California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 1.6 - Advisory Organizations, Manuals Approval › Article 1 - Submission and Approval Procedures, Fees › Section 2199.2.3 - Findings

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
For purposes of these regulations, the Commissioner finds
					 that:
(a) According to custom and
				  usage in the insurance industry, a manual is a publication distributed by an
				  insurer to its agents and policy issuance personnel for purposes of instructing
				  them on how to assemble an insurance policy. Typically, such manuals include
				  one or more types of material such as policy writing rules, rating plans,
				  classification codes, and descriptions, territory codes and descriptions, rules
				  that include factors and relativities, prospective cost information or
				  rates.
(b) Advisory organization
				  manuals made available to insurers in many other states include prospective
				  loss costs.
(c) Insurance Code
				  section
				  1855.5
				  authorizes advisory organizations to prepare, develop and file manuals, but
				  prohibits advisory organizations from issuing any manual that contains final
				  rates.
(d) Insurance Code section
				  1855.5
				  requires that the Commissioner approve only those advisory organization manuals
				  that are found by the Commissioner to contemplate activities and practices that
				  are not unfair, unreasonable or otherwise inconsistent with the provisions of
				  the Insurance Code.
(e) Under
				  Insurance Code section
				  1855.5 as
				  well as California case law, the Commissioner has the authority to determine
				  and regulate the competitive effect of the advisory organization manuals within
				  the context of insurance practices that may be unfair, unreasonable or
				  otherwise in violation of the insurance code.
(f) Where there is a large number of
				  insurers, an unconcentrated market structure, shifting market shares, or a real
				  potential for the entry and exit of insurers, the property/casualty insurance
				  markets in the United States and California for any line of insurance is likely
				  to be competitively structured and competitive.
(g) In other states, evidence of price
				  differentials in the form of filed statewide rate levels of insurers that use
				  advisory organization manuals in competitively structured insurance markets
				  indicates that the availability of advisory organization manuals has not, to
				  date, adversely affected competition.
(h) The law in other states, including the
				  law regarding the applicability of antitrust law to the business of insurance,
				  may or may not be the same as it is in California.
(i) The availability of advisory organization
				  manuals usually provides economies of scale in the production of actuarial
				  information and encourages the potential participation by small insurers as
				  well as entry by insurers without prior experience or expertise in insurance
				  markets. Because these economies of scale and potential participation promote
				  competitive insurance markets, they should be encouraged, unless on balance
				  they are found to have an anti-competitive effect.
1. New
					 section filed 6-26-96; operative 7-26-96 (Register 96, No. 26).
2.
					 Change without regulatory effect amending subsection (d) filed 7-14-2021
					 pursuant to section
					 100, title 1, California Code of
					 Regulations (Register 2021, No. 29). Filing deadline specified in Government
					 Code section
					 11349.3(a)
					 extended 60 calendar days pursuant to Executive Order
					 N-40-20.
Note: Authority cited: Section
						12921,
						Insurance Code; Calfarm Insurance Company et al. v. Deukmejian, et al. 48 Cal.
						3d 805, 824 (1989); and 20th Century v. Garamendi, 8 Cal. 4th 216 (1994).
						Reference, Sections
						1855.1
						through
						1855.5,
						Insurance Code.