2011 Connecticut Code
Title 38a Insurance
Chapter 701 Personal and Commercial Risk Insurance Rating Practices
Sec. 38a-665. (Formerly Sec. 38-201c). Standards for the making and use of rates re commercial risk insurance.

      Sec. 38a-665. (Formerly Sec. 38-201c). Standards for the making and use of rates re commercial risk insurance. The following standards, methods and criteria shall apply to the making and use of rates pertaining to commercial risk insurance:

      (a) Rates shall not be excessive or inadequate, as herein defined, nor shall they be unfairly discriminatory. No rate shall be held to be excessive unless (1) such rate is unreasonably high for the insurance provided or (2) a reasonable degree of competition does not exist in the area with respect to the classification to which such rate is applicable. No rate shall be held inadequate unless (A) it is unreasonably low for the insurance provided, and (B) continued use of it would endanger solvency of the insurer, or unless (C) such rate is unreasonably low for the insurance provided and the use of such rate by the insurer using same has, or, if continued, will have the effect of destroying competition or creating a monopoly.

      (b) Consideration shall be given, to the extent possible, to past and prospective loss experience within and outside this state, to conflagration and catastrophe hazards, to a reasonable margin for underwriting profit and contingencies, to past and prospective expenses both country-wide and those specially applicable to this state, to investment income earned or realized by insurers both from their unearned premium and loss reserve funds, and to all other factors, including judgment factors, deemed relevant within and outside this state and in the case of fire insurance rates, consideration may be given to the experience of the fire insurance business during the most recent five- year period for which such experience is available. Consideration may be given in the making and use of rates to dividends, savings or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members or subscribers.

      (c) The systems of expense provisions included in the rates for use by any insurer or group of insurers may differ from those of other insurers or groups of insurers to reflect the operating methods of any such insurer or group with respect to any kind of insurance, or with respect to any subdivision or combination thereof.

      (d) Risks may be grouped by classifications for the establishment of rates and minimum premiums, provided no surcharge on any motor vehicle liability or physical damage insurance premium may be assigned for (1) any accident involving only property damage of one thousand dollars or less, or (2) the first accident involving only property damage of more than one thousand dollars which would otherwise result in a surcharge to the policy of the insured, within the experience period set forth in the insurer's safe driver classification plan, or (3) any violation of section 14-219, unless such violation results in the suspension or revocation of the operator's license under section 14-111b, or (4) less than three violations of section 14-218a within any one-year period, or (5) any accident caused by an operator other than the named insured, a relative residing in the named insured's household, or a person who customarily operates the insured vehicle. Classification rates may be modified to produce rates for individual risks in accordance with rating plans which provide for recognition of variations in hazards or expense provisions or both. Such rating plans may include application of the judgment of the insurer and may measure any differences among risks that can be demonstrated to have a probable effect upon losses or expenses.

      (e) Each rating plan shall establish appropriate eligibility criteria for determining significant risks which are to qualify under the plan, provided all such plans shall include as an eligible significant risk the state of Connecticut or its instrumentalities. Rating plans which comply with the provisions of this subsection shall be deemed to produce rates which are not unfairly discriminatory.

      (f) Notwithstanding the provisions of subsections (a) to (e), inclusive, of this section, no rate shall include any adjustment designed to recover underwriting or operating losses incurred out-of-state.

      (g) The commissioner may adopt regulations in accordance with the provisions of chapter 54 concerning rating plans to effectuate the provisions of this section.

      (1969, P.A. 665, S. 3; P.A. 77-199, S. 2, 12; 77-200; P.A. 78-25; P.A. 79-204, S. 1, 3; 79-609, S. 4; P.A. 80-276, S. 2, 6; P.A. 82-353, S. 4, 26; P.A. 84-165, S. 1; P.A. 85-45, S. 2; P.A. 88-73, S. 3; P.A. 89-114, S. 1; 89-193, S. 1.)

      History: P.A. 77-199 substituted "or" for "and" before Subdiv. (2) in Subsec. (a); P.A. 77-200 prohibited assignment of surcharge on motor vehicle liability insurance premium for accidents involving property damage of $300 or less in Subsec. (d); P.A. 78-25 applied prohibition of surcharge in Subsec. (d) to physical damage insurance premiums; P.A. 79-204 required consideration of investment income earned or realized by insurers from unearned premium and loss reserve funds in Subsec. (b); P.A. 79-609 prohibited surcharge for violations of Sec. 14-219 unless violation results in suspension or revocation of operator's license in Subsec. (d); P.A. 80-276 prohibited surcharge for less than three violations of Sec. 14-218a in Subsec. (d); P.A. 82-353 limited the application of the section to commercial risk insurance where previously applicable to all classes of insurance to which Secs. 38-201a to 38-201s apply and added Subsec. (f) concerning the adoption of regulations for rating plans, effective July 1, 1983; P.A. 84-165 amended Subsec. (d) to increase the minimum damage requirement for premium surcharges from $300 to $600; P.A. 85-45 added Subsec. (d)(4) prohibiting any premium surcharge based on an accident caused by someone other than the named insured, a resident relative or a customary operator of the vehicle; P.A. 88-73 amended Subsec. (d)(1) to increase minimum property damage requirement for premium surcharges from $600 to $1,000; P.A. 89-114 inserted new Subsec. (f) providing that no rate shall include any adjustment designed to recover underwriting or operating losses incurred out-of-state and relettered former Subsec. accordingly; P.A. 89-193 added new Subsec. (d)(3) providing that no surcharge on an automobile insurance policy may be assigned for the first accident involving only property damage of more than $1,000 which would otherwise result in a surcharge to the policy of the insured, within a certain experience period and renumbered the remaining Subdivs.; Sec. 38-201c transferred to Sec. 38a-665 in 1991.

      See Sec. 38a-686 re standards for the making and use of rates for personal risk insurance.