Cal. Code Regs. tit. 10 § 2632.8

Current through Register 2024 Notice Reg. No. 44, November 1, 2024

Section 2632.8 - Factor Weights

(a) For each type of coverage, factor weights shall be calculated for each of the three mandatory factors listed in Section 2632.5(c)(1) through (3) and for each of the optional factors the insurer elects to utilize in its class plan from Section 2632.5(d). Solely for the purpose of calculating factor weights, bodily injury coverage may be combined with property damage coverage and comprehensive coverage may be combined with collision coverage.

(b) The data used to compute the weight shall be based on one of the following:

(1) all of the subject company's currently insured vehicles;

(2) the same data set used to perform the sequential analysis in Section 2632.7; or

(3) the set of insured vehicles that may be published by the Department of Insurance.

(c) The weight of a rating factor is defined as follows:

For additive and multiplicative factors, the weight of Rating Factor j = <Sigma> ¦(R_i -- R)¦*E_i*B. For additive and multiplicative factors, compute, ¦(R_i -- R)C0*E_i *B for each category of rating factor j. The weight for rating factor j is then the sum of all these numbers (as i runs across all categories of rating factor j).

Where R_i -- Balanced relativity of the i^th category of rating factor j (the superscript j is omitted, the same below)

R -- Weighted average relativity (the balanced relativities are weighted by the percent of exposure so that R should be equal to 0 for additive factors and 1 for multiplicative factors)

E_i -- Percent of exposure in the i^th category of rating factor j

B --Base rate

(d) The weights of the factors, as calculated in subdivision (c), must align in decreasing order of importance as follows: driving safety record must have the most weight followed by annual miles driven followed by years of driving experience followed by each individual weight of each optional factor. If the weights are not in the order as specified herein then the insurer must correct the relativities of the rating factors as follows:

(1) Select the rating factors to be modified.

(A) Compute the weighted average of the initial relativities for the factor over the data set selected in subdivision (b) herein;

(B) Subtract the weighted average from each initial relativity;

(C) Multiply the result of step (B) by a correction factor;

(D) Add the result of step (C) to the weighted average.

The formula for this correction is:

NR = (IR - WA) * CF) + WA

	Where:	NR = New Relativity
		IR = Initial Relativity
		CF = Correction Factor
		WA = Weighted Average

(2) Repeat process of subdivision (d)(1)(A) through (D) if it is necessary to correct the weight of any of the rating factors.

(3) The weight of a corrected rating factor may not exceed the corrected weight of the succeeding rating factor, in decreasing order of importance, by more than 0.25.

(4) If two rating factor weights are not in the order specified in this Section, the subject company shall have the right to increase or decrease the weight of either factor to achieve compliance. This right shall apply to both the optional rating factors and the mandatory rating factors.

Cal. Code Regs. Tit. 10, § 2632.8

1. Certificate of Compliance as to 3-17-94 order including repealer and new section heading transmitted to OAL 7-12-94 and filed 8-23-94; operative 9-22-94 (Register 94, No. 34). For prior history, see Register 94, No. 11.
2. New section filed 7-5-96; operative 8-4-96 (Register 96, No. 27).
3. Amendment filed 12-12-2002; operative 1-11-2003 (Register 2002, No. 50).
4. Amendment of subsections (a), (c) and (d) and new subsection (d)(4) filed 7-14-2006; operative 8-13-2006 (Register 2006, No. 28).

Note: Authority cited: Section 1861.02, Insurance Code; and CalFarm Insurance Company v. Deukmejian, (1989) 48 Cal.3d 805. Reference: Sections 1861.02 and 1861.05, Insurance Code.