Court Opinion

ID: 9583410
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:38:19.548672+00
Date Added: 2024-06-11T13:39:00.399390
License: Public Domain

Undercofler, Justice.
The Court of Appeals held the Insurance Commissioner erred in disapproving Allstate Insurance Company’s 1969 homeowners’ insurance premium rates. Allstate Ins. Co. v. Bentley, 122 Ga. App. 738 (178 SE2d 700). We granted certiorari. Held:
1. The Georgia Insurance Commissioner may disapprove an insurance rate as excessive when "(1) such rate is unreasonably high for the insurance provided and (2) a reasonable degree of competition does not exist in the area with respect to the classifica*709tion to which such rate is applicable.” Ga. L. 1967, pp. 684, 690 (Code Ann. §56-507 (a)). In our opinion these provisions are conjunctive. The Commissioner must find both conditions to exist in order to disapprove rates as excessive. To hold otherwise renders part "(2)” of this section meaningless.
2. Allstate contends that the Insurance Commissioner was not authorized to disapprove its homeowners’ insurance rates as excessive because, as provided in Code Ann. § 56-507 (a), a reasonable degree of competition exists in the area. It points out that 210 companies compete vigorously for this business. It shows that although a majority of the companies use rates established by "rating bureaus,” approximately 30% of the companies deviate therefrom. It further shows its rates are 15% below those established by the "rating bureaus.”
"The business of insurance is one so clothed with a public interest, affecting the community at large, as to render it peculiarly subject to proper governmental regulation.” Cooper Co. of Gainesville v. State, 187 Ga. 497, 500 (1 SE2d 436). One of the primary purposes of such regulation is to make certain that insurance rates are not excessive. To the same effect is Georgia’s policy of encouraging competition among insurers. However, such policy does not restrict affirmative action to protect the public interest. Ga. L. 1967, pp. 684, 687 (Code Ann. § 56-501). The provision of the Act prohibiting the Insurance Commissioner from disapproving a rate as excessive when a reasonable degree of competition exists is directed to the sufficiency of the competition to keep rates at a fair level. The question is not whether a particular insurer is competing or whether there is some competition in the area. The question is whether the competition in the industry is vigorous enough to assure that rates are not excessive.
The evidence shows that competition in homeowners’ insurance in Georgia is based primarily on two factors, price and service. The variations in the policy forms are not shown to be significant. There is testimony that of the two factors, price is the more important.
With respect to service, there is no question that the companies compete vigorously. There are hundreds of agents and salesmen *710in this State selling homeowners’ insurance and striving to render better service than their competitors.
With respect to price, the evidence shows that when the "rating bureaus” established rate increases in 1969 approximately 90% of the companies, including Allstate, writing approximately 90% of the homowners’ insurance increased their rates in the same percentage. We think this is ample evidence to support the Commissioner’s findings that a reasonable degree of competition in pricing did not exist. The fact that the rates may have been competitive prior to the rate increases has no bearing on this conclusion. When 90% of the companies adopted the same percentage of rate increases, it cannot be said that the provision of the statute encouraging competition was met. On the contrary, it appears that the "reasonable degree of competition” which was intended to promote the establishment of premium rates at a reasonable level was lacking. By "floating” with the bureau rates the large majority of the industry indicated a disposition not to compete in establishing new higher prices.
3. Allstate further contends, as is also provided in Code Ann. § 56-507 (a), that its rates are not unreasonably high for the insurance provided. It points out that its rates are 15% below the rates of a majority of the other companies.
Insurance is a plan for distributing individual losses. Ga. L. 1960, pp. 289, 293 (Code Ann. § 56-102). The insurance company is an organization for the distribution of such losses. The public is primarily and foremost concerned with the solvency of the company. However, the public interest also demands that the operating costs and profits shall not be unreasonably high. Code Ann. § 56-507 (a).
The Insurance Commissioner is charged with the responsibility of protecting the public from excessive insurance rates.
The guide lines for making such a determination have been established by the Georgia General Assembly. As provided in Code Ann. § 56-507 (b): "Consideration shall be given, to the extent applicable, to past and prospective loss experience within and outside this State, to conflagration and catastrophe hazards, to a reasonable margin for underwriting profit and contingencies, to past and prospective expenses both country-wide and those *711specially applicable to this State, and to all other factors, including judgment factors, deemed relevant within and outside this State; and in the case of fire insurance rates, consideration may be given to the experience of the fire insurance business during the most recent five-year period for which such experience is available. Consideration may also be given in the making and use of rates to dividends, savings or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members or subscribers . . . (c) The systems of expenses provisions included in the rates for use by any insurer or group of insurers may differ from those of other insurers or groups of insurers to reflect the operating methods of any such insurer or group with respect to any kind of insurance, or with respect to any subdivision or combination thereof.”
In our opinion this calls for an individual examination of each company’s experience and manner of operation. The bureaus’ rates are not a protective umbrella. Code Ann. § 56-524. The fact that Allstate’s rate may be less than the rate for the majority of the companies does not require a conclusion that the rate is not excessive. Many factors must be taken into consideration as set out in Code Ann. § 56-507 (b, c).
The record here shows that Allstate writes 5% of the homeowners’ insurance business in Georgia and is the second largest company in this field. In the last 5 years its business has more than doubled. From 1960 to 1968 its premium volume has increased 500%. In the five years preceding the 1969 rate increase it operated at an average expense ratio of 25.4% as compared with the rating bureaus’ average of 34%. Its average profit during these five years was 9.9% compared to the generally accepted industry rate of 5% profit plus 1% for contingencies. At the same time its average loss ratio was 4.6% higher than the rating bureaus’ standard of 60%. The efficiency of Allstate’s operation and the appeal of its lower premiums is apparent. So far as the record discloses its reduced expense factor even when offset by high loss ratio has rewarded it with profits well above average. There is nothing in the record to indicate a change from its past experience other than the rating bureaus’ increase and some evidence of an excessive loss ratio for the *712first six months of 1969 which the Commissioner was authorized to find was inconclusive.
Argued March 9, 1971
Decided May 20, 1971
Rehearing denied June 17, 1971.
Arthur K. Bolton, Attorney General, Harold N. Hill, Jr., Executive Assistant Attorney General, Robert J. Castellani, Assistant Attorney General, for appellant.
Kilpatrick, Cody, Rogers, McClatchey & Regenstein, Devereaux F. McClatchey, Donald F. Schaffer, Troy W. Cox, for appellee.
Alston, Miller & Gaines, Francis Shackleford, F. Dean Copeland, Whelchel, Dunlap & Gignilliat, James A. Dunlap, Weymon H. Forrester, amicus curiae.
In our opinion there was substantial evidence to support the Insurance Commissioner’s finding that Allstate’s June 16, 1969 homeowners’ rate increases of 13.2% for classes 1, 2 and 3; 10% for class 4; and 25% for class 5 were excessive. Code Ann. § 56-227 (c).
4. Unfair discrimination arises when like policyholders are treated differently. This principle has no application to whether rate structures are excessive as here. Code Ann. §56-507 (d).
5. Divisions 3, 4, 5 (a), (b) and 7 (a) of the Court of Appeals opinion are erroneous. Division 6 is affirmed not for the reason given by the Court of Appeals but upon Division 4 of this opinion.

Judgment reversed in part; affirmed in part.

All the Justices concur, except Almand, C. J., Felton, and Hawes, JJ., who dissent.