N.Y. Comp. Codes R. & Regs. tit. 11 § 161.8

Current through Register Vol. 46, No. 45, November 2, 2024

Section 161.8 - Rating plan rules and standards

For rating plans applicable to commercial risk, professional liability or public entity insurance policies, the following rules and standards shall govern:

(a) Experience rating, schedule rating, IRPM, loss rating, composite rating and retrospective rating plans may be used in the rating of commercial risk, professional liability and public entity insurance policies, and may not be used in rating personal lines policies. Expense reduction plans may be used in connection with commercial and personal lines policies.

(b) Such rating plans shall contain reasonable internal credibility constraints and, for eligibility purposes, may only be used in the rating of risks which would otherwise generate at least the following basic limits premium for the type(s) of insurance addressed by the particular rating plan, except that an indivisibly rated policy shall generate a basic limits premium of at least $3,500 in order to qualify for application of an experience rating, schedule rating or IRPM plan:

(1) Experience Rating	$ 2,500
(2) Schedule Rating	$ 2,500
(3) IRPM	$ 2,500
(4) Expense Reduction	$10,000
(5) Retrospective Rating	$25,000

(c) Such rating plans may also be used in the rating of commercial motor vehicle policies insuring five or more vehicles.

(d) Any rating plan designed to be applied simultaneously to property, liability or other types of coverages shall contain reasonable factors that give appropriate recognition to the distinct exposures involved in such coverages, except that the divisible premium attributable to each of the different coverages involved may not be combined for purposes of determining whether such risk meets the premium thresholds set forth in subdivision (b) of this section.

(e)

(1) Once filed and approved in conformity with this section, the use of an experience rating, schedule rating, IRPM or expense reduction plan shall become mandatory, and shall be applied uniformly in a nondiscriminatory manner for all eligible classes of risk, except that experience rating plans may be applied only when, for the experience period specified in the plan, there is verifiable experience, which the current insurer shall make a good faith effort to obtain. (For example, if an insurer files an experience rating plan applicable to all liability risks with manual premiums over $2,500, then all such risks for which verifiable experience is in fact obtained are to be experience-rated by that insurer, which could not elect to exclude an insured from the plan's provisions nor disregarded the results.)

(2) Every experience rating plan shall set forth the specific procedures that the insurer will employ to obtain and verify experience applicable to each prospective insured, and shall also set forth the specific procedures that the insurer will employ to provide other authorized insurers with the verifiable experience of their own insureds upon the written request of such an insured or its authorized agent or broker.

(f) An expense reduction plan shall:

(1) permit only expense reductions that can be demonstrated;

(2) provide for the proper documentation by the insurer of all such expense reductions;

(3) not provide for reduction in the insured's premium based upon a reduction in the otherwise applicable commission payable to the agent or broker, unless made part of the insurer's filed and approved expense reduction plan and such reductions are applied in a fair and nondiscriminatory manner to all eligible classes of risk; and

(4) not provide for modification of rates in excess of minus () 15 percent.

(g) The adjustments contemplated by schedule rating and IRPM plans must be based only on rating characteristics not already reflected in the base rates. Such plans must clearly indicate the objective criteria that permit upward and downward adjustment of the base rates. Individual underwriting files shall contain the specific criteria, relative to the risk being rated, and document the particular circumstances that support each debit or credit.

(h) Schedule rating and IRPM plans may not provide for modification of rates in excess of plus (+) or minus () 15 percent.

(i) The overall rate effect of applying schedule rating plans, IRPM plans and experience rating plans on any individual insured risk shall not, in the aggregate, provide for modification of filed rates applicable to such risk in excess of plus (+) or minus (-) 25 percent, except that:

(1) In the event that application of an experience rating plan produces a modification that exceeds plus (+) or minus (-) 25 percent, such modification may be applied in its entirety; and

(2) No additional rate modifications shall be applied that would increase the level of rate modification beyond that determined by such experience rating plan, but rate modifications may be applied that reduce the maximum level of modification as determined by the application of the experience rating plan.

(For example, if the indicated experience rating modification for a particular risk is 35 percent, no schedule rating credits may be applied. Schedule rating debits could be applied, since they would reduce the indicated experience rating credit. If the indicated experience rating modification were 15 percent, schedule rating credits could be applied to the extent that the combined effect of experience rating and schedule rating does not exceed the maximum allowable modification of plus (+) or minus (-) 25 percent.)

(j) The superintendent may disapprove without a hearing any rating plan that fails to conform with the rules and standards set forth in this section.

(k)

(1) The provisions of this section regarding schedule rating and IRPM plans apply to rating plans that provide for ranges of debits and credits, the exact application of which is determined in accordance with the informed judgment of the individual company underwriter based upon an analysis of each risk's loss potential.

(2) Such provisions do not preclude use of filed and approved rating classifications that provide for application of specific, pre-established debits or credits given the presence or absence of a specific risk management, loss control, or cost control procedure or device. (For example, a rating classification could provide that a specific credit be applied to all risks with installed smoke alarms or fire extinguishers.)

(3) If neither the application of a credit (or debit), nor its amount, is discretionary, such credit (or debit) can be applied through an approved rating classification, rather than a schedule or IRPM rating plan within the meaning of this section, and thus would not require a premium credibility threshold nor be subject to the other provisions governing rating plans set forth in this section.

(l) The provisions of this section supersede any inconsistent provisions of Part 160 of this Title in connection with commercial risk, professional liability or public entity insurance policies.

N.Y. Comp. Codes R. & Regs. Tit. 11 § 161.8