Opinion ID: 1293583
Heading Depth: 1
Heading Rank: 9

Heading: Cap on Rate Increase

Text: We next turn to the Commissioner's conclusion that any increase in the total number of insureds in the Facility would increase the overall rate level by more than 6% in contravention of G.S. 58-124.26. While this finding and conclusion is mathematically correct, it is erroneous as a matter of law. As noted above, the statutes permit insurers to cede any unwanted business to the Facility. Indeed, the previous limitation for cessions to the Facility at 50% without specific approval of the board of governors was repealed by the 1977 Legislature. At present, there is no limit to the number of insureds who may be ceded to the Facility. Consequently, as appellants correctly note, should the Commissioner approve the overall rate level increase of 6% and thereafter one single additional insured were ceded to the Facility, everything else being equal, an increase in the overall rate level above the 6% cap imposed by G.S. 58-124.26 would result. Under the Commissioner's conclusion, all rate increases would be impossible to justify since there is no way to ascertain what the total future cessions to the Facility might be and thus whether, at some time in the year, additional cessions to the Facility might push the overall rate level above 6%. Moreover, if an additional cession to the Facility resulted in an increase in the general rate level the same result would follow when other factors not directly related to the ratemaking process cause an increase or decrease in total premium collections. For example, premium variations are established by such factors as the number of SDIP points and territory in which a car is principally garaged. If we adopt the Commissioner's contention here, a general rate increase would occur anytime any insured in the State is convicted of a traffic violation or moved into a territory with a higher risk factor. Such was clearly not the legislative intent. Construing the applicable statutes in pari materia and interpreting each in a way as would give meaning and effect to each provision and thus carry out the legislative intent, State ex rel. Commissioner of Insurance v. Automobile Rate Bureau Administrative Office, supra, we believe the Legislature did not intend a result impossible to obtain in practical terms, but instead intended that any overall rate increase should be limited to 6% given the same book of business as for the experience period. The ratemaking process is premised on the underlying assumption that the book of business throughout the period for which rates are to be made will be the same as that which existed during the experience period. Finally, we note again that the Commissioner's statistical findings, to the extent stated, are supported by the evidence. However, the Rate Bureau's exhibits tend to establish that while the statistical data in the filing support and justify an overall 11.8% increase in liability insurance rates for voluntary business, the corresponding data with respect to Facility insureds support and justify an overall 63.4% increase for insureds who have been ceded to the Facility. As explained earlier, the evidence clearly supports the assertion that the differential in rates between the voluntary market and the Facility are actuarially justified, the standard established by statute. Again, it is not our task to substitute our judgment for the Commissioner's where evidence is conflicting. However, under the whole record test, which we are bound to apply, we do not merely consider the evidence which in and of itself justifies the Commissioner's conclusion without taking into account contradictory evidence or evidence from which conflicting inferences could be drawn. Applying the whole record test, as explained above, we hold that the evidence to support the Commissioner's findings and conclusions that the 10% rate differential was unfairly discriminatory was insubstantial in view of the entire record.