, 1970, effective July 1, 1970. Amended: Filed Dec. 20, 1974, effective Dec. 30, 1974. Rescinded and readopted: Filed Aug. 4, 1987, effective Feb. 1, 1988. Amended: Filed Oct. 13, 1989, effective Feb. 1, 1990. Amended: Filed July 13, 1990, effective March 14, 1991. Amended: Filed June 24, 1999, effective Feb. 29, 2000. Amended: Filed July 12, 2002, effective Jan. 30, 2003. Non-substantive change filed Sept. 11, 2019, published Oct. 31, 2019. *Original authority: 374.045, RSMo 1967, amended 1993, 1995; and 379.893, RSMo 1987, amended 1993, 1995.