Bill 3596

                    Current Status

Bill Number:               3596
Ratification Number:       799
Act Number                 673
Introducing Body:          House
Subject:                   Excessive or unreasonable insurance
                           rates

(A673, R799, H3596)

AN ACT TO AMEND SECTION 38-73-1100, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO EXCESSIVE OR UNREASONABLE INSURANCE RATES, SO AS TO INCREASE FROM THREE TO FIVE THE NUMBER OF YEARS OF AN INSURERS BUSINESS WHICH MAY BE INVESTIGATED, PLUS THE YEAR IN WHICH THE INVESTIGATION IS MADE AND PROVIDE FOR THE RATE OF INTEREST OF A REFUND TO BE THE INSURERS AVERAGE RATE OF RETURN FOR THE FIVE YEAR PERIOD AND TO AMEND THE 1976 CODE BY ADDING SECTION 38-73-1110 SO AS TO PROVIDE FOR THE INSURANCE COMMISSIONER TO PROMULGATE A REGULATION CONCERNING THE CALCULATION AND REFUNDING OF EXCESS PROFITS AND FOR THE REQUIREMENTS OF THE REGULATION.

Be it enacted by the General Assembly of the State of South Carolina:

Excessive or unreasonable rates

SECTION 1. Section 38-73-1100 of the 1976 Code, as amended by an act of 1988 bearing ratification number 487, is further amended to read:

"Section 38-73-1100. If at any time it appears to the Commissioner that rates charged for property, casualty, surety, marine, title, or allied lines of insurance in this State are excessive or unreasonable, in that the results of the business of the insurer in this State during the five years immediately preceding the year in which the investigation is made, as indicated by the insurer's annual statements and any supplements to them, show an aggregate operating profit in excess of a reasonable amount, then the Commissioner may order a general reduction in rates which will reduce the operating profit to a reasonable amount. Any reduction ordered by the Commissioner must be applied to the class or classes of risks as the insurer or rating bureau may elect, and they may not be compelled to reduce rates on classes which have not produced a reasonable operating profit for the five-year period. In addition to ordering a general reduction in rates, the Commissioner may also order a pro rata refund of any excessive or unreasonable profits found to have been realized by the insurer, together with interest. The Commissioner shall determine the rate of interest which must be the insurer's average rate of return for the five-year period. Any refund which is ordered must be equitably apportioned among the policyholders entitled to it, and may be given either in the form of a cash refund or as a credit toward future premiums or a combination of these two methods. In determining the question of a reasonable operating profit under this section, the Commissioner as a protection to policyholders shall give proper and reasonable consideration to conflagration liabilities, both within and without this State."

Regulation

SECTION 2. Article 9, Chapter 73, Title 38 of the 1976 Code is amended by adding:

"Section 38-73-1110. In order to assure fair implementation of Section 38-73-1100, the Commissioner shall promulgate a regulation concerning the calculation and refunding of excess profits. The regulation shall include consideration of:

(1) the total operating profits of each insurer in this State for the lines of insurance enumerated in Section 38-73-1100;

(2) the margin by which any insurer's operating results differ from the insurance industry's total results;

(3) the amount of excessive profits earned after the effective date of the refund provision of Section 38-73-1100;

(4) the insurers that operate in this State as affiliates of a group; and

(5) the development period used to determine if unpaid losses are fairly estimated."

Time effective

SECTION 3. This act takes effect upon approval by the Governor.