SENATE BILL REPORT

SB 5705

BYSenators Metcalf and Talmadge

Revising provisions on casualty insurance rates and rating schedules.

Senate Committee on Financial Institutions

Senate Hearing Date(s):February 20, 1987

Senate Staff:Phil Sorensen (786-7470)

AS OF FEBRUARY 18, 1987

BACKGROUND:

Casualty insurance generally refers to most lines of insurance outside of life insurance.

Rates and rating schedules are tables developed by insurers.  Normally, rates and rating schedules reflect the amount of income needed by the insurer to meet anticipated expenditures for the coming year.

Loss experience is one of the elements used in arriving at insurance rates.  Essentially, loss experience involves the number of losses a given type of risk has produced in the past or is likely to produce in the future.  The type of risk involved determines how large a pool of sources is needed to produce accurate loss experience information.

SUMMARY:

Casualty rates and rating schedules must be supported by loss experience within this state, unless that information is unavailable or not credible.  If Washington loss experience cannot be used, insurers may use loss experience from specified states.  The use of loss experience from states other than those specifically mentioned is permitted only when the Commissioner is satisfied that loss experience from Washington and the specified states is either unavailable or statistically unreliable.

In no case, however, is California loss experience to be used as a basis for rates and rate schedules either alone or in conjunction with Washington's experience.

Fiscal Note:      none requested