38.2-1904 - Rate standards.
§ 38.2-1904. Rate standards.
A. Rates for the classes of insurance to which this chapter applies shall notbe excessive, inadequate or unfairly discriminatory. All rates and allchanges and amendments to rates to which this chapter applies for use in thisCommonwealth shall consider loss experience and other factors within Virginiaif relevant and actuarially sound; provided, other data, includingcountrywide, regional or other state data, may be considered where such datais relevant and where a sound actuarial basis exists for considering dataother than Virginia-specific data.
1. No rate shall be held to be excessive unless it is unreasonably high forthe insurance provided and a reasonable degree of competition does not existin the area with respect to the classification to which the rate applies.
2. No rate shall be held inadequate unless it is unreasonably low for theinsurance provided and (i) continued use of it would endanger solvency of theinsurer or (ii) use of the rate by the insurer has or, if continued, willhave the effect of destroying competition or creating a monopoly.
3. No rate shall be unfairly discriminatory if a different rate is chargedfor the same coverage and the rate differential (i) is based on soundactuarial principles or (ii) is related to actual or reasonably anticipatedexperience.
B. 1. In determining whether rates comply with the standards of subsection Aof this section, separate consideration shall be given to (i) past andprospective loss experience within and outside this Commonwealth, (ii)conflagration or catastrophe hazards, (iii) a reasonable margin forunderwriting profit and contingencies, (iv) dividends, savings or unabsorbedpremium deposits allowed or returned by insurers to their policyholders,members or subscribers, (v) past and prospective expenses both countrywideand those specifically applicable to this Commonwealth, (vi) the lossreserving practices, standards and procedures utilized by the insurer, (vii)investment income earned or realized by insurers from their unearned premiumand loss reserve and the Commission may give separate consideration toinvestment income earned on surplus funds, and (viii) all other relevantfactors within and outside this Commonwealth. When actual experience or datadoes not exist, the Commission may consider estimates.
2. In the case of fire insurance rates, consideration shall be given to theexperience of the fire insurance business during a period of not less thanthe most recent five-year period for which such experience is available.
3. In the case of workers' compensation insurance rates for volunteerfirefighters or volunteer lifesaving or volunteer rescue squad members, therates shall be calculated based upon the combined experience of bothvolunteer firefighters or volunteer lifesaving or volunteer rescue squadmembers and paid firefighters or paid lifesaving or paid rescue squadmembers, so that the resulting rate is the same for both volunteer and paidmembers, but in no event shall resulting premiums be less than forty dollarsper year for any volunteer firefighter or rescue squad member.
4. In the case of uninsured motorist coverage required by subsection A of §38.2-2206, consideration shall be given to all sums distributed by theCommission from the Uninsured Motorists Fund in accordance with theprovisions of Chapter 30 (§ 38.2-3000 et seq.) of this title.
C. For the classes of insurance to which this chapter applies, includinginsurance against contingent, consequential and indirect losses as defined in§ 38.2-133 (i) the systems of expense provisions included in the rates foruse by any insurer or group of insurers may differ from those of otherinsurers or groups of insurers to reflect the requirements of the operatingmethods of any such insurer or group for any class of insurance, or withrespect to any subdivision or combination of insurance for which separateexpense provisions are applicable, and (ii) risks may be grouped byclassifications for the establishment of rates and minimum premiums.Classification rates may be modified to produce rates for individual risks inaccordance with rating plans that establish standards for measuringvariations in hazards, expense provisions, or both. The standards may measureany difference between risks that can be demonstrated to have a probableeffect upon losses or expenses. Notwithstanding any other provision of thissubsection, except as permitted by § 38.2-1908, each member of a rate serviceorganization shall use the uniform classification system, uniform experiencerating plan, and uniform statistical plan of its designated rate serviceorganization in the provision of insurance defined in § 38.2-119.
D. No insurer shall use any information pertaining to any motor vehicleconviction or accident to produce increased or surcharged rates above theirfiled manual rates for individual risks for a period longer than thirty-sixmonths. This period shall begin no later than twelve months after the date ofthe conviction or accident.
E. Each authorized insurer subject to the provisions of this chapter may filewith the Commission an expense reduction plan that permits variations inexpense provisions. Such filing may contain provisions permitting agents toreduce their commission resulting in an appropriate reduction in premium.Nothing in this section shall be construed to require an agent to reduce acommission, nor may an insurer unreasonably refuse to reduce a premium due toa commission reduction as permitted by its filed expense reduction plan.
(1973, c. 504, § 38.1-279.33; 1975, c. 155; 1977, c. 415; 1981, c. 243; 1982,c. 226; 1986, c. 562; 1987, c. 697; 1991, c. 104; 1993, c. 985; 1996, c. 250;2002, c. 145.)