20-383

20-383. Rate standards

A. An insurer shall not charge rates that are excessive, inadequate or unfairly
discriminatory. An insurer shall not charge any rate which if continued will have or
tend to have the effect of destroying competition or establishing a monopoly.

B. Rates are excessive if they are likely to produce an underwriting profit that is
unreasonably high for the class of business or if expenses are unreasonably high in
relation to established services rendered. Rates are presumed not to be excessive if a
reasonable degree of price competition exists at the consumer level with respect to a
particular class of business. A competitive market is presumed to exist unless the
director, after a hearing, determines that a reasonable degree of price competition does
not exist in the market and issues an order pursuant to section 20-388 to that
effect. The order expires no later than one year after its effective date unless the
director finds, after a hearing, that there is a continuing lack of reasonable
competition in the market. If the director finds, after a hearing, that a reasonable
degree of price competition among insurers writing a particular line, subline or class of
business does not exist, he may prescribe an allowable percentage of increase in a
proposed rate level for such line, subline or class of business. Any insurer making a
rate filing exceeding the allowable percentage of increase shall, prior to the effective
date of such proposed rate increase, provide the director with sufficient actuarial data
to support such increase. The director's order establishing allowable percentages of
increase for a particular line, subline or class of business shall expire no later than
one year after its effective date. In determining whether a reasonable degree of price
competition exists, the director shall consider relevant tests of competition pertaining
to market structure, market performance and market conduct, including:

1. The number of insurers actively engaged in the class of business.

2. The market share and changes in market share of insurers.

3. The existence of a degree of rate differentials in a particular class of
business.

4. The ease of entry and latent competition of insurers capable of easy entry.

C. Rates are inadequate if they are clearly insufficient to sustain projected
losses and expenses in the class of business to which they apply.

D. A rate is not unfairly discriminatory in relation to another in the same class
if it reflects equitably the differences in expected losses and expenses. Rates are not
unfairly discriminatory because different premiums result for policyholders with like
loss exposures but different expense factors, or like expense factors but different loss
exposures, if the rates reflect the differences with reasonable accuracy. Rates are not
unfairly discriminatory if they are averaged broadly among persons insured under a group,
franchise or blanket policy.