3 Colo. Code Regs. § 702-5-1-10-5

Current through Register Vol. 47, No. 24, December 25, 2024

Section 3 CCR 702-5-1-10-5 - Rules

All rate, rule, and loss cost filings shall be submitted electronically by licensed companies, rating organizations and advisory organizations (except for conditions provided by regulation). Failure to supply the information required in Subsections 5.A.4., 5.A.5., 5.A.7., and 5.B.4. of this regulation would render the filing incomplete. Incomplete filings will be rejected on or before the 15th business day after receipt. Incomplete filings are not reviewed for substantive content. All filings that are not returned on or before the 15th day after receipt will be considered complete. Filings may be reviewed for substantive content, and if reviewed, any deficiency will be identified and communicated to the filing insurer on or before the 30th business day after receipt. Correction of any deficiency, after the 30th business day, will be required on a prospective basis, and no penalty will be applied to a non-willful violation identified in this manner. Nothing in this Section 5 shall render a rate filing subject to prior approval by the Division unless otherwise subject to prior approval as provided by statute.

A. Rate Filing General Requirements

1. Required Submissions

a. All companies must submit rate filings whenever the rates to be charged to new or renewal policyholders will differ from the rates on file with the Division. Included in this requirement are changes due to periodic recalculation of experience or projections, change in rate calculation methodology, or change(s) in trend or other rating assumptions.

b. Annual rate filings for homeowners insurance and private passenger automobile insurance

(1) All foreign companies with written premiums for homeowners insurance (line 4 from the Colorado exhibit of premiums and losses from the annual statement) or private passenger automobile insurance (the sum of lines 19.1, 19.2, and 21.1 from the Colorado exhibit of premiums and losses from the annual statement) in excess of $10,000,000 in the preceding calendar year, and all Colorado domestic companies without regard to annual written premium, must submit a homeowners and/or private passenger automobile rate filing on at least an annual basis.

(2) Each rate filing must be submitted to the Division on or before the one-year anniversary of the filing date of the most recent rate filing made by a particular company for that line of business.

(3) The annual rate filing shall contain all of the items required in this regulation and the bulletin entitled, "Requirements for the Filing of Rates, Rules, Loss Cost, and Forms for Property and Casualty Carriers." The rate filing must demonstrate that the rate the company is using or proposing to use is not excessive, inadequate or unfairly discriminatory.

c. These rate filings shall be considered "file-and-use" and treated in the same manner as rate filings from other Type II insurance lines.

d. All rate filings required by this regulation must contain detailed support demonstrating that the assumptions continue to be appropriate, and that rates are not excessive, inadequate or unfairly discriminatory.

2. Timing and Submission

a. Unless a filing is specifically identified as requiring prior approval, by statute, all filings are classified as file-and-use. All companies are to file appropriate Colorado Rate and Rule Submission Form(s) (Form A is required for all filings and loss cost filings require a form B, C and/or D, as appropriate) with the rates prior to distribution, release to producers, collection of premium, advertising, or any other use of the rate.

b. All personal lines, medical malpractice, commercial lines, and workers compensation insurance require the rating data to be submitted with the filing. The Division may also request rating data for other lines of business along with appropriate supporting data.

c. All filings must be submitted to the rates and forms section of the Division. In the case of rates requiring prior approval, if a rate increase has been implemented without Division approval, corrective actions may be ordered, including fines, refunds to policyholders, and/or rate credits.

3. Withdrawn or Returned Filings: Filings that have either been withdrawn by the filer or returned by the Division as incomplete, and subsequently resubmitted, will be considered new filings and must have a new filing date and effective date (new effective date if the date has expired). If a filing is withdrawn or returned, the rates may not be used or distributed.

4. Submission of rates, rules, and loss cost filings: All filings must be submitted electronically in a format made available by the Division. These filings must be submitted, by company, so that each filing contains all required documents. Required documents include (at a minimum) the cover letter and filing forms A, B, C and D, if appropriate. If the company fails to comply with these requirements, then the company will be notified that the filing has been rejected as incomplete. If a filing is rejected due to lack of completeness, the rates may not be used or distributed.

5. Group Filings: Group filings are allowed to be submitted in one filing for multiple companies in the same holding group as long as company-specific information, forms, support, data, manuals, and all other required information is provided. Group data and support are acceptable in addition to company specific data to support the rates so long as the source of the experience is clearly identified.

6. Required Inclusions: The level of detail and the degree of consistency incorporated in the experience records of the company are vital factors in the presentation and review of rate filings. Every personal lines, commercial lines, medical malpractice, and workers compensation rate filing shall be accompanied by sufficient information to support the reasonableness of the rate. Valid company experience should be used whenever possible. This information may include the company's experience and judgment; the experience or data of other insurers or organizations relied on by the company; the interpretation of any statistical data relied on by the company; descriptions of methods used in making the rates; and any other similar information. In addition, the Commissioner may request any information necessary to adequately support the rate request.

7. Each rate filing must include:

a. Required Forms: A fully completed Rate and Rule Filing Submission Form A and loss cost filing forms B, C and/or D (when appropriate) are required. These forms are available from the Division and are contained in a separately published bulletin.

b. Summary: The filing must include a brief written summary of the reason for the rate filing; the methodology used to develop the rate change; marketing method; premium classes; product description; and any relevant considerations which have a material effect upon the ratemaking methodology.

c. Territorial Factors: The initial personal lines, medical malpractice, commercial lines, and workers compensation insurance filings must clearly display and adequately support all territorial factors and definitions, and any subsequent personal lines, medical malpractice, commercial lines and workers compensation insurance filings must clearly display and adequately support all changes in territorial factors and definitions.

d. Side-by-Side Comparison: A "side-by-side comparison" including the proposed change(s) must be included in the filing. The "side-by-side comparison" should include three columns: the first containing the current rates, rating factor, rating variable, or rules; the second containing the proposed rates, rating factor, rating variable, or rules; and the third containing the percentage increase or decrease of each proposed change(s). If the proposed rates are not replacing existing rates, then the filing must specifically state that the rates proposed are new rates.

e. Loss Offsets: For all lines of business for which the ultimate loss payments are expected to be affected by the subsequent collection of salvage or subrogation amounts, or through the coordination of benefits, such anticipated reductions must be considered, either implicitly or explicitly, in the ratemaking process.

f. Loss Ratios: The filing must state the anticipated loss ratio for the period the rates are projected to be applicable. This should be stated on an incurred basis as the ratio of incurred losses to earned premiums. Incurred losses may include loss adjustment expenses, but the filing must clearly identify the components of the loss ratio. The anticipated loss ratio shall be submitted on all rate and loss cost filings, with all the necessary support to show how the loss ratio was developed.

g. Rate History: The filing must include a chart showing the rate changes implemented in at least the three (3) years immediately prior to the date of the filing.

h. Data Requirements: A personal lines, medical malpractice, commercial lines or workers compensation filing must, at a minimum, include past and prospective loss experience, loss costs or pure premium rates, and premiums. The Division may also request rating data for other lines of business along with appropriate supporting data for any line of business. This information shall be submitted on a Colorado-only basis for at least three (3) years, if available, and on a national, regional or other appropriate basis if the Colorado data is not fully credible. The loss data must be on an incurred basis including both the accrued and unaccrued portions of the liability and reserve (e.g., case, bulk and IBNR reserves) as of the valuation date. Premiums and/or exposure data must be stated on both an actual and on-rate level basis.

i. Development of Expected Loss or Pure Premium: A personal lines, medical malpractice, commercial lines or workers compensation filing must adequately support all material assumptions and methodologies used to develop the expected losses or pure premiums. Material assumptions and methodologies may include but are not necessarily limited to:

(1) Catastrophic losses: The filing must clearly identify the degree to which the underlying data was adjusted for catastrophic or large losses and must describe the method (if any) used to prospectively provide for catastrophic losses.

(2) Trend: The filing must discuss and adequately support any trends or trending assumptions (whether applied to loss, premium or exposure data) that are used.

(3) Credibility: The filing must discuss the credibility of the data, and the source, applicability, and use of collateral data.

(4) Investment income: The filing must describe how anticipated investment income will be used to reduce the prospective rate.

(5) Exposure base: If the exposure base to which the rate is applied is subject to inflationary or other trend, then the filing must either demonstrate that the loss trend has made due consideration for the offsetting exposure trend, or that the changing exposure trend has been adequately taken into account in the development of the prospective rates.

j. Expense Provision: A personal lines, medical malpractice, commercial lines, and workers compensation filing must clearly describe the amount of the fixed and/or variable expense provision and how this provision is to be accounted for in the final rate. This justification must include a statement that the expense provision has been adjusted to appropriately reflect Colorado requirements and reflects the operating methods of the company and any Colorado-specific anticipated expenses. Specifically, the provision for taxes, licenses and fees varies according to the jurisdiction and according to the existence of a regional or home office which qualifies as a "Home" or "Regional Home Office" under Colorado Insurance Regulation 2-1-2 and § 10-3-209(b)(I)(B), C.R.S. The expense provision in the filing must accurately reflect any such Colorado-specific expense.

k. Provision for Profit and Contingencies: A personal lines, medical malpractice, commercial lines, or workers compensation filing must identify the amount or percentage of the provision for profit and contingencies and how this provision is added to the final rate. Investment income shall be considered from unearned premium reserves, reserves from incurred losses, and reserves from incurred but not reported (IBNR) losses.

B. Additional Rate Filing Requirements by Line

The following subsections set forth the requirements by separate lines of insurance that must be complied with in addition to the above general requirements.

1. Type I Lines: Type I filings are defined in § 10-4-401, C.R.S. All filings for Type I lines of insurance require prior approval.

2. Rate Modification Plans: Rate modification plans are rating plans or procedures which provide a listing of various risk characteristics or conditions and a range of modification factors which may be applied for these characteristics or conditions to the manual rate of a particular insurance risk. Rate modification plans are regulated by Colorado Insurance Regulation 5-1-11. All requirements of Colorado Insurance Regulation 5-1-11 should be observed, in addition to the requirements of this regulation, whenever a rate modification plan is filed.

3. Adoption of Advisory or Rating Organization Rates: Each company adopting pure premium rates must file their final loss cost multiplier. If the company requests that its final loss cost multiplier which includes the pure premium rate modification remains on file without change, it will remain in effect until the company withdraws it, files revised pure premium rate adjustments, files expense adjustments, or makes an independent filing. However, any company that delays, modifies, or fails to adopt a subsequent filing made by the rating or advisory organization must promptly make an appropriate filing with the Division.

If the rating or advisory organization prints and distributes the pure premium rates, any company that adopts those pure premiums with or without modification is not required to file its final rate pages with the Division, even if the company chooses to print and distribute final rate pages based solely upon the application of its filed final loss cost multiplier for its own use. If the rating or advisory organization does not print the pure premium rates in its manual, then the company must submit its final rates to the Division.

The final loss cost multiplier must include a provision for expenses (expense multiplier) and may include an adjustment to the pure premium rate (pure premium rate modification). The final loss cost multiplier is a combination of these two adjustments:

a. Expense Multiplier:

(1) The required expense multiplier must provide for the company's actual production expense, general expense, profit and contingencies with the investment income offset provisions, taxes, licenses and fees, and any other necessary expense. The description of the expense components must be made on the appropriate filing form. Companies that adopt advisory pure premium rates may vary the expense provision by individual classification, grouping, or subline of insurance only to the extent that the actual expenses of the company do in fact differ by these separate classifications, groupings or sublines. Companies may use variable and/or fixed expense provisions to establish the appropriate expense provision in the final loss cost multiplier.

(2) The expense multiplier shall make provision only for expenses. No implicit or explicit provision for actual or anticipated differences in the pure premium rate may be included in the development of the expense multiplier.

b. Pure Premium Rate Modifications: A company may file for modification of the pure premium rates based on its own anticipated experience. This modification must be made on the appropriate filing form. Supporting actuarial or statistical documentation is required to adequately support the reasonableness of any modifications of the advisory pure premium rate.

4. Medical Malpractice:

As required by § 10-4-403 (2.1), C.R.S., medical malpractice filings shall include an analysis and opinion of a qualified actuary. The analysis and opinion must discuss the impact, if any, of the following on the rates:

a. Tort reform legislation.

b. Risk management activities.

c. Underwriting standards and practices.

d. Any other activity designed to reduce rates or rate increases or the cost of administration and determination of claims.

The qualified actuary must state an opinion as to whether the rates are excessive, inadequate or unfairly discriminatory.

5. Homeowners:

As required by § 10-4-110.7(4), C.R.S., homeowners filings containing underwriting methodologies are not public record. Any homeowner's filing containing information that a company considers to be an underwriting methodology must clearly identify this information as confidential, complete the proper confidentiality request, and segregate it from the rest of the filing so that the Division is able to properly maintain confidentiality.

C. Rule Filing General Requirements

1. Required Forms: A fully completed Filing Form A is required. Filing forms are available from the Division and are contained in a separately published bulletin or the SERFF website and may be duplicated by insurers.

2. Every property and casualty insurance company, including those writing workers' compensation insurance, is required by this regulation to provide a list of minimum premiums, schedule of rates, rating plans, dividend plans, individual risk modification plans, deductible plans, rating classifications, territories, rating rules, rate manuals and every modification of any of the foregoing which it proposes to use. Such filings must state the proposed effective date thereof, and indicate the character and extent of the coverage contemplated.

3. Companies may adopt, by reference, rating and/or advisory organization insurance rating plans, individual risk modification plans, deductible plans, rating classifications, territories, rating rules, rate manuals, and modifications of any of the foregoing. A completed copy of the appropriate filing form prescribed by the Commissioner in a separate bulletin must accompany the filing.

4. Each rule filing must identify the kind of insurance, (e.g., Type II), and must be consistent with the rate filing procedure defined for that type of insurance. Each filing must be accompanied by a completed copy of the appropriate filing form prescribed by the Commissioner in a separate bulletin.

5. Each rule filing must include a side-by-side comparison of any change proposed. If the proposed rules are not replacing existing rules used by the filer, then the filer must so state in the filing.

D. Prohibited Practices

The Division has determined that certain rating practices lead to excessive, inadequate or unfairly discriminatory rates and are unfair methods of competition and/or unfair or deceptive acts or practices in the business of insurance. Therefore, in accordance with § 10-3-1110(1), C.R.S., it is considered an unfairly discriminatory practice for a company to include, in any component of a rate, any amount intended to recover losses or expenses incurred in another state or jurisdiction due to any referendum, law or regulation which requires a general reduction in rates. This subsection shall not prohibit the use of national, regional or other industry data as a necessary and actuarially supportable supplement to Colorado data that is not fully credible.

3 CCR 702-5-1-10-5

38 CR 17, September 10, 2015, effective 10/1/2015

38 CR 18, September 25, 2015, effective 10/15/2015

39 CR 01, January 10, 2016, effective 2/1/2016

39 CR 05, March 10, 2016, effective 4/1/2016

41 CR 01, January 10, 2018, effective 2/14/2018

40 CR 21, November 10, 2017, effective 4/1/2018

41 CR 19, October 10, 2018, effective 11/1/2018

42 CR 18, September 25, 2019, effective 1/1/2020

42 CR 23, December 10, 2019, effective 1/1/2020

44 CR 13, July 10, 2021, effective 6/3/2021

44 CR 08, April 25, 2021, effective 8/1/2021

45 CR 03, February 10, 2022, effective 3/2/2022

45 CR 22, November 25, 2022, effective 12/15/2022

46 CR 11, June 10, 2023, effective 4/27/2023