reglab/statecodes huggingface dataset:
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 161 - Flexible-rating System; Rating Plans; Tort Reform Refiling Requirements › Section 161.4 - Flexibility bands

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Flex-bands
				  will be periodically reviewed by the superintendent, in light of factors such
				  as:
(1) the extent and nature of
				  competition;
(2) size and
				  significance of the coverage;
(3)
				  level and range of rates and rate changes among insurers;
(4) investment and underwriting experience of
				  insurers;
(5) reinsurance
				  availability;
(6) consumer
				  complaints;
(7) extent of denials
				  and restrictions of coverage;
(8)
				  volume of cancellations and nonrenewals; and
(9) changing conditions in the economic,
				  judicial and social environment.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 161 - Flexible-rating System; Rating Plans; Tort Reform Refiling Requirements › Section 161.6 - Prior approval situations under flex-rating

Current through Register Vol. 46, No. 28, July 10, 2024
Under the flex-rating system, the superintendent's prior
					 approval of rates is required in the following situations:
(a) Where an insurer or a rate service
				  organization seeks to implement a rate change that exceeds the applicable
				  flex-band.
(b) Where an insurer or
				  a rate service organization seeks to implement a rate change that exceeds the
				  maximum permitted variation for an individual insured. (If a filing proposed
				  changes in class relativities which would result in rate changes ranging from,
				  for example, +40 percent to -12 percent for individual insureds in the affected
				  classes, independent of any other rate changes, the filing would require prior
				  approval.)
(c) Where an insurer or
				  a rate service organization seeks to implement a further rate change in the
				  same direction as a rate change that has already been prior-approved in the
				  12-month period immediately preceding the effective date of such proposed
				  change.
(d) Where an insurer or
				  rate service organization seeks to implement a rate change when it has already
				  implemented three rate revisions within the applicable flex-band for a
				  particular market during the 12-month period immediately preceding the
				  effective date of such proposed change. (For example, an insurer implemented a
				  three-percent rate increase on November 15, 1986, an additional five-percent
				  increase on March 1, 1987, and another seven-percent rate increase on June 1,
				  1987, all in regard to the professional liability insurance market. On
				  September 1, 1987, it wishes to implement yet another three-percent rate
				  increase for this same market. Even though the overall rate changes do not
				  exceed the 20-percent flex-band, this last filing would require prior approval,
				  but could be implemented on a file-and-use basis after November 15,
				  1987.)
(e) Where the rate change
				  affecting one component of a rate filing made by an insurer or a rate service
				  organization exceeds its applicable flex-band and thus is subject to prior
				  approval, the entire filing also requires prior approval.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 161 - Flexible-rating System; Rating Plans; Tort Reform Refiling Requirements › Section 161.7 - Filing of rates and the relation and role of rate service organizations

Current through Register Vol. 46, No. 28, July 10, 2024
(a) In connection
				  with adoption by an insurer of rates published by a rate service organization:
(1) Whenever, pursuant to this Part, the
				  superintendent prior approves a rate or loss cost filed by a rate service
				  organization on behalf of its members and subscribers, those members and
				  subscribers using or deviating from the rate service organization rates or loss
				  costs, and which have given the rate service organization appropriate filing
				  authority, may adopt such revisions without further prior approval, provided
				  that such adoption is made effective within 90 days of the effective date of
				  the rate service organization revision.
(2) Insurers that are not members or
				  subscribers of the rate service organization, as well as those members and
				  subscribers which do not elect to adopt the revision within 90 days, may not
				  implement a prior-approved rate service organization rate or loss cost
				  revision, that prior approval notwithstanding, without the specific prior
				  approval of the superintendent.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 161 - Flexible-rating System; Rating Plans; Tort Reform Refiling Requirements › Section 161.9 - Insurers under common control

Current through Register Vol. 46, No. 28, July 10, 2024
In the event an expiring policy is renewed with another
					 insurer under common control, as defined in section 107 (a)(16)  of the Insurance
					 Law, both expiring and renewing insurers under common control shall maintain
					 records, subject to the department's examination, documenting the specific
					 underwriting criteria or other valid business reasons for shifting the
					 policy.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 161 - Flexible-rating System; Rating Plans; Tort Reform Refiling Requirements › Section 161.10 - Policies subject to audit

Current through Register Vol. 46, No. 28, July 10, 2024
(a) An
				  audit to determine final premium for policies under which the initial premium
				  is based on an estimate of the insured's exposure base shall be conducted
				  within 180 days after expiration of such policy, and may not be waived except
				  in the following circumstances:
(1) the total
				  annual premium attributable to the auditable exposure base is not reasonably
				  expected to exceed $1,500;
(2) the
				  policy requires notification to the insurer with the specific identification of
				  any additional exposure units for which coverage is requested (i.e., motor
				  vehicles); or
(3) the policy is a
				  commercial umbrella for which the rate or premium is determined by the
				  application of a factor to the rate or premium of an auditable underlying
				  policy.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 161 - Flexible-rating System; Rating Plans; Tort Reform Refiling Requirements › Section 161.11 - Flex-rating submissions

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Under
				  the flex-rating system, insurers must supply adequate support for all rate
				  changes, whether or not prior approval is required, including class and
				  territorial changes and effects. Although meeting competition is an important
				  motivating factor in rate changes, the dimensions of all such changes must be
				  justified. In the event that a rate change beyond the applicable flex-band is
				  sufficiently justified by an insurer, prior approval will be granted. If the
				  need for rate relief can be demonstrated, a rate filing should be
				  made.
(b) All flex-rating changes
				  must be statistically or judgmentally supported. Wherever possible, the insurer
				  or rate service organization shall provide statistical support for the rate
				  change, including incurred losses and loss adjustment expense data, on reported
				  and unreported and outstanding and paid categories. When data are not
				  available, or volume is so low as to lack credibility, data bearing upon a
				  larger or related market, or upon the experience of other insurers in the same
				  market, should be supplied. If the rate change is based upon judgment, the key
				  factors in forming that judgment must be identified and explained.
(c) The superintendent may request additional
				  information in support of a filing, even if the rate change is within the
				  applicable flex-band. If prior approval is required because a proposed rate
				  change exceeds the flex-band, a properly supported rate filing shall be deemed
				  approved unless disapproved by the superintendent within 30 days, which the
				  superintendent may with cause extend an additional 30 days and with further
				  cause extend an additional 15 days, in accordance with section 2344 (d)  of the Insurance
				  Law.
(d) In order to expedite the
				  flex-rating review process, in filing rate change submissions, insurers must
				  use the appropriate forms prescribed by the superintendent, responding by
				  affirmation of a responsible officer as fully as possible to the
				  interrogatories therein, and shall contain, wherever appropriate and whenever
				  feasible, the following supporting information:
(1) paid and outstanding loss and allocated
				  loss adjustment expense experience, on New York and countrywide
				  bases;
(2) premiums earned,
				  exposure base and type of coverage (e.g., occurrence or claims-made,
				  deductibles, key endorsements and exclusions, liability limits, defense cost
				  treatment);
(3) trend and
				  development factors and indications, including the basis for such factors and
				  indications; and
(4) factors
				  considered, where the rate filed is based upon judgment, in exercising such
				  judgment.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 161 - Flexible-rating System; Rating Plans; Tort Reform Refiling Requirements › Section 161.12 - Individual risks

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Except as
				  set forth in subdivision (b) of this section, individual rate filings for 'a'
				  rated risks, including 'a' rated commercial umbrella policies, shall not be
				  required to be filed with the superintendent. All such information, as
				  described in section
				  161.11  of
				  this Part, shall be retained in the insurer's individual underwriting file for
				  each policy issued, for a period of five years from the date of first issuance
				  of such policy, and shall be available for inspection by the superintendent at
				  any time.
(b) Premium rates subject
				  to prior approval as set forth in section 2305 (b)  of the Insurance
				  Law and section
				  161.4(b)(21) 
				  of this Part shall continue to be submitted in accordance with the requirements
				  of section
				  161.11  of
				  this Part.
(c) Premium and loss
				  statistics on commercial umbrella policies shall be separately maintained by
				  insurers writing such coverage and shall be segregated from statistics on other
				  commercial liability insurance policies. Such statistics shall be reported to
				  the superintendent upon request.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 163 - Flexible Rating For Nonbusiness Automobile Insurance Policies › Section 163.0 - Preamble

Current through Register Vol. 46, No. 28, July 10, 2024
On June 30, 2008, the Governor signed chapter 136 of the
					 Laws of 2008 into law to enhance competition in the nonbusiness motor vehicle
					 market, by adding a new Insurance Law section 2350. Chapter 136 replaces the
					 prior approval system, in effect since 2001 for nonbusiness motor vehicle
					 insurance rates, with a flexible rating (flex-rating) system. The new system,
					 which takes effect on January 1, 2009, is a blend of prior approval and
					 competitive rating. The system allows periodic overall average rate changes up
					 to five percent on a file and use basis, and requires the superintendent's
					 prior approval of overall average rate increases above five percent in any
					 twelve-month period. The new section 2350 requires the superintendent to
					 promulgate rules and regulations implementing the new flex-rating
					 system.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 163 - Flexible Rating For Nonbusiness Automobile Insurance Policies › Section 163.1 - Definitions

Current through Register Vol. 46, No. 28, July 10, 2024
For the purpose of this Part, the following definitions
					 shall apply:
(a) Base rate means the
				  dollar charge for a given coverage for one car year prior to the application of
				  rating factors.
(b) Car year means
				  insuring a motor vehicle for one year.
(c) Coverage means the following motor
				  vehicle insurance coverages:
(1) no-fault
				  (personal injury protection), residual bodily injury liability, property damage
				  liability, statutory uninsured motorists, supplementary uninsured/underinsured
				  motorists, comprehensive, and collision; and
(2) any other motor vehicle
				  coverage.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 163 - Flexible Rating For Nonbusiness Automobile Insurance Policies › Section 163.2 - Rules and standards governing proposed file and use overall average rate changes for nonbusiness automobile insurance policies

Current through Register Vol. 46, No. 28, July 10, 2024
(a) An insurer may implement a proposed
				  overall average rate increase on a file and use basis provided that the change
				  is within the five percent flex-band. If the proposed overall average rate
				  increase exceeds the five percent flex-band, then the insurer shall obtain the
				  superintendent's prior approval before implementing the change.
(b) During any 12-month period, an insurer
				  may implement no more than two overall average rate increases on a file and use
				  basis provided that the cumulative effect of the increases shall be within the
				  five percent flex-band. If a proposed overall average rate increase combined
				  with a prior rate increase implemented within a 12-month period of the proposed
				  effective date of the request exceeds the five percent flex-band, then the
				  insurer shall obtain the superintendent's prior approval before implementing
				  the change. The cumulative effect of two or more rate charges in a 12-month
				  period is derived in a multiplicative manner. For example, if an insurer
				  implements on a file and use basis a 2.9 percent overall average rate increase
				  effective February 1, 2009 and a 2 percent overall average rate increase
				  effective August 1, 2009, then the insurer may not implement another file and
				  use overall average rate increase before February 1, 2010. However, at such
				  time, the insurer may implement an overall average rate increase up to a
				  maximum of 2.9 percent.
(c) An
				  insurer may implement an overall average rate decrease on a file and use basis
				  up to a maximum of five percent at any one time from the overall average rate
				  currently in effect.
(d)
				  Notwithstanding any provision of this Part, an insurer shall not implement an
				  overall average rate increase on a file and use basis subsequent to an overall
				  average rate increase greater than the five percent flex-band that the
				  superintendent has already prior approved in the 12-month period immediately
				  preceding the effective date of the proposed increase.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 163 - Flexible Rating For Nonbusiness Automobile Insurance Policies › Section 163.3 - Rules and standards governing changes in rating factors

Current through Register Vol. 46, No. 28, July 10, 2024
(a) An insurer may adjust its rating factors
				  as part of a file and use change. The insurer shall incorporate the rate impact
				  of these adjustments in the overall average rate change. These changes shall be
				  consistent with the rate change limitations for individual insureds contained
				  in section
				  163.4 
				  of this Part.
(b) An insurer may
				  adjust its rating factors in separate and distinct filings independent of an
				  overall average rate change. If these filings have no overall average rate
				  impact, then the insurer may implement them on a file and use basis and the
				  insurer shall not be precluded from implementing a file and use change for an
				  overall average rate increase within the time periods specified in section
				  163.2(b) 
				  of this Part. For example, the introduction of a physical damage coverage's
				  model year rating factor for a new model year that is consistent with an
				  existing model year rating rule is not subject to prior approval. These filings
				  shall be consistent with the rate change limitations for individual insureds
				  contained in section
				  163.4 
				  of this Part.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 163 - Flexible Rating For Nonbusiness Automobile Insurance Policies › Section 163.4 - Rules and standards governing nonbusiness automobile insurance policy premium change limitations for individual insureds as a consequence of file and use filings

Current through Register Vol. 46, No. 28, July 10, 2024
(a) In any
				  12-month period, the total premium on any nonbusiness automobile insurance
				  policy shall not change by more than 30 percent as a consequence of file and
				  use filings. An insurer shall meet this requirement by adjusting the base rates
				  or rating factors in the file and use filing. An insurer shall not cap an
				  individual insured's premium as a final step. If a filing produces an annual
				  total premium change on an insurance policy that exceeds the 30 percent
				  maximum, then the filing shall be subject to the superintendent's prior
				  approval.
(b) Changes in the
				  premium of a nonbusiness automobile insurance policy as a consequence of
				  changes in an insured's rating characteristics or changes in the coverages or
				  the amounts of coverage being purchased shall not be considered within the
				  calculation of the individual insured premium limitation contained in
				  subdivision (a) of this section. For example, if an insured has an accident
				  during the prior year and incurs a 25 percent surcharge or an uptier, then this
				  25 percent surcharge/uptier shall not be considered within the individual
				  premium limitation. Similarly, if a change in the age of an insured results in
				  the application of a different classification factor, the rate effect
				  attributable to that classification change shall also not be considered within
				  the individual premium limitation.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 163 - Flexible Rating For Nonbusiness Automobile Insurance Policies › Section 163.5 - Support for filings submitted on a file and use basis

Current through Register Vol. 46, No. 28, July 10, 2024
An insurer shall include support for all proposed changes
					 specified in each filing submitted on a file and use basis. The support shall
					 include the specific reasons for the proposed changes, and any other material
					 information required by section 2304  of the Insurance Law (e.g., the
					 underlying data upon which the change is based). Filings submitted on a file
					 and use basis shall be subject to the superintendent's review in accordance
					 with article 23 of the Insurance Law.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 163 - Flexible Rating For Nonbusiness Automobile Insurance Policies › Section 163.6 - Support for filings subject to prior approval

Current through Register Vol. 46, No. 28, July 10, 2024
(a) An insurer shall include support for all
				  proposed changes specified in each filing subject to the superintendent's prior
				  approval. The support shall include the specific reasons for the proposed
				  changes, and any other material information as required by section 2304  of the Insurance Law.
(b) Subject to all other requirements of this
				  Part and article 23 of the Insurance Law, an insurer may adjust rating factors
				  associated with territories or classifications as part of its file and use
				  filing, provided that there are no changes to the underlying definitions which
				  remain subject to the superintendent's prior approval pursuant to article 23 of
				  the Insurance Law. Examples of rating classifications include discounts,
				  surcharges, merit rating plans or multi-tier programs.
(c) If any one element of a filing is subject
				  to prior approval, then the entire filing shall be subject to prior
				  approval.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter D - Rate Regulation And Promotion Of Competition › Part 163 - Flexible Rating For Nonbusiness Automobile Insurance Policies › Section 163.7 - Notification to insureds of rate changes

Current through Register Vol. 46, No. 28, July 10, 2024
(a) An insurer shall mail or deliver to every
				  named insured affected by a rate increase due to a flex-band rate filing, at
				  least 30 but not more than 60 days in advance of the end of the policy period,
				  a notice of its intention to change the insured's rate. The notice shall set
				  forth the specific reason or reasons for the rate change.
(b) An insurer shall not implement a rate
				  increase due to a flex-band rate filing unless the insurer has mailed or
				  delivered to the named insured affected by the rate increase the notice
				  required by subdivision (a) of this section.
(c) An insurer shall submit a flex-band rate
				  filing to the superintendent in a timely manner. An insurer shall not submit a
				  flex-band rate filing to the superintendent after insureds have received
				  notification pursuant to subdivision (a) of this section.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter E - Methodologies For Measuring The Profitability Of Property And Liability Insurance Lines › Part 165 - Methodologies For Measuring The Profitability Of Property And Liability Insurance Lines Written In New York State › Section 165.1 - Preamble

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Section 2323  of the Insurance Law directs the
				  Superintendent of Financial Services, by regulation, to establish a method for
				  determining and reporting profitability for each kind of property and liability
				  insurance. Specifically, subsections (a) and (b) of section 2323 provide as
				  follows:
"(a) The superintendent shall by
				  regulation establish a method for determining profitability, from whatever
				  source such profits are derived, and rates of return on net worth, assets and
				  earned premiums, with respect to each kind of insurance subject to this
				  article, based on reasonable and uniform assumptions, including assumptions as
				  to (1) amounts of net worth attributable to such kinds of insurance, (2) assets
				  available for investment generated by such kinds of insurance, (3) federal
				  income taxes, and (4) average earnings on insurers' investments.
(b) The regulation shall require insurers
				  annually to report to the superintendent, who will make these reports available
				  to the public, concerning such profitability and rates of
				  return."
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter E - Methodologies For Measuring The Profitability Of Property And Liability Insurance Lines › Part 165 - Methodologies For Measuring The Profitability Of Property And Liability Insurance Lines Written In New York State › Section 165.2 - Profit measurement definitions and tables

Current through Register Vol. 46, No. 28, July 10, 2024
(a)
Abbreviations.
(1) Abbreviations used in this Part include:
(i)
P.
= page
(ii)
C.
= column
(iii)
L.
= line
(iv)
Pt.
= part
(v)
Exh.
= exhibit
(vi)
IEE
= Insurance expense
				  exhibit
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter E - Methodologies For Measuring The Profitability Of Property And Liability Insurance Lines › Part 165 - Methodologies For Measuring The Profitability Of Property And Liability Insurance Lines Written In New York State › Section 165.3 - Profit measurement reporting and methodology

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Profit reporting.
(1) All insurance companies are required to
				  report their New York profits commencing with the business of 1974, pursuant to
				  the following format for each of the following kinds of insurance:
Fire
Allied lines
Homeowners multiple peril
Commercial multiple peril
Inland marine
Workmen's compensation
Liability other than auto (B.I.)
Liability other than auto (P.D.)
Auto no-fault and liability (B.I.)
Auto liability (P.D.)
Auto collision
Auto fire, theft and comprehensive
Aircraft (all perils)
Fidelity
Surety
Glass
Burglary and theft
Boiler and machinery
Credit
(2) The reports are to be filed in triplicate
				  no later than April 1st of the year following and shall be presented on forms
				  to be supplied by the Insurance Department.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-1 - General Rules › Section 166-1.0 - Introduction

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Section 2329 of
					 the New York State Insurance Law, as amended, requires insurers to return to
					 consumers any "excess profits" on automobile insurance written in New York
					 State for the period specified in section 2329.
(b) This regulation presents a reasonably
					 simple, practical, and conceptually defensible approach to the determination of
					 excess profits which takes into account the interests of all
					 concerned--comsumers, insurers, regulators and investors.
(c) To comply with the statute, the "excess"
					 point must be set at a level which permits an economically acceptable return
					 over many years, since no retrospective recovery is possible following years of
					 poor results. The statute states: "An excess profit shall be... so far above a
					 reasonable profit as to amount to an excess profit (taking into consideration
					 the fact that losses or profits below a reasonable average profit will not be
					 recouped from such policyholders)."
(d) This regulation relies to a considerable
					 extent on the work of Professor C. Arthur Williams of the University of
					 Minnesota College of Business Administration, who was engaged as a consultant
					 to the department to develop a methodology for implementing this
					 statute.
(e) The rules for
					 measuring profitability and for determining excess profits are in sections
					 166-1.1
					 through
					 166-1.7 
					 of this Subpart.
(f) See section
					 166-2.0 
					 of this Part for discussion of this section.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-1 - General Rules › Section 166-1.1 - Reasonable rate of return

Current through Register Vol. 46, No. 28, July 10, 2024
(a)
					 The reasonable rate of return shall be 18 percent.
(b) The department accepts its consultant's
					 methodology, and the resulting reasonable rate of return of 18 percent. The
					 methodology appropriately measures rates of return by line of business in a
					 single state, as the law requires, and, since it is based on an analysis of
					 prior years' results, it is suitable for use in a retrospective review of
					 profitability.
(c) See section
					 166-2.1 
					 of this Part for discussion of this section.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-1 - General Rules › Section 166-1.2 - Aggregate industry data used

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Aggregate industry data shall be used in
					 testing profitability, rather than individual- insurer results.
(b) The aggregate industry data approach has
					 been adopted to minimize random fluctuations, to avoid unfair treatment of
					 insurers with differing financial makeup, and to permit the selection of one
					 relatively low and logically defensible excess profit point.
(c) See section
					 166-2.2 
					 of this Part for discussion of this section.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-1 - General Rules › Section 166-1.3 - Profitability data averaged

Current through Register Vol. 46, No. 28, July 10, 2024
(a)
					 Profitability data shall be averaged over a six-year period.
(b) In measuring profitability from all
					 sources of income, including capital gains, investment income and underwriting
					 income, it is desirable to use a base of several years in order to minimize
					 volatility in the results. The business cycle in insurance is believed to be
					 approximately six years in length. While little can be deduced from the
					 volatile results of a single year, an excess profit over a six-year period
					 would be good evidence that the forces of competition have been insufficient to
					 exercise a natural control over the prices and profits of insurers.
(c) See section
					 166-2.3 
					 of this Part for discussion of this section.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-1 - General Rules › Section 166-1.4 - Measurement of profitability

Current through Register Vol. 46, No. 28, July 10, 2024
(a)
					 Profitability shall be measured by relating profits to net worth rather than to
					 sales or total capital.
(b) Section 2323  of the Insurance Law states that rates
					 of return on net worth, assets and premiums earned shall be calculated. Section
					 2329 requires that an excess profit be defined in terms of return on net
					 worth.
(c) See section
					 166-2.4 
					 of this Part for discussion of this section.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-1 - General Rules › Section 166-1.5 - Excess profit threshold

Current through Register Vol. 46, No. 28, July 10, 2024
(a) The
					 excess profit threshold shall be 21 percent.
(b) The department has followed the general
					 approach of its consultant's statistical analysis but, on a judgment basis, has
					 modified the excess profit threshold of 22.4 percent that was recommended by
					 the consultant. As explained below, the department has selected a lower excess
					 profit threshold of 21 percent, rounded to the nearest full percentage, which
					 is based on net worth, the assumption of the normal distribution, and a
					 probability level which differs from that selected by the consultant.
(c) See section
					 166-2.5 
					 of this Part for discussion of this section.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-1 - General Rules › Section 166-1.6 - Annual rate formulas

Current through Register Vol. 46, No. 28, July 10, 2024
The formulas which shall be used to calculate the
						tindustrywide annual rate of return on motor vehicle insurance written in New
						York for the period 1974-1983 follow:
(a) RETURN ON NETWORTH
					 NY= (INCOME NY/SURPLUS
					 NY- (.5 x INCOME NY))
(b) INCOME NY=
(UNDERWRITING GAIN RATIO* NYx
						EARNED PREMIUM CTY)
+ INVESTMENT GAIN CTY
- DIVIDENDS TO POLICYHOLDERS
						CTY
- FEDERAL TAX CTY
- ADJUSTED FEDERAL TAX
(c) ADJUSTED FEDERAL TAX =
(.46 x UNDERWRITNG GAIN RATIO* NYx
						EARNED PREMIUM CTY)
- (.46) x (UNDERWRITING GAIN
						CTY)
(d) SURPLUS NY=
					 SURPLUS CTY
+ (1 - .46) x (UNDERWRITING GAIN RATIO*
						NYx EARNED PREMIUM CTY)
- (.46) x (UNDERWRITING GAIN
						CTY)
(e) In the formulas above:
(1) NY = New York (from N.Y. Ins. Dept. Loss
					 and Expense Ratios)
(2) CTY =
					 Countrywide All Lines (from Best's Aggregates and Averages)
(3) .46 = Assumed Federal tax rate
* for Automobile (Motor Vehicle) Insurance only.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-1 - General Rules › Section 166-1.7 - Allocation of excess profits

Current through Register Vol. 46, No. 28, July 10, 2024
(a)
					 Annually, the Insurance Department shall determine the total amount of excess
					 profit dollars to be distributed, in accordance with the following procedure: A
					 six-year excess profit shall equal the six-year average of the annual rates of
					 return on net worth (computed in accordance with section 166- 1.6 of this
					 Subpart), minus 21.0 percent. The resulting figure, if positive, shall be
					 divided by the average countrywide earned premium-to-net worth ratio of the
					 six-year period, thus stating the excess profit as a percentage of premiums.
					 This percentage shall then be multiplied by the six-year total direct earned
					 premiums for New York motor vehicle insurance, to produce the total dollar
					 amount to be returned to New York policyholders.
(b) A group or fleet of insurers shall be
					 deemed, with respect to this regulation, to be a single insurer.
(c) Insurers with an overall six-year average
					 rate of return of 21 percent or less (computed using the method described in
					 subdivision (d) of this section) shall be exempted from returning excess
					 profits.
(d) Insurers not subject
					 to subdivision (c) of this section shall have their share of total New York
					 excess profits computed in accordance with the following procedure:
(1) Each insurer's annual return on net worth
					 shall be computed using the formulas and the industrywide values from section
					 166-1.6  of
					 this Subpart, except that:
(i) the
					 Underwriting Gain Ratio NYshall be replaced by the
					 individual insurer's comparable Underwriting Gain Ratio (derived from New
					 York's Loss and Expense Ratios); and
(ii) the Dividends to Policyholders
					 CTY shall be replaced by the ratio of the individual
					 insurer's total dividends paid on New York motor vehicle business to its New
					 York earned premiums for the motor vehicle lines, multiplied by industrywide
					 Earned Premium CTY. Individual insurer New York dividend
					 and earned premium data will be taken from page 14 of the insurer's annual
					 statement; industrywide Earned Premium CTY will be the
					 value used in section
					 166-1.6  of
					 this Subpart (as derived from Best's Aggregates and Averages).
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-2 - Discussion Of General Rules › Section 166-2.2 - Discussion of aggregate industry data

Current through Register Vol. 46, No. 28, July 10, 2024
(a) There are serious technical problems in
					 setting an excess profit threshold which is reasonable for each individual
					 insurer. Premium volume, leverage, investment and underwriting strategy, and
					 chance all contribute to the fluctuations in individual-insurer results.
					 Professor Williams had proposed, in the first draft of his report, that
					 companies be classified according to premium volume, with excess points varying
					 by premium size. This method would not have addressed the other causes of
					 individual fluctuations. These points would also, by necessity, have been quite
					 high in order to allow for normal variation. In particular, these excess profit
					 thresholds could have been astronomical for the small insurer, whose results
					 could be expected to show extreme fluctuations, even when averaged over six
					 years. The method would have been unnecessarily confusing to the public, since
					 there would be an array of excess profit percentages (rather than a single
					 figure), and an insured might well fail to understand why his or her company
					 should be allowed a higher return than a larger company.
(b) Therefore, the aggregate industry data
					 approach has been adopted, to minimize random fluctuations, to avoid unfair
					 treatment of insurers with differing financial make-up, and to permit the
					 selection of one relatively low and logically defensible excess profit
					 point.
(c) The department plans,
					 nevertheless, to examine individual insurer results and to utilize them in
					 several ways. First, any industrywide excess profits will be distributed in
					 part in accordance with insurers' individual rates of return. Second, the
					 department intends to continue monitoring each insurer's experience
					 independently of this regulation to assure that unusually high profits of
					 individual insurers with credible statistics are returned to consumers whenever
					 they occur.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-2 - Discussion Of General Rules › Section 166-2.3 - Discussion of profitability data averaging

Current through Register Vol. 46, No. 28, July 10, 2024
(a) To assure as much stability as possible
					 in the excess profit calculation, six-year average rates of return are used.
					 Although no one can explain exactly what causes results to become better or
					 worse, a reasonable approximation of the length of time for completion of the
					 business cycle in insurance is six years.[FN5]
(b) Arguments have been made for a three-year
					 profitability test, and even for a one-year test. The selection of the number
					 of years to be tested may not, in the long run, affect the amount of excess
					 profits, when a technically sound formula is used. The use of a six-year
					 average generates a relatively modest margin above the reasonable point before
					 excess profits are declared. In general, the shorter the time period, the
					 greater the fluctuation in the data, and thus the larger the margin required
					 for the excess point. If, for example, the department had chosen three years,
					 it would have had to set the excess profit threshold at a significantly higher
					 point, to overcome the much greater variability in the results. In addition,
					 too short a time period risks violating the statutory admonition to take into
					 account that losses may not be recouped.
[FN5] Williams, pp. 14a, 48b.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-2 - Discussion Of General Rules › Section 166-2.4 - Discussion of measurement of profitability

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Some theoreticians favor return on
					 assets, and others favor return on earned premiums, as the proper method for
					 reflecting the profitability of the insurance business. Each of these measures
					 gives valuable information. Both assets and earned premiums are easily
					 calculated, while net worth is more difficult to estimate. However, return on
					 net worth is generally considered to be the measure most comparable to
					 profitability standards used in other industries.
(b) The department's consultant estimates net
					 worth by adjusting countrywide surplus for New York's underwriting results, and
					 subtracting one half of income (again, adjusted for New York's underwriting
					 results). This is a relatively simple formula, and provides a reasonable
					 approximation of true net worth. However, there are numerous adjustments which
					 arguably could be made to refine the formula. A more complex formula might be
					 adopted as part of the department's periodic revision of this regulation, if
					 such formula were demonstrably more accurate than the present
					 calculation.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-2 - Discussion Of General Rules › Section 166-2.7 - Discussion of allocation of excess profits

Current through Register Vol. 46, No. 28, July 10, 2024
(a) At the October 1982 hearing, several
					 speakers commented that some companies might be unfairly required to
					 participate in a refund of excess profits. The proposed regulation required
					 that insurers with combined ratios (of underwriting losses and expenses to
					 premiums) of up to 115 percent might have to issue refunds or credits. Although
					 the department believes that it is not necessary to earn an underwriting profit
					 in order to have an excess profit, there is some merit in the contention that
					 too high a refund point might result in some insurers realizing less than a
					 reasonable profit after excess profits are distributed. The refund point will
					 be modified to an overall return on net worth of 21 percent, so that the
					 distribution will be made from earnings above the excess point.
(b) Several speakers at the hearing expressed
					 concern over the procedural difficulty and expense of issuing excess profit
					 refunds or credits. This department wholeheartedly favors an efficient
					 procedure for carrying out the statutory mandate. However, it is irrelevant to
					 argue that inconvenience or expense are appropriate reasons for ignoring high
					 insurer profits.
New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter V - Rates And Rating Organizations › Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance › Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance › Subpart 166-2 - Discussion Of General Rules › Section 166-2.8 - Discussion of revision procedures

Current through Register Vol. 46, No. 28, July 10, 2024
(a) At the October 5, 1982 hearing, several
					 speakers mentioned that the proposed regulation was not specific about the
					 procedures to be used for updating and revising the methodology. Some vagueness
					 is inevitable since the methodology should be responsive to changes in the
					 economic and business climate, and these cannot be dealt with until they occur.
					 Such a change might conceivably include modification of the current method of
					 selecting the reasonable and excess points. However, it is the department's
					 plan to recalculate the reasonable and excess profit points, according to
					 Professor Williams' methodology, as each additional year of data becomes
					 available. The department departed somewhat from that methodology in the
					 proposed regulation, and can be expected to follow a parallel procedure in the
					 future. Substantive changes in methodology are not anticipated, although
					 changes in the reasonable and excess figures may occur.
(b) Each year, the department will have
					 available at its offices the updated calculations and the selected figures for
					 the ensuing year. Technical adjustments in the formulas may also be included
					 (for example, a more refined treatment of taxes, dividends or net worth might
					 be developed within the general framework of this regulation).