Opinion ID: 1264940
Heading Depth: 1
Heading Rank: 6

Heading: absence of legislative standards

Text: If the Commissioner, after a hearing, determines that the rates charged or filed    are excessive, inadequate, unreasonable, unfairly discriminatory, or otherwise not in the public interest, G.S. § 58-248.1 provides that he shall issue an order    directing that such rates   be altered or revised in the manner and to the extent stated in such order to produce rates    which are reasonable, adequate, not unfairly discriminatory, and in the public interest. (Our italics.) However, no legislative provision purports to define what constitutes a reasonable rate or provides a formula or standards for the guidance of the Commissioner in the determination thereof. We pass, without discussion, questions relating to the power of the General Assembly to fix the rates for automobile liability insurance. It is noteworthy that a casualty insurance company, unlike a public utility, has no monopolistic or exclusive rights. All of the 251 competing companies are required to issue policies at the rate fixed by a State agency as a condition of doing business in North Carolina. Suffice to say, the only power the Commissioner has to fix rates is such power as the General Assembly has delegated to and vested in him. It is settled and fundamental in our law that the legislature may not abdicate its power to make laws nor delegate its supreme legislative power to any other coordinate branch or to any agency which it may create. Carolina-Virginia Coastal Highway v. Coastal Turnpike Authority, 237 N.C. 52, 74 S.E.2d 310. It is equally well settled that, as to some specific subject matter, it may delegate a limited portion of its legislative power to an administrative agency if it prescribes the standards under which the agency is to exercise the delegated powers. North Carolina Turnpike Authority v. Pine Island, 265 N.C. 109, 114, 143 S.E.2d 319, 323, and cases there cited. For present purposes, it is sufficient to say that no question is presented in the Attorney General's petition for review of the Commissioner's order of December 18, 1969, as to the power of the General Assembly or of the Commissioner to fix rates. The arguments brought forward assume the existence of such power. In the absence of a legislative formula or standards, the Commissioner has had no alternative but to look to the rate-making procedures recognized in the industry and in other States. The words, pure cost and expense loading as used, without explanation, in G.S. § 58-248, facilitated this course. Thus, the Rate Office and the Commissioner adopted the industry view that the reasonableness of a profit to be allowed to a company writing automobile liability insurance was determinable on the basis of a percentage of the gross premium rather than on the basis of a rate of return on invested capital. Underlying this view is the fact that the required capital assets of a casualty insurance company are primarily reserves to guarantee its ability to discharge its liability rather than for use as working capital in the prosecution of its business. Such a company has no significant inventory of assets which are used and useful in the prosecution of its business. The primary function of such a company is to render a service. It is noted that the 5% of premium allowed for underwriting profit and contingencies in computing the rates proposed by the 1969 Filing is the same as that used in preceding filings and is the same as that generally approved in the industry.