Sec. 38a-665. (Formerly Sec. 38-201c). Standards for the making and use of rates re commercial risk insurance.
Sec. 38a-665. (Formerly Sec. 38-201c). Standards for the making and use of
rates re commercial risk insurance. The following standards, methods and criteria
shall apply to the making and use of rates pertaining to commercial risk insurance:
(a) Rates shall not be excessive or inadequate, as herein defined, nor shall they be
unfairly discriminatory. No rate shall be held to be excessive unless (1) such rate is
unreasonably high for the insurance provided or (2) a reasonable degree of competition
does not exist in the area with respect to the classification to which such rate is applicable.
No rate shall be held inadequate unless (A) it is unreasonably low for the insurance
provided, and (B) continued use of it would endanger solvency of the insurer, or unless
(C) such rate is unreasonably low for the insurance provided and the use of such rate
by the insurer using same has, or, if continued, will have the effect of destroying competition or creating a monopoly.
(b) Consideration shall be given, to the extent possible, 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 specially applicable to this state, to investment
income earned or realized by insurers both from their unearned premium and loss reserve
funds, 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 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 expense 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.
(d) Risks may be grouped by classifications for the establishment of rates and minimum premiums, provided no surcharge on any motor vehicle liability or physical damage insurance premium may be assigned for (1) any accident involving only property
damage of one thousand dollars or less, or (2) the first accident involving only property
damage of more than one thousand dollars which would otherwise result in a surcharge
to the policy of the insured, within the experience period set forth in the insurer's safe
driver classification plan, or (3) any violation of section 14-219, unless such violation
results in the suspension or revocation of the operator's license under section 14-111b,
or (4) less than three violations of section 14-218a within any one-year period, or (5)
any accident caused by an operator other than the named insured, a relative residing in the
named insured's household, or a person who customarily operates the insured vehicle.
Classification rates may be modified to produce rates for individual risks in accordance
with rating plans which provide for recognition of variations in hazards or expense
provisions or both. Such rating plans may include application of the judgment of the
insurer and may measure any differences among risks that can be demonstrated to have
a probable effect upon losses or expenses.
(e) Each rating plan shall establish appropriate eligibility criteria for determining
significant risks which are to qualify under the plan, provided all such plans shall include
as an eligible significant risk the state of Connecticut or its instrumentalities. Rating
plans which comply with the provisions of this subsection shall be deemed to produce
rates which are not unfairly discriminatory.
(f) Notwithstanding the provisions of subsections (a) to (e), inclusive, of this section,
no rate shall include any adjustment designed to recover underwriting or operating losses
incurred out-of-state.
(g) The commissioner may adopt regulations in accordance with the provisions of
chapter 54 concerning rating plans to effectuate the provisions of this section.
(1969, P.A. 665, S. 3; P.A. 77-199, S. 2, 12; 77-200; P.A. 78-25; P.A. 79-204, S. 1, 3; 79-609, S. 4; P.A. 80-276, S. 2,
6; P.A. 82-353, S. 4, 26; P.A. 84-165, S. 1; P.A. 85-45, S. 2; P.A. 88-73, S. 3; P.A. 89-114, S. 1; 89-193, S. 1.)
History: P.A. 77-199 substituted "or" for "and" before Subdiv. (2) in Subsec. (a); P.A. 77-200 prohibited assignment
of surcharge on motor vehicle liability insurance premium for accidents involving property damage of $300 or less in
Subsec. (d); P.A. 78-25 applied prohibition of surcharge in Subsec. (d) to physical damage insurance premiums; P.A. 79-204 required consideration of investment income earned or realized by insurers from unearned premium and loss reserve
funds in Subsec. (b); P.A. 79-609 prohibited surcharge for violations of Sec. 14-219 unless violation results in suspension
or revocation of operator's license in Subsec. (d); P.A. 80-276 prohibited surcharge for less than three violations of Sec.
14-218a in Subsec. (d); P.A. 82-353 limited the application of the section to commercial risk insurance where previously
applicable to all classes of insurance to which Secs. 38-201a to 38-201s apply and added Subsec. (f) concerning the adoption
of regulations for rating plans, effective July 1, 1983; P.A. 84-165 amended Subsec. (d) to increase the minimum damage
requirement for premium surcharges from $300 to $600; P.A. 85-45 added Subsec. (d)(4) prohibiting any premium surcharge based on an accident caused by someone other than the named insured, a resident relative or a customary operator
of the vehicle; P.A. 88-73 amended Subsec. (d)(1) to increase minimum property damage requirement for premium surcharges from $600 to $1,000; P.A. 89-114 inserted new Subsec. (f) providing that no rate shall include any adjustment
designed to recover underwriting or operating losses incurred out-of-state and relettered former Subsec. accordingly; P.A.
89-193 added new Subsec. (d)(3) providing that no surcharge on an automobile insurance policy may be assigned for the
first accident involving only property damage of more than $1,000 which would otherwise result in a surcharge to the
policy of the insured, within a certain experience period and renumbered the remaining Subdivs.; Sec. 38-201c transferred
to Sec. 38a-665 in 1991.
See Sec. 38a-686 re standards for the making and use of rates for personal risk insurance.
Annotations to former sections 38-116 and 38-187:
Power of commissioner, under section 38-192, to order a workmen's compensation rating organization, which had
rejected the proposal for such filing, to add it to its filings, was conditioned on conformity to this section. 152 C. 620, 621.
Commissioner's action in approving a filing which was restricted to a particular project was discriminatory in light of the
circumstances surrounding that case because it was not made generally applicable. Id., 622-624. History discussed. 153
C. 465, 468, 469. Constitutionality of 1963 act embracing amendment to section 38-187 upheld. Id. Constitutionality of
1963 amendment upheld against claim of illegal delegation of legislative power to insurance commissioner and private
insurance companies. Id., 478. Constitutionality of "deemer" clause upheld. Id., 479, 480.
Cited. 25 CS 312. Uniformity in rates among insurers is neither required nor prohibited under general statutes. 26 CS 419.
Statute upheld as constitutional. 2 Conn. Cir. Ct. 83.