North Dakota Administrative Code › Title 45 - Insurance, Commissioner of › Article 45-05 - Property and Casualty Insurance › Chapter 45-05-06 - Risk Modification Plan Regulation › Section 45-05-06-03 - Rate modification plans

Current through Supplement No. 393, July, 2024
Rate modification plans, justified according to the
				  standards herein, are allowed by the insurance code. However, the commissioner
				  has determined that the use of unjustified rate modification plans is not
				  reasonable, is not objective, and is unfairly discriminatory. Therefore, the
				  use of unjustified rate modification plans in rating of commercial property and
				  casualty insurance risks located in North Dakota is prohibited.
The following elements must be considered in determining
				  whether or not a rate modification plan, or its use, is justified:
1. Rate modification plans must be used to
				acknowledge variance in risk characteristics and not merely to gain competitive
				advantage or for any other purpose.
2. Rate modification plans must be based only
				on rating characteristics not already reflected in the manual rates. The plans
				must clearly indicate the objective criteria to be used.
3. Individual underwriting files must contain
				the specific criteria and document the particular circumstances of the risk
				that support each debit or credit. This documentation must exist in the
				individually rated risk file to enable the commissioner to verify compliance
				with this chapter. Documentation may include, but is not limited to, inspection
				reports, photographs, agent observations and findings, insured's formal safety
				plans, premises evaluations, and narrative reports covering other aspects of
				the risk. Intentional or willful misclassification of a risk constitutes a
				modification without justification.
4. Any rate modification plan designed to be
				applied simultaneously to property, liability, or vehicle coverage must contain
				reasonable factors that give appropriate recognition to the distinct exposures
				involved in such coverages.
5.
				Once a company has filed a rate modification plan, its use is mandatory. The
				plan must be applied uniformly in a nondiscriminatory manner for all eligible
				classes of risk.
6. The
				application of any rate modification plan may not result in debits or credits
				that exceed twenty-five percent. Modifications generated by experience rating
				plans or based upon company expense experience are not subject to this
				limitation.
7. Once a rate
				modification plan has been applied to a risk and a credit or debit established,
				no change in the established credit or debit can be made without appropriate
				justification and documentation.
8. Any rate modification plan must provide
				that when a risk is rated below average (debited) an insured or applicant, upon
				request, will be advised by the insurer of the factors which resulted in the
				adverse rating so that the insured or applicant will be fairly apprised of any
				corrective action that might be appropriate with respect to the insurance risk.
General Authority: NDCC 28-32-02
Law Implemented: NDCC 26.1-25,
					 26.1-30-19