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 161.5 - Flex-rating rules and standards

Current through Register Vol. 46, No. 28, July 10, 2024
For those commercial risk, professional liability and
					 public entity insurance markets subject to (and not exempt from) flex-rating,
					 the following rules and standards shall govern:
(a) To determine whether a rate change falls
				  within or beyond an applicable flex-band, the insurer should compare the
				  resulting rate level (current rate level plus rate change) as of its proposed
				  effective date with its pivot rate level, where the initial pivot rate level
				  has been adjusted to reflect tort reform pursuant to section
				  161.2 
				  of this Part.
(b) If the percentage
				  difference between the resulting rate and that pivot rate is less than or equal
				  to the applicable flex-band percentage, then the rate change may become
				  effective on a file-and-use basis. However, if the percentage difference is
				  greater than that band, then prior approval must be sought and received prior
				  to implementation of any part of the proposed rate increase.
(c) In addition to overall rate level
				  increases or decreases that may be made on a file-and-use basis within a
				  flex-band, the rate (except for 'a' rated risks) may be adjusted for an
				  individual insured in a particular market based upon appropriate changes in
				  class (where such class or subclass does not itself constitute a nonexempt
				  market subject to flex-rating) relativities and territorial relativities,
				  increased limits factors, deductible relativity factors, or similar factors.
				  (For example, the public school liability market, subject to a +-15-percent
				  flex-band in terms of the overall rate level, consists of elementary,
				  intermediate and high school subclasses in different territories. Given that
				  these subclasses do not themselves constitute this nonexempt market, class and
				  territorial adjustments may be made to reflect appropriate relativities, so
				  long as total adjustments for both class and territory sum back to the overall
				  rate level for public schools.)
(d)
				  The rate for any individual insured in a particular market may not, without
				  prior approval, be increased or decreased by more than plus (+) or minus (-) 20
				  percent beyond the overall rate level change, as a combined result of all rate
				  adjustments permitted by subdivision (c) of this section, except that this
				  limitation shall not apply to individual premium or rate changes resulting from
				  the application of rating plans conforming to the rules and standards set forth
				  in section
				  161.8 
				  of this Part. (For example, the total upward or downward rate adjustment due to
				  class and territorial relativities, when combined with adjustments for
				  increased limits and deductibles, cannot without prior approval exceed 20
				  percent beyond the overall rate level change for any individual insured in the
				  public school liability market or any other market, while none of these
				  adjustments may be made in connection with an 'a' rated risk, such as a
				  fireworks factory. Thus if an insurer files a rate revision of +10 percent for
				  a market subject to a 15 percent flex-band and, in addition, wishes to revise
				  its class or territorial relativities, the maximum permitted rate increase
				  affecting any individual insured would be: (1.10 x 1.20) = +32%.)
(e) In the event that more than one flex-band
				  would apply to a given type of risk for the same coverage, the narrowest or
				  most specific applicable flex-band governs. If rating can be compartmentalized
				  for different coverages for the same type of risk, then that risk may be
				  subject to more than one flex-band. (For example, a day-care center is included
				  in owners, landlords and tenants liability but, rather than the broader and
				  more general +-15-percent flex-band, the narrower and more specific
				  +-10-percent flex-band for child care liability governs. Commercial risk
				  insurance policies issued to plumbers illustrate separately rated coverage
				  components subject to different flex-bands of +-20 percent applicable to
				  "completed operations liability" and +-15 percent applicable to "other
				  manufacturers and contractors liability".)
(f) A flex-band applies to coverages in the
				  particular market for which there are manual rates. Any 'a' rated coverages in
				  such market are exempt from flex-rating until renewal, when a +-30-percent
				  flex-band becomes applicable to those 'a' rated coverages. (For example,
				  municipal liability consists of multiple coverages, where some of these
				  coverages are 'a' rated while there are manual rates for the rest.)
(g) Following a rate change which required
				  and received prior approval, no further rate change in the same direction
				  within an applicable flex-band can be made by the insurer with respect to that
				  market for a 12-month period after the effective date of such approval. If,
				  notwithstanding this limitation, an insurer determines that it requires such a
				  further rate change, it may seek the superintendent's prior approval. The pivot
				  rate adjusted pursuant to section
				  161.2 
				  of this Part for tort reform savings will not be considered a prior-approved
				  rate for purposes of this section. Rate changes in the direction opposite to
				  the prior-approved rate change will be permitted on a file-and-use basis,
				  within the applicable flex-band, with the approved rate serving as the new
				  pivot rate level.
(h) Rate changes
				  within an applicable flex-band may be implemented on a file-and-use basis by an
				  insurer in regard to a particular market no more than three times during any
				  12-month period (other than pursuant to the section
				  161.2 
				  tort reform refiling requirement), unless prior approval is sought and granted,
				  subject to the provisions of section 3426  of the Insurance Law which, in
				  general, permits premium increases during the 12-month required policy period
				  for a commercial risk, professional liability and public entity insurance
				  policy only commensurate with subsequent additional insured value pursuant to
				  the policy or at the insured's request.
(i) In connection with commercial multiple
				  peril insurance policies, component coverages must be rated separately and the
				  statewide rate level change shall be based only on the premiums generated by
				  the coverages within nonexempt markets subject to flex-rating, including the
				  effect of any changes in the package modifiers used in the rating of the
				  policy. (For example, if a filing proposed a 50-percent increase in the rates
				  for the liability portion of commercial multiple peril policies, and the
				  overall effect is only 10 percent because there were no changes [or decreases]
				  in the rate levels of the other coverages within exempt markets, the rate
				  change would exceed the applicable flex-band, and the entire filing would
				  require prior approval. Similarly, if a filing proposed a 15-percent increase
				  in the rates for the liability portion of commercial multiple peril policies,
				  and a change in the package modifier from 0.70 to 0.90, the filing would exceed
				  the 20-percent flex-band, and the filing would require prior
				  approval.)
(j) Policyholders'
				  dividends issued from earned surplus will not be considered rate decreases for
				  purposes of this Part.
(k) Filings
				  that consist solely of rule changes without pricing or rating impact shall not
				  be considered rate filings for purposes of this Part.
(l) In the event that the rate change
				  affecting one component of a rate filing exceeds its applicable flex-band,
				  making that rate change subject to prior approval, the entire rate filing shall
				  also become subject to prior approval.
(m) Pivot rate levels shall be subject to
				  review and adjustment by the department in accordance with section 2344 (f)  of the Insurance
				  Law. All commercial risk, professional liability and public entity insurance
				  rate increases filed with the department between June 1, 1986 and the effective
				  date of this Part [September 10, 1986] will be reviewed to assure that they are
				  adequately supported and otherwise meet the standards of the Insurance Law.
				  Commercial risk, professional liability and public entity insurance rate
				  increases filed with the department during the period June 1, 1985 through May
				  31, 1986 will be reviewed on a selective basis, focusing upon those markets
				  which received the sharpest increases and affect the largest number of
				  insureds.
(n) In order to establish
				  appropriate pivot rate levels, commercial risk, professional liability and
				  public entity insurance rates will also be subject to review and adjustment by
				  the department in connection with:
(1) rates
				  for a new program sought to be implemented by an insurer or a rate service
				  organization;
(2) rates filed by an
				  insurer or a rate service organization which did not previously have rates in
				  effect; and
(3) rates filed by a
				  newly licensed insurer.
Such rates shall be deemed the pivot rate levels as if they
					 had been in effect for the 12 months prior to their effective date.