3 Colo. Code Regs. § 702-5-1-20-5
Current through Register Vol. 47, No. 24, December 25, 2024
Section 3 CCR 702-5-1-20-5 - Rate Capping and Rate Transition Plan RequirementsA. Requirements 1. Any rating practice that results in a cap on the amount of a rate change when renewal rates are calculated for existing policyholders, but applies the filed rates without any limitation to new policyholders, constitutes the use of unfairly discriminatory rates in violation of §§ 10-3-1104(1)(f)(II) and 10-4-403, C.R.S. a. Any other rating or tiering practice that can result in different rates being applied between policyholders of the same class and hazard is also considered unfairly discriminatory ratemaking that violates §§ 10-3-1104(1)(f)(II) and 10-4-403, C.R.S.b. Insurers that believe they have a need to cap or limit the amount of a rate change shall, along with the required rate transition plan documentation, submit either an amendment or post submission update, to a related filing, or file a new rate or rate/rule filing.2. Excluding loyalty/persistency/tenure credits/discounts, rate ceilings and floors are permitted if:a. New business rates are the same as existing business rates for policyholders of the same class and hazard. (1) Any credits/discounts must be appropriately filed with the Division and adequately justified.(2) Use of unfiled credits/discounts is a violation of Colorado insurance statutes and regulations.b. An insurer can justify the appropriateness of implementing a rate transition plan for existing policyholders when a fundamentally different rating methodology is implemented and the rates under the old rating methodology differ to such a degree from the new rating methodology that policyholders or the insurer would be unduly burdened by the impact of the full rate change applied at one time.c. An insurer acquires a book of business from another licensed insurer or MGA representing the licensed insurer where the existing policyholder rates for the insurer's current book of business and the acquired book of business differ to such a degree that policyholders or the insurer would be unduly burdened by the impact of the full rate change applied at one time. The following constraints apply to all requests for a rate transition plan for an acquired book of business.
(1) The book of business must meet the definition contained herein of an acquired book of business.(2) An acquired book of business is eligible for a rate transition plan only if the prior insurer is withdrawing from the state of Colorado or discontinuing the program or products in the program in the state of Colorado.(3) A book of business acquired from a producer is ineligible for a rate transition plan.3. Rate transition plans shall not extend beyond three years in length unless otherwise approved by the Division.4. Rate transition plans are temporary in nature and therefore a rate transition plan may not appear in a rate or rule manual.5. Each rate transition plan shall include the following supporting information:a. A memorandum explaining why the rate transition plan is necessary, including a clear description of the rate transition plan structure and an explanation of how it is to be applied.b. Start and end dates of the rate transition plan, limited to the minimum number of renewals necessary to achieve rate parity with the existing book of business, not to exceed three years.c. For each year of the rate transition plan, updated histograms illustrating: (1) The beginning spread of the transitioning book of business segmented by rate needed to achieve rate parity with the existing book of business, including the number of policyholders in each segment.(2) The selected ceiling and floor to be applied to the transitioning book of business for that year or renewal period.(3) The anticipated spread of the transitioning book of business, after that year or renewal period of capping is complete, segmented by the rate needed to achieve rate parity with the existing book of business, including the number of policyholders in each segment.(4) The actual spread of the transitioning book of business, for any year after the first year or renewal period of capping is complete, segmented by the rate needed to achieve rate parity with the existing book of business, including the number of policyholders in each segment.6. An insurer may have simultaneous but not overlapping rate transition plans.38 CR 17, September 10, 2015, effective 10/1/201538 CR 18, September 25, 2015, effective 10/15/201539 CR 01, January 10, 2016, effective 2/1/201639 CR 05, March 10, 2016, effective 4/1/201641 CR 01, January 10, 2018, effective 2/14/201840 CR 21, November 10, 2017, effective 4/1/201841 CR 19, October 10, 2018, effective 11/1/201842 CR 18, September 25, 2019, effective 1/1/202042 CR 23, December 10, 2019, effective 1/1/202044 CR 13, July 10, 2021, effective 6/3/202144 CR 08, April 25, 2021, effective 8/1/202145 CR 03, February 10, 2022, effective 3/2/202245 CR 22, November 25, 2022, effective 12/15/202246 CR 11, June 10, 2023, effective 4/27/2023