§ 27-9-51 - Excess profits for workers' compensation and employer's liability insurance prohibited.
SECTION 27-9-51
§ 27-9-51 Excess profits for workers'compensation and employer's liability insurance prohibited. – (a) Each insurance group shall file with the department prior to July 1 of eachyear, on a form prescribed by the department, the following data for workers'compensation and employers' liability insurance:
(1) The calendar year earned premium;
(2) Accident year incurred losses and loss adjustmentexpenses;
(3) The administrative and selling expenses incurred in RhodeIsland or allocated to Rhode Island for the calendar year; and
(4) Policyholder dividends applicable to the calendar year.
(b) Excess profit has been realized if the underwriting gainis greater than the anticipated underwriting profit plus five percent (5%) ofearned premiums for the three (3) most recent calendar years;
(2) As used in this section with respect to any three (3)year period, "anticipated underwriting profit" means the sum of the dollaramounts obtained by multiplying, for each rate filing of the insurance group ineffect during that period, the earned premiums applicable to the rate filingduring that period by the percentage factor included in the rate filing forprofit and contingencies, the percentage factor having been determined with duerecognition to investment income from funds generated by Rhode Island business.Separate calculations need not be made for consecutive rate filings containingthe same percentage factor for profits and contingencies.
(c) Each insurance group shall also file a schedule of RhodeIsland loss and loss adjustment experience for each of the three (3) mostrecent accident years. The incurred losses and loss adjustment expenses shallbe valued as of December 31 of the accident year, developed to an ultimatebasis, and two (2) twelve (12) month intervals after this, each developed to anultimate basis so that a total of three (3) evaluations will be provided foreach accident year. For reporting purposes unrelated to determining excessiveprofits, the loss and loss adjustment experience of each accident year shallcontinue to be reported until each accident year has been reported at eight (8)stages of development.
(d) Each insurance group's underwriting gain or loss for eachcalendar accident year shall be computed as follows: The sum of theaccident-year incurred losses and loss adjustment expenses as of December 31 ofthe year, developed to an ultimate basis, plus the administrative and sellingexpenses incurred in the calendar year, plus policyholder dividends applicableto the calendar year, shall be subtracted from the calendar year earned premiumto determine the underwriting gain or loss.
(e) For the three (3) most recent calendar-accident years,the underwriting gain or loss shall be compared to the anticipated underwritingprofit.
(f) If the insurance group has realized an excess profit, thedepartment shall order a return of the excess amounts after affording theinsurance group an opportunity for a hearing and complying with the provisionsof the Administrative Procedures Act, chapter 35 of title 42. The excessamounts shall be refunded in all instances unless the insurance groupaffirmatively demonstrates to the department that the refund of the excessamounts will render the insurance group insolvent under the provisions of thistitle.
(g) Any excess profit of an insurance group offering workers'compensation or employers' liability insurance shall be returned topolicyholders in the form of a cash refund or be returned to policyholders inthe form of a credit toward the future purchase of insurance. The excess amountshall be refunded on a pro rata basis in relation to the final compilation yearearned premiums to the workers' compensation policyholders of record of theinsurance group on December 31 of the final compilation year.
(h) Cash refunds to policyholders may be rounded to thenearest dollar;
(2) Data in required reports to the department may be roundedto the nearest dollar;
(3) Rounding, if elected by the insurance group, shall beapplied consistently.
(i) Refunds shall be completed in one of the following ways:
(i) If the insurance group elects to make a cash refund, therefund shall be completed within sixty (60) days of the entry of a final orderindicating that excess profits have been realized; or
(ii) If the insurance group elects to make refunds in theform of a credit to renewal policies, the credits shall be applied to policyrenewal premium notices which are forwarded to insured more than sixty (60)calendar days after the entry of a final order indicating that excess profitshave been realized. If an insurance group has made this election, but aninsured after this cancels his or her policy or allows his or her policy toterminate, the insurance group shall make a cash refund not later than sixty(60) days after the termination of the coverage;
(2) Upon completion of the renewal credits or refundpayments, the insurance group shall immediately certify to the department thatthe refunds have been made.
(j) Any refund or renewal credit made pursuant to thissection, for the purposes of reporting under this section for subsequent years,shall be treated as a policyholder dividend applicable to the year in which itis incurred.