Subject of Possible Rule Making: The commissioner is considering adopting rules concerning property and casualty insurance rate cap rules, transition rating rules, rate stability formulas, and other rating methods. The rules may:

     1. Specify situations in which these rules, formulas and other rating methods would or would not result in rates that are unfairly discriminatory;

     2. Clarify the meaning of RCW 48.19.040 as it applies to these rules, formulas and other rating methods and the rate manuals which they involve; and

     3. Establish processes and procedures that insurers must use when implementing rate cap rules, transition rating rules, rate stability formulas, and other rating methods.

     Statutes Authorizing the Agency to Adopt Rules on this Subject: RCW 48.02.060.

     Reasons Why Rules on this Subject may be Needed and What They Might Accomplish: Using advanced information technology and predictive modeling methods, property and casualty insurers are implementing increasingly sophisticated systems for calculating insurance premiums. When new rating factors are inserted into premium formulas and then applied to an existing book of business, many policyholders may see significant premium changes. To mitigate this effect, insurers often propose rating rules or formulas that reduce the magnitude of the premium changes for certain policyholders. These rating rules or formulas, however, may result in different premiums being charged to similarly situated policyholders, which may be contrary to RCW 48.18.480. A regulation could specify the situations in which these rating rules or formulas would or would not result in rates that are unfairly discriminatory. The regulation could also clarify how the requirements of RCW 48.19.040 apply to these situations. If such a regulation were adopted, the commissioner would have objective standards by which to evaluate and approve or disapprove insurers' proposed rating rules or formulas, and consumers would be better protected from unfairly discriminatory rates.

     Other Federal and State Agencies that Regulate this Subject and the Process Coordinating the Rule with These Agencies: None.

     Process for Developing New Rule: Submit written comments by November 6, 2009, to Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, e-mail jimt@oic.wa.gov, fax (360) 586-3109.

     Interested parties can participate in the decision to adopt the new rule and formulation of the proposed rule before publication by contacting Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, e-mail jimt@oic.wa.gov, fax (360) 586-3109.

September 21, 2009

Mike Kreidler

Insurance Commissioner

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