Pennsylvania Code › Title 31 - INSURANCE › Part VII - Property, Fire and Casualty Insurance › Chapter 120 - LOSS COSTS ADJUSTMENT FILINGS-STATEMENT OF POLICY › Section 120.4 - Insurer action

Current through Register Vol. 54, No. 28, July 13, 2024
(a) Each insurer
				shall individually determine the final rates it will file for approval, for
				filings submitted before December 1, 1994, and the effective date of rate
				changes. Individual insurer loss costs adjustment filings are not subject to
				approval after December 1, 1994, unless they are found in violation of sections
				704 and 711 of the act ( ___P. ___S ).
This will be the result of the independent company decision
				  making process of each insurer. For the initial loss costs adjustment filing,
				  the Commissioner " . . . shall publish an aggregate factor reflecting the
				  experience of stock insurance companies and including the effect of applicable
				  premium discount programs, for loss adjustment, or claim management expenses,
				  other operating expenses, assessments, taxes and profit or contingency
				  allowances which all insurers may use in the foregoing initial filings. Any
				  insurer filing which uses an aggregate factor not in excess of the appropriate
				  foregoing factor shall be deemed approved upon filing for purposes of this
				  section." (See section 24(5) of the act of July 2, 1993 (P. L.___ , No. 44).)
				  An insurer shall submit its filing for the Commissioner's aggregate factor in
				  writing to the Department in duplicate with a stamped, self-addressed return
				  envelope. The Department will acknowledge receipt of the filing, and send a
				  copy of the acknowledgment to the company. If an insurer's loss costs
				  adjustment filing is disapproved, under section 705(b) of the act ( ___P.
				  ___S), it " . . . may not make or issue a contract or policy of insurance of
				  the kind to which this article applies, except in accordance with the filings
				  which are in effect for the insurer as provided in this article." This
				  provision would require an insurer to use the rates approved as of December
				  1992 until its initial loss costs adjustment filing is
				  approved.
(b) If an insurer
				that is a member, subscriber or service purchaser of a rating organization
				decides to use the prospective loss costs in the approved reference filing in
				support of its own initial filing, the insurer should make a filing for
				approval using the reference filing adoption form. The insurer's rates are the
				combination of the prospective loss costs and the loss costs adjustments
				contained in the reference filing adoption form, which should be completed even
				if adopting the aggregate factor. After the approval of an initial filing, the
				insurer shall notify the Department if it chooses not to use an approved rating
				organization loss costs filing.
(c)
				Insurers may file modifications of the prospective loss costs in the approved
				reference filing based on their own anticipated experience. Supporting
				documentation will be required for modifications, upwards or downwards, of the
				prospective loss costs in the approved reference filing.
Examples
The "summary of supporting information form," this refers to
				  the forms in Appendix A, contains a reference to examples of how to apply a
				  company's loss costs modification factor (this and other terms that are a part
				  of Appendix A are defined in the context with which they are used on the forms)
				  to the rating organization's prospective loss costs. Two examples
				  follow:
Example 1
: Loss costs modification factor:
				  If your company's loss costs modification is -10%, a factor of .90 (1.000 -
				  .100) should be used.
Example 2
: Loss costs modification factor:
				  If your company's loss costs modification is +15%, a factor of 1.15 (1.000 +
				  .150) should be used.
(d)
				Insurers may vary expense loads by individual classification or grouping.
				Insurers may use variable or fixed expense loads or a combination of these to
				establish their expense loadings. The loss costs methodology shall be filed
				with the Department. Insurers are required to file data in accordance with the
				uniform statistical plan approved by the Commissioner. Insurers may offer
				premium discount plans that shall be filed with the Department. For the purpose
				of the initial filing, insurers may choose to adopt the premium discount plan
				approved and currently on file with the Department.
(e) At a minimum, the Department will require
				the following data to support the loss costs adjustment filing by insurers: an
				explanation of the derivation of expense loadings including documentation of
				data sources relied on to derive the actual loadings and documentation showing
				how the company arrived at its underwriting profit loading and how it reflected
				investment income in the derivation of the profit loading. In addition, an
				exhibit showing the company's estimated payout pattern including data and
				methodology that documents its derivation and an exhibit showing how the loss
				adjustment expense factor was derived using historical state specific and
				countrywide data will be required. Loss constants should be filed as a separate
				item under "Other" on the form.
(f)
				If an insurer wishes to use minimum premiums, it shall file with support, and
				obtain approval for, the minimum premium rules, formulas or amounts it proposes
				to use.
(g) The insurer may request
				to have its loss costs adjustments remain on file and refer to all subsequent
				loss costs reference filings. Under such a request, the insurer's rates will be
				the combination of prospective loss costs, subsequently approved under the
				rating organization's reference filings, and the loss costs adjustments
				contained in the insurer's reference filing adoption form on file with the
				Department. These rates will be effective on the effective dates of those
				prospective loss costs.
(1) If an insurer that
				has filed to have its loss costs adjustments remain on file with the Department
				intends to delay, modify or not adopt a particular rating organization's
				reference filing, the insurer shall make an appropriate filing with the
				Department.
(2) The insurer's filed
				loss costs adjustments will remain in effect until the insurer withdraws them
				or files and receives approval of a revised reference filing adoption
				form.