State Ex Rel. Com'r of Ins. v. Comp. Rating & Inspec. Bureau

242 S.E.2d 887 (1978)

STATE of North Carolina ex rel. COMMISSIONER OF INSURANCE v. COMPENSATION RATING AND INSPECTION BUREAU of North Carolina.

No. 7710INS256.

Court of Appeals of North Carolina.

April 18, 1978.

*889 Atty. Gen. Rufus L. Edmisten, by Asst. Atty. Gen. Isham B. Hudson, Jr., Raleigh, for John Randolph Ingram, Commissioner of Insurance.

Allen, Steed & Allen, P. A., by Thomas W. Steed, Jr., Raleigh, for appellant Compensation Rating and Inspection Bureau.

WEBB, Judge.

We hold that the facts found by the Commissioner, on which he based his conclusion that a rate change should be denied, were not supported by material and substantial evidence, and his order must be vacated.

As to the Commissioner's finding that the 13 June 1973 filing and the 18 June 1974 filing cannot both be correct because the 1974 filing requested an increase of approximately 331/3% less than the 1973 filing, although the benefits had been increased for the 1974 filing, the Commissioner has failed to take into account the fact that the 18 June 1974 filing included an experience review and a reduction in loss adjustment expense. The evidence does not support a finding that the two filings are inconsistent.

We do not believe the Commissioner's conclusion is justified that the projections of the Bureau as to increased benefit costs are speculative because they are based on the same methods used to project costs in 11 other states, in which subsequent experience showed a need for a downward adjustment in six of the states and upward adjustment in five of the states. Parenthetically, we might say the fact that the upward and downward adjustments were *890 almost equal between the 11 states is some support for the argument that it is a valid method of projection. We do not rest on this, however. The fact that experience might require an upward or downward adjustment in rates does not invalidate a projection of rates. Retroactive rate-making has been disapproved in this State. Commissioner of Insurance v. Automobile Rate Office, 292 N.C. 1, 231 S.E.2d 867 (1977). Prognostication of insurance rates can hardly be expected to achieve exact precision. Our system provides that if experience shows rates have been set at too high a level, they can be reduced.

We also hold the Commissioner erred in holding that there were no factors used in the filing to reflect changes in payroll conditions or frequency of accidents. The testimony of the only witness who testified as to the method of compiling the projected rates was that both the payroll and frequency factors were taken into account by the calendar year and policy year experiences of the companies. It may be that a trend factor was not necessary to support the filing, Commissioner of Insurance v. Rating Bureau, 292 N.C. 70, 231 S.E.2d 882 (1977), but since we hold that the trend factor was taken into account in the filing, we do not pass on this.

The order of the Commissioner is vacated. Since a proceeding for new rates under a new statute has been initiated, we do not remand the case to the Commissioner. Commissioner of Insurance v. Automobile Rate Office, 294 N.C. 60, 241 S.E.2d 324 (1978).

Order vacated.

BRITT and HEDRICK, JJ., concur.