Current Status Introducing Body:House Bill Number:3690 Primary Sponsor:G. Brown Committee Number:26 Type of Legislation:GB Subject:Motor vehicle insurance, provisions Residing Body:House Current Committee:Labor, Commerce and Industry Date Tabled:19930420 Computer Document Number:BBM/10285JM.93 Introduced Date:19930311 Last History Body:House Last History Date:19930420 Last History Type:Tabled in Committee Scope of Legislation:Statewide All Sponsors:G. Brown Type of Legislation:General Bill
Bill Body Date Action Description CMN Leg Involved
____ ______ ____________ ______________________________ ___ ____________
3690 House 19930420 Tabled in Committee 26
3690 House 19930311 Introduced, read first time, 26
referred to Committee
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TO AMEND THE TITLE OF ARTICLE 5, CHAPTER 77, TITLE 38, CODE OF LAWS OF SOUTH CAROLINA, 1976, BY CHANGING IT FROM "REINSURANCE FACILITY AND DESIGNATED PRODUCERS" TO "REINSURANCE FACILITY; SERVICING CARRIERS AND PRODUCERS"; TO AMEND THE TITLE OF SECTION 38-77-590 BY CHANGING IT FROM "DESIGNATED PRODUCERS" TO "SERVICING CARRIERS AND PRODUCERS"; TO AMEND SECTION 38-77-590, AS AMENDED, RELATING TO DESIGNATED PRODUCERS UNDER THE AUTOMOBILE INSURANCE LAWS, SO AS TO, AMONG OTHER THINGS, DELETE VARIOUS PROVISIONS, ADD PROVISIONS, AND PROVIDE THAT, AMONG OTHER THINGS, THE GOVERNING BOARD OF THE REINSURANCE FACILITY SHALL CONTRACT WITH INSURERS MEETING ELIGIBILITY REQUIREMENTS PROMULGATED BY THE GOVERNING BOARD TO ACT AS SERVICING CARRIERS FOR THE WRITING OF AUTOMOBILE INSURANCE THROUGH PRODUCERS ASSIGNED TO THE SERVICING CARRIER BY THE GOVERNING BOARD; TO AMEND SECTION 38-73-455, AS AMENDED, RELATING TO AUTOMOBILE INSURANCE RATES, SO AS TO DELETE "DESIGNATED" AND REPLACE IT WITH "CONTRACTED" OR "ASSIGNED" AND TO ADD CERTAIN OTHER LANGUAGE; TO AMEND SECTION 38-73-1420, RELATING TO THE REQUIREMENT THAT THE BOARD OF GOVERNORS OF THE SOUTH CAROLINA REINSURANCE FACILITY SHALL FILE AN EXPENSE COMPONENT AND THE USE OF THE COMPONENT AFTER APPROVAL, SO AS TO, AMONG OTHER THINGS, DELETE CERTAIN LANGUAGE, ADD CERTAIN LANGUAGE, AND PROVIDE, AMONG OTHER THINGS, THAT THE BOARD OF GOVERNORS OF THE REINSURANCE FACILITY SHALL FILE AN EXPENSE COMPONENT FOR PRIVATE PASSENGER AND COMMERCIAL AUTOMOBILE INSURANCE RATE OR PREMIUM CHARGES FOR USE WITH THE PURE LOSS COMPONENTS FOR PRIVATE PASSENGER AUTOMOBILE INSURANCE AND SMALL COMMERCIAL RISKS FILED WITH THE COMMISSIONER BY THE RATING ORGANIZATION WITH THE LARGEST NUMBER OF MEMBERS OR SUBSCRIBERS; TO AMEND SECTION 38-77-540, RELATING TO AUTOMOBILE INSURANCE AND THE DUTIES OF A CEDING INSURER, SO AS TO ADD CERTAIN LANGUAGE, INCLUDING REFERENCES TO SECTION 38-73-1420, AND DELETE CERTAIN LANGUAGE AND PROVISIONS, INCLUDING THE PROVISION THAT NO CEDING INSURER MAY INCLUDE IN THE AGENTS' COMMISSIONS COMPONENT OF ITS UNDERWRITING EXPENSES ANY AMOUNT GREATER THAN IT HAS ACTUALLY PAID ITS AGENT AS COMMISSION ON THE REINSURED RISK; AND TO REPEAL SECTION 38-73-1425, RELATING TO THE FINAL RATE OR PREMIUM CHARGE FOR PRIVATE PASSENGER AUTOMOBILE INSURANCE RISK CEDED TO THE REINSURANCE FACILITY.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The title of Article 5, Chapter 77, Title 38 of the 1976 Code is amended to read:
SECTION 2. The title of Section 38-77-590 of the 1976 Code is amended to read:
SECTION 3. Section 38-77-590 of the 1976 Code, as last amended by Act 524 of 1990, is further amended to read:
"Section 38-77-590. (a) Not more than six months after July 9, 1974, or at an earlier time as the Commissioner considers necessary by reason of complaints regarding want of access to automobile insurance in particular areas or want of outlets for producers, the Commissioner shall survey the various areas of the State to ascertain if sufficient marketing outlets exist in all areas or are available to all producers. Upon a finding by the Commissioner that insufficient marketing outlets exist in particular areas or that certain producers have been deprived of a market for risks previously serviced by them, the Commissioner may, after consultation with the Facility, designate one or more insurers to service the areas through agents appointed by them or may designate the producers as the agents of any insurer. The arrangements shall include provision for one hundred percent quota share reinsurance through the Facility of any automobile insurance policy marketed through the arrangements, at the option of the insurer, and the reinsurance is not subject to the statutory provisions or regulations regarding excessive utilization of the Facility The Governing Board of the Reinsurance Facility shall contract with insurers meeting eligibility requirements promulgated by the governing board to act as servicing carriers for the writing of automobile insurance through producers assigned to the servicing carrier by the governing board. The contract shall include a provision for one hundred percent quota share reinsurance through the facility of any automobile insurance policy ceded to the facility. The governing board may establish reasonable nondiscriminatory standards which all servicing carriers must meet for contract renewal. The servicing carriers are not subject to the statutory provisions or regulations regarding excessive utilization of the Reinsurance Facility for policies produced by its assigned servicing agents. The servicing carrier shall cede the risk on every policy of automobile insurance produced by its assigned servicing agents for the Reinsurance Facility. Servicing carriers and their assigned servicing agents may not cancel, nonrenew, or refuse to write any policy of automobile insurance for individual private passenger automobile and small commercial risks as defined in this chapter except for nonpayment of premium, failure to possess a valid drivers license, or any other valid reason promulgated by the commissioner which is not consistent with the purposes of this chapter.
(b) After the effective date of this section, those producers previously designated by the Commissioner may continue to serve in that capacity under the jurisdiction and control of the governing board of the Facility, except that any change in the rate of commissions allowed designated producers is subject to the Commissioner's approval Producers assigned to a servicing carrier in accordance with this section and producers previously designated to a servicing carrier by the commissioner or the Governing Board of the Reinsurance Facility must remain assigned to that servicing carrier until and unless the producer's written request to change the assignment is received by the Governing Board of the Reinsurance Facility or until the assignment is terminated and transferred to another carrier by the governing board upon nonrenewal or termination of that servicing carrier's contract.
(c) A producer may be designated by the governing board of the Facility upon application for designation and is eligible for designation upon a finding by the governing board that the applicant meets the following qualifications A producer may apply to the governing board for assignment to a servicing carrier and is eligible for assignment upon a finding by the governing board that the applicant meets the following qualifications:
(1) The applicant has been, for ten five continuous years, a licensed resident property and casualty insurance agent and is at the time of application an agency owner or principal associated with an agency in South Carolina which has been actively in business for five years with authority from one or more licensed insurers to write liability and physical damage insurance on private passenger automobiles; and
(2) At the time of application the applicant is servicing and owns the renewals on South Carolina private passenger and commercial automobile insurance business, the net premiums on which exceeded seventy-five one hundred thousand dollars of potential cedeable automobile insurance during any one of the previous five calendar years preceding the application; and
(3) Neither the applicant, nor any employee of the applicant or the applicant's corporate agency, nor any partner or shareholder in any related insurance agency, related premium service company, or related other business, has any direct or indirect connection with any voluntary market outlet for the purpose of writing any type of automobile insurance in this State except for motorcycle insurance and types not cedeable to the facility;
(4) The applicant has not contributed to his termination as agent by any insurer because of any illegal breach of agency agreement or other related, improper, or unethical conduct; and
(5) The books, records, and accounts of the insurance business of the applicant have been audited at the expense of the applicant and found by the governing board to be indicative of a financially sound operation.
(d) Prior to designation the assignment as a producer, the applicant shall furnish at his expense a bond in an amount of not less than fifty thousand dollars for the faithful performance of the duties as a producer, executed by the applicant as principal and a corporate surety licensed to do business in this State as surety, and shall also have effective errors and omissions insurance by an insurer licensed to do business in this State, with the bond and errors and omissions insurance being subject to approval by the governing board.
(e) The governing board shall assign a specific location to each producer designated. The governing board shall determine from the commissioner the locations assigned by him to those producers whom the commissioner has designated. Designated producers may not open or maintain any other locations without the written authorization of the governing board; provided, however, that an applicant maintaining multiple offices on June 4, 1987, is entitled to maintain two locations as a designated agent which he owned and operated at that time and through which premiums in at least the amount of seventy-five thousand dollars were written. The governing board shall terminate the designation, and the commissioner shall revoke all agents' licenses of any producer who does not comply with this requirement upon demand by the governing board. Upon termination, the producer's expirations on designated business become the property of the facility A producer assigned to a servicing carrier may not open or maintain more than one location at which the solicitation or transaction of any automobile insurance business is conducted without the written authorization of the governing board. The governing board shall terminate the assignment of any servicing agent who does not comply with this requirement upon demand by the governing board. Applicants maintaining multiple offices on January 1, 1993, are entitled to maintain two locations as a producer which the agent owned and operated at that time and through which automobile insurance premiums in at least the amount of one hundred and fifty thousand dollars were written by the agent at each of the two locations.
(f) The designation of a producer by the Commissioner or the governing board is transferable to a spouse, child, parent, brother, or sister of the producer upon the designated producer's retirement, incapacity, or death. The duties of a designated producer may be performed by one or more qualified employees of the producer or the producer's corporate agency The assignment of a producer to a servicing carrier by the governing board is transferable to a spouse, child, parent, brother, or sister of the producer upon the producer's retirement, incapacity, or death. The assignment may, at the election of the producer by written notice thereof to the governing board, be irrevocably transferred to a corporation authorized to transact business in South Carolina by the Secretary of State and licensed by the insurance commissioner as an insurance agency. The duties of an individual or corporate producer may be performed by one or more qualified employees of the producer or the individual producer's corporate agency.
(g) Neither a designated producer, nor any employee of a designated producer or the producer's corporate agency, nor any partner or shareholder in any related insurance agency, related premium service company, or related other business, may have any direct or indirect connection with any voluntary market outlet for the purpose of writing any type of automobile insurance in this State except for motorcycle insurance and types not cedable to the Facility. The governing board shall terminate the designation of any producer, and the Commissioner shall revoke all licenses of the producer and of any other insurance agent and premium service company knowingly involved in this connection. Upon termination, the producer's expirations on designated business become the property of the Facility.
(h) (g) A designated servicing carrier who fails a claims audit shall have no new designated producer servicing agent assignments until the time it passes a re-audit within a reasonable time prescribed by the governing board. If this carrier fails two claims audits, including a re-audit, within any three-year period, that carrier is disqualified for renewal of its contract with the facility upon expiration of its existing contract.
(h) The Governing Board of the Reinsurance Facility shall not contract with an insurer to act as a servicing carrier solely for the insurer's own duly authorized and voluntarily contracted agents. Servicing carriers shall accept assignments of servicing agents on an equitable, nondiscriminatory basis promulgated by the governing board. Insurers, other than servicing carriers, shall not cede risks to the Reinsurance Facility on new or renewal policies produced by a servicing agent but may, however, subject to the provisions of this chapter and specifically Section 38-77-950, cede risks to the Reinsurance Facility on new and renewal policies produced by their own duly authorized agents who are not contracted and assigned to a servicing carrier as provided for in this section."
SECTION 4. Section 38-73-455(C) of the 1976 Code, as last amended by Act 113 of 1991, is further amended to read:
"(C) Member companies of an affiliated group of automobile insurers may not utilize different filed rates for automobile insurance coverages which they are mandated by law to write. For the purpose of this section, an affiliated group of automobile insurers includes a group of automobile insurers under common ownership, management, or control. Those automobile insurers designated contracted pursuant to Section 38-77-590(a), for automobile insurance risks written by them through producers designated assigned by the facility governing board pursuant to that section, and all insurers on all risks ceded to the facility shall utilize the rates or premium charges by coverage filed and authorized for use by the rating organization licensed by the commissioner pursuant to Article 11, Chapter 73 of this title, which has the largest number of members or subscribers for automobile insurance rates. However, those automobile insurers designated pursuant to Section 38-77-590(a) are not required to use those same rates or premium charges described in the preceding sentence for risks written by them through their authorized agents not appointed pursuant to Section 38-77-590 on risks not ceded to the facility."
SECTION 5. Section 38-73-1420 of the 1976 Code, as added by Act 148 of 1989, is amended to read:
"Section 38-73-1420. After June 30, 1989, the Board of Governors of the South Carolina Reinsurance Facility shall file an expense component for private passenger and commercial automobile insurance rate or premium charges for use with after the rating organization with the largest number of members or subscribers has filed a the pure loss component components for private passenger automobile insurance and small commercial risks filed with the commissioner by the rating organization with the largest number of members or subscribers. Upon the approval of such component components, those automobile insurers designated contracted pursuant to Section 38-77-590(A) (a), for risks written by them through producers designated assigned pursuant to that same section, and all insurers on all risks ceded to the facility shall utilize these final rate or premium charges. Automobile insurers designated contracted pursuant to Section 38-77-590(A) (a) are not required to use those same final rates or premium charges for risks written through their agents not appointed assigned pursuant to Section 38-77-590 on risks not ceded to the facility."
SECTION 6. Section 38-77-540 of the 1976 Code is amended to read:
"Section 38-77-540. The ceding insurer shall transfer or credit to the facility on any policy of automobile insurance reinsured by the facility the pure loss component of its the rate or premium charge together with the profit and contingency component of the rate or premium charge as determined under its the rating plan or system as filed with the department by the governing board of the facility in accordance with Section 38-73-1420. The ceding insurer shall retain as and for its ceding commission the allocated loss adjustment expense component as well as the underwriting and administrative expense components of the rate or premium charge under ceding insurer's the rating plan or system as filed with the department by the governing board of the facility in accordance with Section 38-73-1420. However, no ceding insurer may include in the agents' commissions component of its underwriting expenses any amount greater than it has actually paid its agent as commission on the reinsured risk."
SECTION 7. Section 38-73-1425 of the 1976 Code is repealed.
SECTION 8. This act takes effect July 1, 1993.