Senate Bill No. 694
(By Senator Minard)
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[Introduced February 19, 2007; referred to the Committee on the
Judiciary; and then to the Committee on Finance.]
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A BILL to repeal §23-2C-18 of the Code of West Virginia, 1931, as
amended; to amend said code by adding thereto a new section,
designated §33-2-3a; to amend and reenact §33-20-3 of said
code; and to amend said code by adding thereto a new section,
designated §33-20-6a, all relating to the Insurance
Commissioner; permitting the Insurance Commissioner to hire
additional exempt employees; exempting the Insurance
Commissioner from purchasing rules in some circumstances;
revising rate-making process with respect to workers'
compensation insurance; defining terms; and providing for the
designation of a single rating organization for workers'
compensation.
Be it enacted by the Legislature:
That §23-2C-18 of the Code of West Virginia, 1931, as amended,
be repealed; that said code be amended by adding thereto a new section, designated §33-2-3a; that §33-20-3 of said code be amended
and reenacted; and that said code be amended by adding thereto a
new section, designated §33-20-6a, all to read as follows:
ARTICLE 2. INSURANCE COMMISSIONER.
§33-2-3a. Authority of Insurance Commission to exempt employees
from classified service; exemption from purchasing
rules.
In order to better enable the commissioner to fulfill the
additional duties assumed as a result of the transition to a
private workers' compensation system, the commissioner may,
notwithstanding any other provision of this code:
(1) Exempt no more than twenty employees of the offices of the
Insurance Commissioner from the classified service of the state,
which employees shall serve at the will and pleasure of the
commissioner: Provided, That such exempt employees shall be in
addition to those employees in classified-exempt service under the
classification plan adopted by the Division of Personnel. The
commissioner shall report all exemptions made pursuant to this
subsection to the director of the Division of Personnel no later
than the first day of September, two thousand seven, and thereafter
as the commissioner determines to be necessary; and
(2) Expend such sums for professional services as he or she
determines are necessary to perform those duties transferred to the
commissioner upon the termination of the Workers' Compensation Commission in accordance with the provisions of chapter one, acts
of the Legislature, fifth extraordinary session, two thousand five.
The provisions of article three, chapter five-a of this code
relating to the Purchasing Division of the Department of
Administration shall not apply to these contracts, and the
commissioner shall award the contract or contracts on a competitive
basis.
ARTICLE 20. RATES AND RATING ORGANIZATIONS.
§33-20-3. Ratemaking.
All rates shall be made in accordance with the following
provisions:
(a) Due consideration shall be given to past and prospective
loss experience within and outside this state, to catastrophe
hazards, if any, to a reasonable margin for underwriting profit and
contingencies, to dividends, savings or unabsorbed premium deposits
allowed or returned by insurers to their policyholders, members or
subscribers, to past and prospective expenses both countrywide and
those specially applicable to this state and to all other relevant
factors within and outside this state.
(b) Rates may not be excessive, inadequate or unfairly
discriminatory. Rates must not be excessive, inadequate or
unfairly discriminatory, nor may an insurer charge any rate which
if continued will have or tend to have the effect of destroying
competition or creating a monopoly.
(c) Rates for casualty insurance except workers' compensation
insurance and surety insurance to which this article applies shall
also be subject to the following provisions:
(1) 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 requirements
of 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 for which subdivision or combination separate
expense provisions are applicable.
(2) Risks shall be grouped by classifications and by
territorial areas for the establishment of rates and minimum
premiums. Classification of rates shall be modified to produce
rates for individual risks in a territorial area in accordance with
rating plans which establish standards for measuring variations in
hazards or expense provisions, or both. Such standards may measure
any differences among risks that can be demonstrated to have a
probable effect upon losses or expenses: Provided, That such
standards shall include the establishment of at least seven
territorial rate areas within the state: Provided, however, That
such territorial rate established by any insurer or group of
insurers may differ from those of other insurers or group of
insurers.
(3) Due consideration shall be given to such factors as expense, management, individual experience, underwriting judgment,
degree or nature of hazard or any other reasonable considerations,
provided such factors apply to all risks under the same or
substantially the same circumstances or conditions.
(d) Rates for fire and marine insurance to which this article
applies shall also be subject to the following provisions:
(1) Manual, minimum, class rates, rating schedules or rating
plans shall be made and adopted, except in the case of specific
inland marine rates on risks specially rated.
(2) Due consideration shall be given to the conflagration
hazard and in the case of fire insurance rates, consideration shall
be given to the experience of the fire insurance business during a
period of not less than the most recent five-year period for which
such experience is available.
(e) Rates for title insurance to which this article applies
shall also be subject to the following provisions:
(1) Title insurance rates shall be reasonable and adequate for
the class of risks to which they apply. Rates may not be unfairly
discriminatory between risks involving essentially the same hazards
and expense elements. The rates may be fixed in an amount
sufficient to furnish a reasonable margin for profit after
provisions to account for: (i) Probable losses as indicated by
experience within and without this state; (ii) exposure to loss
under policies; (iii) allocations to reserves; (iv) costs participating insurance; (v) operating costs; and (vi) other items
of expense fairly attributable to the operation of a title
insurance business.
(2)(A) Policies may be grouped into classes for the
establishment of rates. A title insurance policy that is unusually
hazardous to the title insurance company because of an alleged
defect or irregularity in the title insured or because of
uncertainty regarding the proper interpretation or application of
the law involved may be classified separately according to the
facts of each case.
(B) Title insurance companies shall file separate rate
schedules for commercial and non-commercial risks. The Insurance
Commissioner shall promulgate rules regarding the requirements of
this subsection which shall give due consideration to the nature of
commercial transactions and the need for greater protections for
consumers in noncommercial transactions.
(3) Title insurance rates may not include charges for
abstracting, record searching, certificates regarding the record
title, escrow services, closing services and other related services
that may be offered or furnished or the cost and expenses of
examinations of titles.
(f) Rates for workers' compensation insurance to which this
article and chapter twenty-three apply shall also be subject to the
following provisions:
(1) The commissioner may disapprove rates if there is not a
reasonable degree of price competition at the consumer level with
respect to the class of business to which they apply.
(2) In determining whether a reasonable degree of price
competition exists, the commissioner shall consider all relevant
tests, including:
(A) The number of insurers actively engaged in the class of
business and their shares of the market;
(B) The existence of differentials in rates in that class of
business;
© Whether long-run profitability for private carriers
generally of the class of business is unreasonably high in relation
to its risk;
(D) Consumers' knowledge in regard to the market in question;
and
(E) Whether price competition is a result of the market or is
artificial. If competition does not exist, rates are excessive if
they are likely to produce a long-run profit that is unreasonably
high in relation to the risk of the class of business, or if
expenses are unreasonably high in relation to the services
rendered.
(f) (g) Except to the extent necessary to meet the provisions
of subdivisions (b) and (c) of this section, uniformity among
insurers in any matters within the scope of this section is neither required nor prohibited.
(g) (h) Rates made in accordance with this section may be used
subject to the provisions of this article.
§33-20-6a. Designation of rating organization for workers'
compensation.
(a) For the purposes of this section:
(1) "Classification system" or "classification" means the
plan, system, or arrangement for grouping risks with similar
characteristics or a specified class of risk by recognizing
differences in exposure to hazards.
(2) "Experience rating" means a statistical procedure
utilizing past risk experience to produce a prospective premium
credit, debit or unity modification.
(3) "Prospective loss costs" means historical aggregate losses
and loss adjustment expenses projected through development to their
ultimate value and through trending to a future point in time.
Prospective loss costs do not include provisions for profit or
expenses other than loss adjustment expenses.
(4) "Statistical plan" means the plan, system or arrangement
used in collecting data for rate making or other purposes.
(b) The commissioner shall designate one rating organization
to:
(1) Assist the commissioner in gathering, compiling and
reporting relevant statistical information on an aggregate basis;
(2) Develop and administer, subject to approval by the
commissioner, the uniform statistical plan, uniform classification
plan and uniform experience rating plan;
(3) Develop and file manual rules, subject to the approval of
the commissioner, that are reasonably related to the recording and
reporting of data pursuant to the uniform statistical plan, uniform
experience rating plan and the uniform classification plan; and
(c) Each workers' compensation insurer shall:
(1) Record and report its workers' compensation experience to
the designated rating organization as set forth in the uniform
statistical plan approved by the commissioner; and
(2) Adhere to the uniform classification plan and uniform
experience rating plan developed by the designated rating
organization and approved by the commissioner.
(d) The commissioner may propose rules to implement the
provisions of this section, including a rule providing for the
equitable sharing and recovery of the expense of the designated
rating organization in performing the functions set forth in
subsection (b) of this section, and such rules shall be reviewed,
approved, rejected or modified by the industrial council in
accordance with the provisions of subdivision (2), subsection (c),
section five, article two-c, chapter twenty-three of this code.
NOTE: The purpose of this bill is to revise the ratemaking
process for workers's compensation and to provide for designation
of a single rating organization for workers's compensation.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
§§33-2-3a and 33-20-6a are new; therefore, underscoring and
strike-throughs have been omitted.