SENATE BILL REPORT

SB 5152

BYSenators von Reichbauer and Smitherman

Amending insurance form filing requirements.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):January 31, 1989; February 16, 1989

Majority Report:  Do pass.

      Signed by Senators von Reichbauer, Chairman; McCaslin, McMullen, Moore, Rasmussen, Sellar, Smitherman.

Senate Staff:Benson Porter (786-7470)

                  March 9, 1989

AS PASSED SENATE, MARCH 8, 1989

BACKGROUND:

The Insurance Commissioner's office reviews insurance policy forms and rates under a 15-day review period.  During this period, the commissioner may approve or disapprove the submitted form or rate, or may extend the review period another 15 days by notifying the applicant.  If the commissioner does not take action, the filed form or rate automatically becomes effective at the end of the initial period. This limited time period can create a situation where the commissioner cannot review a form or rate before it becomes effective.

State law requires the following factors be considered in the formulation of all insurance rates:  loss experience from Washington and other states, potential catastrophies, underwriting profit, and other relevant factors.  Insurers also must submit any plan or guidelines concerning risk classifications and rating schedules to the commissioner.  Citing the use of unsupported or untimely rate filings and the volatility of liability insurance rates, some support for more comprehensive and timely information has been expressed.

A member or subscriber to a rating organization is not required to adhere to a form filed on its behalf by the organization nor to file any deviations to these forms.  Insurance companies, however, are required to file rate deviations under existing law.

The rating basis and rates for a policy subject to audit are provided upon request by the insured or policy examining bureau. In practice, however, the commissioner requires this information prior to the approval of submitted policies.

Deviations filed with the commissioner are to be given a hearing unless the hearing is waived by the applicant.  Critics contend these hearings and other deviation filing provisions are no longer necessary in the application process, inconsistent with other insurance filing requirements, and restrictive to the promotion of competition.

Casualty insurance rates, rating schedules, and deviations are to be filed with the commissioner under a separate section.  These provisions are the same for other insurance policies and the separate casualty insurance section is considered redundant.

SUMMARY:

Requirements for filing forms and rates with the Insurance Commissioner's office are amended.  Forms and rates filed with the Insurance Commissioner's office are to become effective following a 30-day review period unless otherwise extended by the commissioner. 

Past and prospective operating expenses and investment income are added to the list of criteria to be considered in the rate making process.  The commissioner is to determine acceptable periods for which loss experiences are to be considered.  Washington loss experience is to be considered unless it is not available or is unsuitable in which case loss experience from similarly situated states may be considered. 

Similarly, information concerning operating expenses and investment income is to be submitted by every insurer or rating organization filing a plan of risk classification or rating schedule before use of such plan or schedule.

General liability, professional liability, and commercial automobile insurance rate filings must be submitted or updated at least once every 15-month period.

Members or subscribers to a rating organization are to adhere to form filings made on their behalf by such organizations. Deviations from such forms are permitted only when appropriately filed with the commissioner.

The basis for the rating and the actual rating must be included in policies subject to audit.

Provisions requiring deviation filings hearings and certain other procedures are deleted.

The section concerning casualty insurance rates is deleted.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Effective Date:September 1, 1989

Senate Committee - Testified: Lee Barclay, Insurance Commissioner's Office (pro); Allen Morrow, Insurance Commissioner's Office (pro); Christine Fomin, Progressive Insurance (con); Basil Badley, AIA