The Vermont Statutes Online

Title 8: Banking and Insurance

Chapter 128: Property and Casualty Insurance Rate Regulation

• Subchapter 001: Insurance Rates and Statistics

• § 4681. Purposes

  The purposes of this chapter are:

  (1) to prohibit price fixing agreements and other anticompetitive behavior by or among insurers;

  (2) to protect policyholders and the public against the adverse effects of excessive, inadequate, or unfairly discriminatory rates;

  (3) to promote price competition among insurers so as to provide rates that are responsive to competitive market conditions;

  (4) to provide regulatory controls in the absence of competition;

  (5) to promote availability, fairness, and reliability of insurance;

  (6) to authorize cooperative action among insurers in ratemaking and to regulate such activity to prevent practices that tend to substantially lessen competition or create a monopoly; and

  (7) to cause the availability of price and other information to enable the public to purchase insurance suitable for their needs and to foster competitive insurance markets. (Added 1983, No. 238 (Adj. Sess.), § 1.)

• § 4682. Scope

  This chapter applies to all kinds of insurance written on risks in this State by any insurer authorized to do business in this State, except:

  (1) life insurance;

  (2) annuities;

  (3) accident and health insurance;

  (4) ocean marine insurance;

  (5) reinsurance; and

  (6) aircraft liability and aircraft hull insurance. (Added 1983, No. 238 (Adj. Sess.), § 1.)

• § 4683. Definitions

  As used in this chapter:

  (1) “Advisory or service organization” means any person or organization that assists insurers as authorized by section 4690 of this title, but such an organization shall not include joint underwriting organizations, actuarial or legal consultants, a single insurer, any employees of an insurer, or insurers under common control or management or their employees or managers.

  (2) “Classification system” or “classification” means a plan, system, or arrangement for recognizing differences in exposure to hazard among risks.

  (3) “Commercial risk insurance” means insurance within the scope of this chapter that is not:

  (A) personal risk insurance; or

  (B) workers’ compensation and employers’ liability insurance.

  (4) “Competitive market” means a market that has not been found to be noncompetitive pursuant to section 4684 of this title.

  (5) “Expenses” means that portion of any rate attributable to acquisition, field supervision and collection expenses, general expenses, and taxes, licenses, and fees.

  (6) “Experience rating” means a rating procedure utilizing past insurance experience of the individual policyholder to forecast future losses by measuring the policyholder’s loss experience to produce a prospective premium credit, debit, or unity modification.

  (7) “Joint underwriting” means a voluntary arrangement established on an ad hoc basis to provide insurance coverage pursuant to which two or more insurers separately contract with the insured at a price and under policy terms agreed upon between the insurers.

  (8) “Loss cost” means the actuarially developed portion of the rate needed to cover future losses and claims. The loss cost does not include commission expenses, other acquisition expenses, general expenses, taxes, profit, and other contingencies.

  (9) “Loss trending” means any procedure for projecting developed losses to the average date of loss for the period during which the policies are to be effective.

  (10) “Market” means the statewide interaction between buyers and sellers of a particular line of insurance or product market component.

  (11) “Noncompetitive market” means a market for which there is a ruling in effect pursuant to section 4684 of this title that a reasonable degree of competition does not exist.

  (12) “Personal risk insurance,” other than workers’ compensation and employers’ liability insurance, means homeowners, tenants, private passenger nonfleet automobile, mobile home, and other property and casualty insurance primarily for personal, family, or household needs rather than for business or professional needs.

  (13) “Pool” means a voluntary arrangement other than a residual market mechanism, established on an ongoing basis, pursuant to which two or more insurers participate in the sharing of risks on a predetermined basis. The pool may operate through an association, syndicate, or other pooling agreement.

  (14) “Pure premium rate” means that portion of the rate that represents the loss cost per unit of exposure or loss cost per unit of insurance.

  (15) “Rate” means the cost of insurance per exposure base unit, or cost per unit of insurance, prior to the application of individual risk variations based upon loss or expense considerations, and does not include minimum premiums.

  (16) “Residual market mechanism” means an arrangement, either voluntary or mandated by law or regulation of the Commissioner, involving participation by insurers in the equitable apportionment among them of insurance that may be afforded applicants who are unable to obtain insurance through ordinary methods.

  (17) “Statistical plan” means a plan, system, or arrangement used in collecting insurance or related data.

  (18) “Supplementary rate information” includes any manual, schedule, or plan of rates, classification system, rating schedule, minimum premium, policy fee, rating rule, rating plan, or any other similar information needed or used to determine the applicable premium in effect or to be in effect for an insured.

  (19) “Supporting information” means:

  (A) the experience and judgment of the filer and the experience or data of other insurers or organizations relied upon by the filer;

  (B) the interpretation of any statistical data relied upon by the filer;

  (C) the description of methods used in making the rates; and

  (D) any other similar information relied upon by the filer. (Added 1983, No. 238 (Adj. Sess.), § 1; amended 1989, No. 128 (Adj. Sess.), § 1.)

• § 4684. Competitive market

  (a) A competitive market in a type of insurance subject to this chapter is presumed to exist unless:

  (1) the Commissioner, after notice and hearing, determines and orders that a reasonable degree of competition does not exist in the market;

  (2) the average annual increase in premiums or rates in the market is 25 percent or more as determined and noticed by the Commissioner; or

  (3) an insurer uses a claims made liability insurance policy form or endorsement.

  (b) The Commissioner shall conduct hearings to determine whether a reasonable degree of competition exists whenever, in any market over any 12-month period, the average rates or premiums increase at least 15 percent, but less than 25 percent, over the average rate or premiums for the immediately preceding 12-month period for that market. The Commissioner shall not be obligated to hold hearings under this subsection if, based on the information available to him or her under subsection 4688(a) of this title and other sources, the Commissioner determines that a competitive market continues to exist.

  (c) Upon a determination of an increase in rates or premiums of 25 percent or more under subdivision (a)(2) of this section, the Commissioner may issue a notice that a reasonable degree of competition does not exist. Insurers may use their currently filed rates for only 120 calendar days after such notice, unless the Commissioner determines that it is in the consumer’s best interests to extend this time period.

  (d) A competitive market does not exist if an insurer uses a claims made liability insurance policy form or endorsement. Insurers writing insurance on a claims made basis are subject to the prefiling requirements of subdivision 4688(c)(1) of this title.

  (e) The rates or premiums in a noncompetitive market shall be subject to the prefiling requirements set forth in subdivision 4688(c)(1) of this title.

  (f) An order or notice that a noncompetitive market exists under subdivisions (a)(1) and (2) of this section shall expire not later than two years after the order or notice issues unless the Commissioner earlier rescinds the order or notice, or continues the order or notice upon a further determination that a reasonable degree of competition does not exist. Such further determination shall be preceded by public notice, but may be made without a hearing unless requested by an interested party.

  (g) In determining whether a reasonable degree of competition exists under subdivision (a)(1) of this section, the Commissioner shall consider relevant structural and functional factors in determining the competitiveness of the market, including: the number of insurers actively engaged in providing coverage; market shares; and ease of entry. (Added 1983, No. 238 (Adj. Sess.), § 1; 1985, No. 265 (Adj. Sess.), § 1, eff. June 4, 1986; 1987, No. 185 (Adj. Sess.), § 1, eff. May 5, 1988; 1989, No. 128 (Adj. Sess.), § 2; amended 2021, No. 105 (Adj. Sess.), § 219, eff. July 1, 2022.)

• § 4685. Rate standards

  (a) General. Rates shall not be excessive, inadequate, or unfairly discriminatory.

  (b) Excessiveness.

  (1) Competitive market. A rate in a competitive market is not excessive.

  (2) Noncompetitive market. Rates in a noncompetitive market are excessive if they are producing or are likely to produce unreasonably high profits for the insurance provided or if expenses are unreasonably high in relation to services rendered.

  (c) Inadequacy. Rates are not inadequate unless insufficient to sustain projected losses and expenses in the class or classes of business to which they apply or the use of such rates has or, if continued, will have the effect of substantially lessening competition or the tendency to create a monopoly in any market.

  (d) Unfair discrimination. Unfair discrimination exists if, after allowing for practical limitations, price differentials fail to reflect equitably the differences in expected losses and expenses. A rate is not unfairly discriminatory because different premiums result for a class of policyholders with like loss exposures but different expenses, or like expenses but different loss exposures, provided that the rate equitably reflects the differences with reasonable accuracy. A rate is not unfairly discriminatory if it is averaged broadly among persons insured under a group, franchise, or blanket policy or a mass marketed plan. (Added 1983, No. 238 (Adj. Sess.), § 1; amended 2017, No. 134 (Adj. Sess.), § 6.)

• § 4686. Rating methods or criteria

  In determining whether rates comply with the excessiveness standard in a noncompetitive market under subdivision 4685(b)(2) of this title, the inadequacy standard under subsection 4685(c) of this title and the unfair discrimination standard under subsection 4685(d) of this title, the following criteria shall apply:

  (1) Basic factors in rates. Due consideration shall be given to past and prospective loss and expense experience within, and as reasonable and necessary outside this State; to catastrophe hazards; to residual market loss redistributions and other similar obligations, if any; to a reasonable provision for underwriting profit; to contingencies, if any; to trends within and outside this State; to loadings for leveling premium rates over time or for dividends or savings to be allowed or returned by insurers to their policyholders, members, or subscribers; and to all other relevant factors.

  (2) Classification. Risks may be classified in any lawful and reasonable way for the collection of statistics and establishment of rates. Rates may be modified for individual risks in accordance with rating plans or schedules which provide for recognition of probable variations in hazards, expenses, or both.

  (3) Expenses. The expense provisions included in the rates to be used by an insurer shall reflect the operating methods of the insurer, and, so far as is determinable and reasonable, its own actual and anticipated expense experience for the kind of insurance involved, or any subdivision thereof.

  (4) Profits. The rates shall contain an allowance providing for a reasonable profit. In determining the reasonableness of profit, consideration shall be given to all relevant investment income and a provision for contingencies may be included. (Added 1983, No. 238 (Adj. Sess.), § 1; 1987, No. 185 (Adj. Sess.), § 2, eff. May 5, 1988.)

• § 4687. Workers’ compensation and employers’ liability insurance; uniform administration of classifications; reporting of rates and other information

  (a) Every workers’ compensation and employers’ liability insurer shall adhere to the uniform classification system and uniform experience rating plan for such categories of insurance which are filed with the Commissioner by the advisory or service organization which has been designated by the Commissioner and remains subject to his or her approval and designation. However, any insurer may develop subclassifications of the uniform classification system upon which a rate may be made; provided, further, that such subclassifications must be filed for the approval of the Commissioner at least 30 working days prior to their use and submitted simultaneously, for information only, to the designated advisory or service organization. The Commissioner shall disapprove any such subclassifications if the insurer fails to demonstrate that the data thereby produced can be reported consistent with the uniform statistical plan and uniform classification system.

  (b) The Commissioner shall designate an advisory or service organization to assist him or her in gathering, compiling, and reporting relevant statistical information. Every workers’ compensation and employers’ liability insurer shall record and report its workers’ compensation and employers’ liability insurance experience to the designated advisory or service organization as set forth in the uniform statistical plan approved by the Commissioner.

  (c) The designated advisory or service organization shall develop and file manual rules, subject to the approval of the Commissioner, reasonably related to the recording and reporting of data pursuant to the uniform statistical plan, uniform experience rating plan, uniform schedule rating plan, and the uniform classification system. Every workers’ compensation and employers’ liability insurer shall adhere to the approved manual rules and experience rating plan in the underwriting and statistical reporting of its business. No insurer shall agree with any other insurer or with an advisory or service organization to adhere to manual rules that are not reasonably related to the recording and reporting of data pursuant to the uniform classification system, uniform experience rating plan, uniform schedule rating plan, or the uniform statistical plan.

  (d) Filings submitted pursuant to this section shall be filed with the Commissioner at least 30 working days before the proposed effective date of the filing. The Commissioner may give written notice, within 30 working days after the receipt of the filing, that the Commissioner needs additional time, not to exceed 30 days from the date of such notice, to consider the filing. Upon written application of the designated advisory or service organization, the Commissioner may authorize the filing to be effective before the expiration of the waiting period or any extension of the waiting period. A filing shall be deemed to meet the requirements of this section, unless disapproved by the Commissioner before the expiration of the waiting period or any extension of the waiting period.

  (e) The uniform experience rating plan to be filed pursuant to this section shall contain reasonable eligibility standards, provide adequate incentives for loss prevention, and provide for sufficient premium differentials so as to encourage safety. The uniform experience rating plan shall be the exclusive means of providing prospective premium adjustment based upon measurement of the loss producing characteristics of an individual insured, but insurers may file rating plans that provide for retrospective premium adjustments based upon an insured’s past experience. (Added 1983, No. 238 (Adj. Sess.), § 1; amended 1989, No. 128 (Adj. Sess.), § 3; 2021, No. 105 (Adj. Sess.), § 220, eff. July 1, 2022.)

• § 4688. Filing of rates and other rating information

  (a) Filings as to competitive markets. Except with respect to filings submitted pursuant to section 4687 of this title, in a competitive market, every insurer shall file with the Commissioner all rates and supplementary rate information, and supporting information that are to be used in this State, provided that such rates and information need not be filed for specifically rated inland marine risks or such other risks that are designated by regulation of the Commissioner as not requiring a filing. Such rates, supplementary rate information, and supporting information shall be provided to the Commissioner not later than 15 days after the effective date. An insurer may adopt by reference, with or without deviation or modification, provided that said deviation or modification is readily identifiable, the rates, supplementary rate information, and supporting information filed by another insurer or an advisory or service organization with which it is affiliated; provided, however, such an adoption shall not relieve an insurer from any other requirements of this chapter.

  (b) Prefilings for competitive markets. Except with respect to filings submitted pursuant to section 4687 of this title, 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, the insurer shall provide and file for approval of the Commissioner, at least 30 working days before the proposed effective date therefor, 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.

  (c) Prefilings in a noncompetitive market.

  (1) Except with respect to filings submitted pursuant to section 4687 of this title, in a noncompetitive market every insurer or its authorized advisory or service organization except as prohibited by subdivision 4690(b)(2) of this title shall provide and file for approval of the Commissioner all rates, supplementary rate information, and supporting information for noncompetitive markets at least 30 working days before the proposed effective date therefor. The Commissioner may give written notice, within 30 working days after the receipt of the filing, that the Commissioner needs additional time, not to exceed 30 days from the date of such notice, to consider the filing. Upon written application of the insurer, the Commissioner may authorize rates to be effective before the expiration of the waiting period or any extension thereof. A filing shall be deemed to meet the requirements of this chapter and become effective, unless disapproved pursuant to section 4689 of this title by the Commissioner before the expiration of the waiting period or any extension thereof.

  (2) Rates for residual market risks shall be subject to the filing requirements of subdivision (c)(1) of this subsection.

  (d) Requirements of Commissioner.

  (1) Rates filed pursuant to this section shall be filed in such form and manner as may be prescribed by the Commissioner. Rates filed by an insurer for workers’ compensation and employers’ liability insurance shall be filed simultaneously, for information only, with the designated advisory or service organization.

  (2) For a noncompetitive market, whenever a filing is not accompanied by such information as the Commissioner requires under this section, the Commissioner shall so inform the insurer as soon as possible and the filing shall not be deemed made until such information is furnished.

  (e) Filings open to inspection. All rates, supplementary rate information, and any nonproprietary supporting information for risks filed under this chapter shall, as soon as filed or after approval for those matters subject to prefiling, 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 in the manner and amount prescribed by the Commissioner.

  (f) Consent to rate. Notwithstanding any other provisions of this title to the contrary, upon written application of the named insured, stating the reasons therefor and filed for approval of the Commissioner, a rate in excess of, or coverage more restrictive than, that provided by an otherwise applicable filing may be used on any specific risk. Such rate or coverage shall not be effective unless approved by the Commissioner and in accordance with the effective date therefor established by the Commissioner.

  (g) Rating manuals and related information. Notwithstanding any other provision of this chapter to the contrary, every insurer shall file with the Commissioner all manuals of rates and rating rules that it uses in this State, and shall identify the day, month, and year on which such rates and rules were first used by the insurer. This requirement may be satisfied by reference to the manuals of rates or rating rules filed by the advisory or service organization with which the insurer is affiliated and to the extent utilized. Upon specific request of the Commissioner, an insurer shall provide the Commissioner with a copy of the underwriting rules or guides that it uses in this State.

  (h) Form or mode of information required to be furnished to the Commissioner. The Commissioner may prescribe, by rule or regulation, the form or mode in which the information required to be furnished to the Commissioner pursuant to this section must be filed. (Added 1983, No. 238 (Adj. Sess.), § 1; amended 1989, No. 128 (Adj. Sess.), § 4; 2021, No. 105 (Adj. Sess.), § 221, eff. July 1, 2022; 2023, No. 32, § 6, eff. July 1, 2023.)

• § 4688a. Filing fees

  Each filing submitted to the Commissioner pursuant to section 4687 or 4688 of this title shall be accompanied by payment to the Commissioner of a nonrefundable fee of $50.00. A minimum fee of $150.00 shall accompany each such filing if submitted by an advisory or service organization. (Added 1985, No. 236 (Adj. Sess.), § 12; amended 1991, No. 166 (Adj. Sess.), § 12.)

• § 4689. Approval or disapproval of rates

  (a) Timing of approval or disapproval.

  (1) A rate may be disapproved at any time subsequent to the effective date.

  (2) A rate subject to prefiling may also be disapproved before the effective date.

  (3) A rate for a residual market in which insurers are permitted or mandated by law or by order of the Commissioner to participate shall not become effective until approved by the Commissioner, as provided in section 4688 of this title.

  (b) Bases of disapproval.

  (1) The Commissioner shall disapprove a rate for use in a competitive market if the Commissioner finds that the rate is inadequate or unfairly discriminatory.

  (2) The Commissioner shall disapprove a rate for use in a noncompetitive or residual market if the Commissioner finds that the rate is excessive, inadequate, or unfairly discriminatory.

  (c) Disapproval procedure; order; interim rates.

  (1) Disapproval procedure.

  (A) If the Commissioner determines, in accordance with section 4684 of this title, that a reasonable degree of competition does not exist in a market, the Commissioner shall commence a hearing to determine whether or not existing rates are excessive within 30 days of an order finding a market noncompetitive. However, the Commissioner may waive this requirement to hold a hearing if the Commissioner finds such rate filings do not violate the rate standards of this chapter. The Commissioner shall decide whether rates are excessive within 15 days after the conclusion of the hearing. Insurers shall have the burden of proving rates are not excessive in a noncompetitive market.

  (B) If the Commissioner believes that rates in a competitive market violate the inadequacy standard in section 4685 of this title or any other requirement of this chapter, the Commissioner shall require insurers in that market to file additional supporting information for rates. If after reviewing such additional supporting rate information the Commissioner continues to believe that the rates violate these requirements, the Commissioner shall call a hearing before entering any order.

  (C) The Commissioner may disapprove, without a hearing, prefiled rates. However, the insurer or other filer whose rates have been disapproved shall be given a hearing upon written request made within 30 days after the receipt of the disapproval. The Commissioner shall notice in every order of disapproval that a hearing will be granted within 30 days after receipt of a request from an affected insurer.

  (2) Order. If the Commissioner disapproves a rate, the Commissioner shall issue an order specifying in what respect it fails to meet the requirements of this chapter. For rates in effect at the time of disapproval, the Commissioner shall state when the further use of such rate in contracts of insurance made thereafter shall be prohibited.

  (3) Interim rates. In the event existing rates of an insurer are found excessive, the Commissioner shall specify an interim rate at the time he or she issues an order disapproving rates. The interim rate may be modified by the Commissioner upon his or her own motion or upon motion of an insurer. The interim rate or any modification thereof shall take effect prospectively in contracts of insurance written or renewed 15 days after the Commissioner’s decision setting interim rates.

  (4) Distribution of overcharges. When the rates are finally determined, the Commissioner shall order any overcharge in the interim rates to be distributed appropriately, except that refunds to policyholders that are determined to be de minimis by the Commissioner shall be remitted to the State of Vermont General Fund. (Added 1983, No. 238 (Adj. Sess.), § 1; 1987, No. 185 (Adj. Sess.), § 3, eff. May 5, 1988.)

• § 4690. Licensing, operation, services, and activities of advisory or service organizations

  (a) License required. No person or organization may provide any service listed in subsection (b) of this section relating to any insurance subject to this chapter, and no insurer shall utilize any service of such organization for such purposes, unless the organization has obtained a license under subsection (d) of this section as an advisory or service organization.

  (b) Authorized activities. Any licensed advisory or service organization may perform one or more of the following activities on behalf of its affiliates:

  (1) Collect, compile, and furnish loss data and related statistics concerning any type of insurance subject to this chapter;

  (2) Collect, compile, and furnish expense data concerning commercial risk insurance, workers’ compensation insurance, and employers’ liability insurance and, as approved by the Commissioner, personal risk insurance;

  (3) For commercial risk insurance, workers’ compensation insurance, employers’ liability insurance, dwelling fire insurance, personal liability insurance, and inland marine insurance, prepare, recommend, distribute, or file rates and pure premium rates, supplementary rate, and supporting information, or pure premium rate data with or without adjustment for loss development and loss trending, in accordance with its statistical plans where applicable. Such pure premium rate data and adjustments should be in sufficient detail so as to permit insurers to modify the pure premium rates based on their own rating methods or interpretations of underlying data;

  (4) For private passenger nonfleet automobile and homeowner’s insurance, recommend pure premium rates and supply supplementary rate and supporting information or pure premium rate data with or without adjustment for loss development and loss trending in sufficient detail to permit insurers to modify the pure premium rates based upon their own rating methods or interpretation of underlying data. The organization may not file any material or data for or on behalf of insurers for private passenger nonfleet automobile and homeowner’s insurance with the Commissioner, unless the Commissioner approves the form of such material or data;

  (5) Prepare and distribute manuals of rates and pure premium rates and rating rules and rating schedules that provide for the development of rates or provide for the development or calculation of rates with the addition of insurer information that is not ascertainable within the distributed manuals;

  (6) Advise about rate and pure premium rate questions; and provide supporting information for the development and use of rates and pure premium rates;

  (7) Prepare, recommend, and file policy forms and endorsements and consult with its affiliates relative to their use and application;

  (8) Prepare, recommend, or file coverages, classifications, and statistical plans;

  (9) Distribute any and all information that is filed with the Commissioner and open to public inspection;

  (10) Conduct research and collect statistics in order to discover, identify, and classify information relating to causes or prevention of losses;

  (11) Make inspections, surveys, and audits;

  (12) Conduct research and on-the-site inspections in order to prepare classifications of public fire defenses;

  (13) Provide actuarial, statistical, and administrative services to insurers and other insurer-supported organizations;

  (14) Collect, compile, and distribute past and current prices of individual insurers’ insurance contracts, if such information is made available to the general public;

  (15) Conduct research and collect information to determine the impact of benefit level changes on rates and pure premium rates, and conduct research and report on other projects;

  (16) Prepare and distribute rules and rating values for experience rating plans. Calculate and disseminate individual risk premium modifications;

  (17) Assist an individual insurer to develop rates, supplementary rate information, or supporting information when so authorized by the individual insurer; and

  (18) Furnish any other services related to those enumerated in this subsection, as specified in the organization’s license issued by the Commissioner.

  (c) Availability of services. No advisory or service organization shall refuse to supply any service for which it is licensed in this State to any insurer authorized to do business in this State and offering to pay the fair and usual compensation for the service; nor shall such an organization require the purchase of any specific service or services as a condition to obtaining the service sought, provided that the furnishing of the requested service does not otherwise place an unreasonable burden on the organization, except as prescribed by the Commissioner for workers’ compensation and employers’ liability insurance.

  (d) Licensing.

  (1) Application. An advisory or service organization applying for a license shall include with its application:

  (A) a nonrefundable license fee of $1,000.00 payable to the Commissioner, except that the fee shall be $100.00 for such an organization whose principal business office is located in this State;

  (B) a copy of its constitution, articles of association or incorporation, bylaws, and any other rules or regulations governing the conduct of its business;

  (C) a list of its affiliated insurers, together with disclosure of the services provided to each; which list shall be maintained and updated and supplied to the Department at least annually;

  (D) the names and addresses of one or more residents of this State, or the designation of the Secretary of State as a person, upon whom notices, process affecting it, or orders of the Commissioner may be served;

  (E) written documentation of its technical qualifications or abilities; and

  (F) any other relevant information and documents that the Commissioner may require.

  (2) Change in material circumstances. Every organization that has applied for a license pursuant to this subsection shall promptly file with the Commissioner, not less than 10 days after the effective date, every change in the material facts or in the documents on which its application and license was based.

  (3) Granting of license. If the Commissioner finds that the applicant and the natural persons through which it acts are competent, trustworthy, and technically qualified or able to provide the services proposed, and that all other requirements of law are met, the Commissioner shall issue a license specifying the authorized activities of the applicant. The Commissioner shall not issue a license to any organization whose activities would tend to create a monopoly or to substantially lessen competition in any market segment.

  (4) Duration. Licenses issued pursuant to this section shall remain in effect until the licensee withdraws from the State or until the license is suspended or revoked by the Commissioner. The Commissioner may at any time, after a hearing, revoke or suspend the license of an advisory or service organization that does not comply with the requirements and standards of this title. (Added 1983, No. 238 (Adj. Sess.), § 1; amended 1989, No. 128 (Adj. Sess.), § 5.)

• § 4691. Filing of records and reports; exchange of information

  (a) Except as provided in section 4687 of this title, the Commissioner shall review and approve, as appropriate, reasonable rules and plans for recording and reporting of loss and expense experience in appropriate form and detail and shall by rule require insurers to file loss and expense data and investment income statistics in such form and detail as the Commissioner deems appropriate. Notwithstanding any other provision of this chapter to the contrary, the Commissioner may designate one or more advisory or service organizations or contractors to assist in the gathering of such experience and making and distributing compilations thereof.

  (b) The Commissioner and every insurer, advisory or service organization may exchange information and experience data with insurance regulatory officials, insurers, advisory or service organizations in this and other states and may consult with them with respect to ratemaking and the application of rating systems. (Added 1983, No. 238 (Adj. Sess.), § 1; 1987, No. 185 (Adj. Sess.), § 4, eff. May 5, 1988; amended 2021, No. 105 (Adj. Sess.), § 222, eff. July 1, 2022.)

• § 4692. Joint underwriting; pool and residual market activities

  (a) Authorization. Notwithstanding section 4693 of this title, insurers participating in joint underwriting, pools, or residual market mechanisms for the purpose of affording insurance under a method of distributing or sharing risks, or both, may, in connection with such activity, act in cooperation with each other in the making of rates; rating systems; policy forms; underwriting rules; surveys; inspections and investigations; the furnishing of loss and expense statistics or other information; or carrying on research. Joint underwriting, pools, and residual market mechanisms shall not be deemed advisory or service organizations.

  (b) Regulation.

  (1) Except to the extent modified by this section, insurers participating in joint underwriting, pools, and residual market mechanisms are subject to the other provisions of this chapter.

  (2) If, after a hearing, the Commissioner finds that any activity or practice of an insurer participating in joint underwriting or a pool is unfair or unreasonable, he or she shall issue a written order specifying in what respects such activity or practice is unfair or unreasonable and require the discontinuance of such activity or practice in addition to any penalties that may be levied.

  (3) Every pool shall file for approval of the Commissioner a copy of its constitution, articles of association or incorporation, its bylaws, rules, and regulations governing its activities; a list of its members; the name and address of one or more residents of this State, or the designation of the Secretary of State as a person, upon whom notices or orders of the Commissioner or process may be served; and any changes or amendments in the foregoing.

  (4) Any residual market mechanism, plan, or agreement to implement such a mechanism, and any amendments thereto, shall be submitted in writing to the Commissioner for consideration and approval, together with such information as the Commissioner may reasonably require. The Commissioner shall approve only such agreements as are found to contemplate the use of rates that meet the standards prescribed by this chapter and activities and practices that are not unfair, unreasonable, or otherwise inconsistent with the provisions of this chapter. At any time after such agreements are in effect, the Commissioner may review the activities and practices of the parties to such agreements and if, after a hearing, the Commissioner finds that any such activity or practice is unfair, unreasonable, or otherwise inconsistent with the provisions of this chapter, the Commissioner shall issue a written order specifying in what respects such activity or practice is unfair, unreasonable, or otherwise inconsistent with the provisions of this chapter and require the discontinuance of such activity or practice or revoke approval of any such agreement. (Added 1983, No. 238 (Adj. Sess.), § 1.)

• § 4693. Agreements to adhere

  (a) Except as necessary to comply with the requirements of section 4687 of this title, no insurer may agree with any other insurer or with an advisory or service organization to adhere to or use any rate or supplementary rate information. The fact that any insurer adheres to or uses such rate or material is not sufficient in itself to support a finding that an agreement to adhere or use exists but may be used for the purpose of supplementing any other evidence as to the existence of such an agreement.

  (b) Two or more insurers having common ownership or operating in this State under common management or control may act in concert between or among themselves in the same manner as if they constituted a single insurer. (Added 1983, No. 238 (Adj. Sess.), § 1.)

• § 4694. Residual market mechanism status

  All insurers authorized to write insurance that is subject to this chapter may establish and participate in a plan providing for the equitable apportionment among them of insurance that may be afforded applicants who are in good faith entitled to, but who are unable to, procure such insurance through ordinary methods. A plan shall be submitted for the Commissioner’s prior approval, unless already existing on July 1, 1984. The rates, supplementary rate information, and policy forms to be used in such a plan and any future modification thereof must be submitted to the Commissioner for approval in accordance with sections 4686, 4687, and 4688 of this title. (Added 1983, No. 238 (Adj. Sess.), § 1.)

• § 4695. Exemptions

  The Commissioner may, by rule, exempt any market from any or all of the provisions of this chapter, if and to the extent that the Commissioner finds their application unnecessary or impractical to achieve the purpose of this chapter. (Added 1983, No. 238 (Adj. Sess.), § 1.)

• § 4696. Mandatory market participation

  If the Commissioner finds that there is no voluntary market in which buyers of any line of property and casualty insurance may obtain such insurance, the Commissioner may initiate proceedings to establish a joint underwriting association for that market under chapter 137 of this title. (Added 1985, No. 265 (Adj. Sess.), § 2, eff. June 4, 1986.)

• Subchapter 002: General Administration of Chapter

• § 4700. Examinations

  (a) The Commissioner or his or her designee shall examine any insurer, pool, advisory or service organization, or residual market mechanism as he or she deems necessary to ascertain compliance with this chapter.

  (b) Every insurer, pool, advisory or service organization, and residual market mechanism shall maintain reasonable records of the type and kind reasonably adapted to its method of operation containing its experience, or the experience of its affiliated insurers including the data, statistics, or information collected or used by it in its activities. These records shall be available at all reasonable times to enable the Commissioner to determine whether the activities of any advisory or service organization, insurer, residual market mechanism, or pool comply with the provisions of this chapter. Such records shall be maintained in an office within this State or shall be made available to the Commissioner for examination or inspection at any time.

  (c) The necessary and reasonable cost of an examination made pursuant to this section shall be paid by the examined party upon presentation of a detailed account of such costs.

  (d) In lieu of any such examination, the Commissioner may accept the report of an examination made by the insurance supervisory official of another state, pursuant to the laws of such state. (Added 1983, No. 238 (Adj. Sess.), § 1.)

• § 4701. Consumer information

  The Commissioner shall utilize, develop, or cause to be developed a consumer information system that will include representative price ranges and other relevant information to be readily available to purchasers of insurance. The development and operation of this system may be conducted internally within the Department of Financial Regulation, in cooperation with other state insurance departments, through outside contractors, or in any other appropriate manner. To the extent deemed necessary and appropriate by the Commissioner, insurers, advisory or service organizations, and other persons or organizations involved in conducting the business of insurance in this State to which this section applies shall assist and cooperate in the development and utilization of a consumer information system. (Added 1983, No. 238 (Adj. Sess.), § 1; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4702. Monitoring competition

  In determining whether or not a competitive market exists pursuant to section 4684 of this title, the Commissioner shall monitor the degree of competition in this State. In doing so, the Commissioner shall utilize existing relevant information, analytical systems, and other sources; cause or participate in the development of new relevant information, analytical systems, and other sources; or rely on some combination thereof. Such activities may be conducted internally within the Department of Financial Regulation, in cooperation with other state insurance departments, through outside contractors or in any other appropriate manner. (Added 1983, No. 238 (Adj. Sess.), § 1; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4703. Information and monitoring costs

  To the extent deemed necessary and appropriate by the Commissioner, the costs of complying with sections 4689, 4691, 4701, and 4702 of this title shall be assessed against insurers subject to this chapter. These assessments shall be made on an equitable and practicable basis established after a hearing by regulation of the Commissioner. (Added 1983, No. 238 (Adj. Sess.), § 1; amended 1987, No. 185 (Adj. Sess.), § 5, eff. May 5, 1988.)

• § 4704. Information to be furnished insureds; aggrieved persons

  (a) Every insurer shall, within a reasonable time after receipt of a written request and upon payment of a reasonable charge, if any, furnish to any insured affected by a premium or rate utilized by it, all pertinent information as to the development and application of such premium or rate.

  (b) Every insurer and advisory or service organization shall provide within this State a reasonable means whereby a person aggrieved by the application of any of its filings shall be allowed to be heard, on written request, for the purpose of reviewing the manner in which the filing has been applied in connection with the insurance involved. If 25 persons are aggrieved, they may appeal in writing to the Commissioner who may call a hearing, to be held not less than 10 days after written notice to the parties, and review the filing in accordance with the provisions of this chapter and all other applicable provisions of this title. (Added 1983, No. 238 (Adj. Sess.), § 1; amended 2021, No. 105 (Adj. Sess.), § 223, eff. July 1, 2022.)

• § 4704a. Rerating after use of erroneous credit information

  If it is determined through the reinvestigation process set forth in the federal Fair Credit Reporting Act, 15 U.S.C. § 1681i(a)(5), that credit information relied upon by an insurer was incorrect, and if an insurer receives notice of that determination from either the consumer reporting agency or from the insured who has provided written documentation from the consumer reporting agency, within one year of the date after the insured is no longer a customer of the insurer, such insurer shall reunderwrite and rerate the consumer within 30 days after receiving the notice. After reunderwriting or rerating the insured, the insurer shall make any adjustments necessary consistent with its underwriting and rating guidelines. If an insurer determines that the insured has overpaid the premium, the insurer shall refund to the insured the amount of overpayment. (Added 2005, No. 211 (Adj. Sess.), § 5.)

• § 4705. Dividend plans

  Nothing in this chapter shall be construed to prohibit or regulate the payment of dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers; provided, however, this provision shall not contravene the provisions of chapter 145 of this title. A plan for the payment of dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers shall not be deemed a rating plan or system nor be conditioned upon renewal of a policy. The Commissioner is authorized to obtain information concerning dividends in such form or detail as he or she deems appropriate. (Added 1983, No. 238 (Adj. Sess.), § 1; amended 1987, No. 185 (Adj. Sess.), § 6, eff. May 5, 1988.)

• § 4706. Penalties

  (a) If the Commissioner finds that any person, insurer, or advisory or service organization has violated any provision of this chapter, the Commissioner may impose an administrative penalty of not more than $2,000.00 for each violation; but if the Commissioner finds such violation to be willful, a penalty of not more than $15,000.00 for each such violation may be imposed.

  (b) Unintentional technical violations arising from systems or computer generated errors or failures of the same type shall be treated as a single violation for the purposes of this section. In the event of resulting overcharges that are de minimis, the insurer shall make financial restitution, including payment of interest, as determined by the Commissioner and no penalty shall be imposed under this chapter, provided that the insurer demonstrates to the satisfaction of the Commissioner that the violation was unintentional.

  (c) For purposes of this section, any insurer using a premium or rate for which the insurer has failed to submit a filing pursuant to section 4687 or 4688 of this title shall have committed a separate violation for each day such failure existed.

  (d) The Commissioner may suspend or revoke the license of any advisory or service organization or insurer failing or refusing to comply with an order of the Commissioner within the time limit prescribed by such order or any extension thereof that the Commissioner may grant.

  (e) The Commissioner may determine when a suspension of license shall become effective, and it shall remain in effect for the period fixed by the Commissioner, including an indefinite period, unless such suspension is modified or rescinded or until the order upon which such suspension is based is modified, rescinded, or reversed.

  (f) No penalty shall be imposed and no license shall be suspended or revoked except upon a written order of the Commissioner, stating the findings made after a hearing.

  (g) The penalties applicable under this section are in addition to any other penalties applicable under this title. (Added 1983, No. 238 (Adj. Sess.), § 1; amended 1995, No. 167 (Adj. Sess.), § 18.)

• § 4707. Judicial review

  Any party in interest aggrieved by the decision or final order of the Commissioner may appeal to a court of competent jurisdiction. (Added 1983, No. 238 (Adj. Sess.), § 1.)

• § 4708. Severability

  If any provision of this chapter or the application of such provision to any person or circumstance shall be held invalid by a court of competent jurisdiction, the remainder of the chapter and the application of its provisions to a person or circumstance other than that or those as to which it is held invalid, shall not be affected thereby. (Added 1983, No. 238 (Adj. Sess.), § 1.)

• Subchapter 003: Cancellations of Policies

• § 4711. Cancellation of commercial risk insurance

  (a) A notice of cancellation of a policy of commercial risk insurance as defined in this chapter but excluding farm risks, issued under this chapter shall be effective only if it is based on:

  (1) nonpayment of premium;

  (2) fraud or material misrepresentation affecting the policy or in the presentation of a claim under the policy, or violation of any of the terms or conditions of the policy; or

  (3) substantial increase in hazard, provided that cancellation for this reason shall be effective only after prior approval of the Commissioner.

  (b) This section shall not apply to any policy or coverage that has been in effect less than 60 days at the time notice of cancellation is mailed or delivered by the insurer unless it is a renewal policy.

  (c) This section shall not apply to nonrenewal. (Added 1985, No. 265 (Adj. Sess.), § 3; amended 2021, No. 105 (Adj. Sess.), § 224, eff. July 1, 2022.)

• § 4712. Notice of cancellation

  (a) No notice of cancellation of a policy to which section 4711 of this title applies shall be effective unless mailed or delivered by the insurer to the named insured at least 45 days prior to the effective date of cancellation, provided, that where cancellation is for nonpayment of premium, at least 15 days’ notice of cancellation shall be given.

  (b) In all instances, the reason or reasons for cancellation shall accompany or be included in the notice of cancellation. An insurer shall not be held liable in any claim or suit for damages arising solely from the insurer’s compliance with the requirement that the reason for cancellation be specified.

  (c) The Commissioner shall have the authority to waive any provision of subsection (a) or (b) of this section upon the written request of an insurer specifying the reasons therefor.

  (d) This section shall not apply to nonrenewal. (Added 1985, No. 265 (Adj. Sess.), § 3.)

• § 4713. Notice of nonrenewal

  No insurer shall refuse to renew a policy of insurance to which section 4711 of this title applies at its expiration or anniversary if written for a term of more than one year, unless such insurer or its agent shall mail or deliver to the named insured, at the address shown in the policy, at least 45 days’ advance notice of its intention not to renew. This section shall not apply if the insurer has manifested its willingness to renew, or in case of nonpayment of premium, or if the insured fails to pay any advance premium required by the insurer for renewal. However, notwithstanding the failure of an insurer to comply with this section, the policy shall terminate on the effective date of any other policy with respect to property designated in both policies. Renewal of a policy shall not constitute a waiver or estoppel with respect to grounds for cancellation that existed before the effective date of such renewal. (Added 1985, No. 265 (Adj. Sess.), § 3.)

• § 4714. Notice requirements

  When notice required under section 4712 or section 4713 of this title is provided by mail, such notice shall be by certified mail, except that in the case of cancellation for nonpayment of premium, notice shall be by certified mail or certificate of mailing. (Added 1985, No. 265 (Adj. Sess.), § 3; amended 1989, No. 171 (Adj. Sess.), § 8, eff. Sept. 1, 1990.)

• § 4715. Renewal policies

  (a) If the insurer has the necessary information to issue the renewal policy of insurance to which section 4711 of this title applies, the insurer shall confirm in writing at least 45 days prior to expiration its intention to renew the policy and the premium at which the policy is to be renewed. The insured shall have the right to renew the policy at this premium.

  (b) An insurer not complying with subsection (a) of this section shall grant its insured renewal coverage at the rate or premium in effect under the expiring or expired policy or at rates lawfully in effect on the expiration date. This shall be done on a pro rata basis and shall continue for 45 days after the insurer confirms renewal coverage and premium. This subsection shall not apply if the insured accepts the renewal policy.

  (c) An insurer may transfer a policy to an affiliate, as defined by subdivision 3681(1) of this title, upon expiration of the policy without providing notice of nonrenewal, provided that:

  (1) the rating by A. M. Best or a similarly qualified rating service of the affiliate is equal to or better than the transferring insurer;

  (2) there is no diminution in the terms and conditions of coverage; and

  (3) notice of the transfer is provided to the insured at least 45 days prior to the transfer by first-class mail, and in connection with such notice the insurer:

  (A) complies with any requirements of federal law relating to notice of adverse credit determination;

  (B) includes in the notice of transfer a telephone number of the insurer, or the producer, if any, and a toll-free telephone number of the insurer in the case of personal lines policies, where the insured can learn additional information concerning the transfer and the reasons for the transfer;

  (C) complies with the other provisions of this section relating to renewal policies. (Added 1985, No. 265 (Adj. Sess.), § 3; amended 2007, No. 135 (Adj. Sess.), § 3.)

• § 4716. Penalties

  A person who violates a provision of this subchapter may be subject to an administrative penalty of $2,000.00 for each violation. (Added 1995, No. 167 (Adj. Sess.), § 18a.)