Current Status Bill Number:674 Type of Legislation:General Bill GB Introducing Body:Senate Introduced Date:19970422 Primary Sponsor:Saleeby All Sponsors:Saleeby Drafted Document Number:bbm\9382jm.97 Residing Body:Senate Current Committee:Banking and Insurance Committee 02 SBI Subject:Property, casualty, and inland marine insurance; territorial and risk classification plans, motor vehicle liability
Body Date Action Description Com Leg Involved
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Senate 19970422 Introduced, read first time, 02 SBI
referred to Committee
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TO AMEND SECTION 38-73-10, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE DECLARATION OF THE PURPOSE AND THE CONSTRUCTION OF THE CHAPTER ON PROPERTY, CASUALTY, AND INLAND MARINE INSURANCE AND SURETY RATES AND RATEMAKING ORGANIZATIONS, SO AS TO REPLACE REFERENCES TO "DEPARTMENT OF INSURANCE" WITH "DIRECTOR OF THE DEPARTMENT OF INSURANCE OR HIS DESIGNEE", ALLOW FOR APPROVAL OF RISK CLASSIFICATION AND TERRITORIAL PLANS, AND DELETE CERTAIN LANGUAGE; TO AMEND SECTION 38-73-720, AS AMENDED, RELATING TO INSURANCE AND THE POWER TO ESTABLISH RISK AND TERRITORIAL CLASSIFICATIONS, SO AS TO, AMONG OTHER THINGS, DELETE CERTAIN LANGUAGE AND ADD A PROVISION THAT ANY RISK CLASSIFICATION OR CLASS PLAN WHICH DOES NOT RESULT IN AN INCOME LEVEL INCREASE FOR AN INSURER MUST NOT BE CONSIDERED A RATE CHANGE SUBJECT TO THE REQUIREMENTS OF SECTION 38-73-920; TO AMEND SECTION 38-73-730, AS AMENDED, RELATING TO INSURANCE AND RISK CLASSIFICATION PLANS, SO AS TO, AMONG OTHER THINGS, ALLOW FOR APPROVAL OF RISK AND TERRITORIAL CLASSIFICATION PLANS; TO AMEND SECTION 38-73-737, RELATING TO THE DRIVER TRAINING COURSE CREDIT TO BE APPLIED TOWARD LIABILITY AND COLLISION INSURANCE COVERAGE, SO AS TO, AMONG OTHER THINGS, DELETE CERTAIN LANGUAGE, AND PROVIDE FOR DRIVER TRAINING COURSE CREDIT MANDATED BY REGULATION BY ORDER OF THE DIRECTOR OF THE DEPARTMENT OF INSURANCE OR HIS DESIGNEE OR WITHIN ANY INSURER'S APPROVED CLASSIFICATION PLAN; TO AMEND SECTION 38-73-760, AS AMENDED, RELATING TO INSURANCE AND UNIFORM STATISTICAL PLANS, SO AS TO, AMONG OTHER THINGS, ALLOW FOR APPROVAL OF RISK AND TERRITORIAL CLASSIFICATION PLANS FOR AUTOMOBILE INSURANCE, DELETE CERTAIN LANGUAGE AND PROVISIONS, AND ADD A PROVISION THAT, BY JANUARY 1, 1998, THE REINSURANCE FACILITY SHALL FILE WITH THE DIRECTOR OF THE DEPARTMENT OF INSURANCE FOR APPROVAL A MERIT RATING AND RISK CLASSIFICATION PLAN TO BE USED BY ALL DESIGNATED CARRIERS FOR BUSINESS WRITTEN BY DESIGNATED PRODUCERS AND THAT, IN THE ALTERNATIVE, THE FACILITY MAY ADOPT ANY MERIT RATING AND RISK CLASSIFICATION PLAN ISSUED BY ORDER OF THE DIRECTOR OR APPROVED FOR A LICENSED RATING ORGANIZATION; TO AMEND SECTION 38-73-770, AS AMENDED, RELATING TO INSURANCE AND THE REQUIREMENT THAT CLASSIFICATION PLANS MUST BE STRUCTURED TO PRODUCE FAIR RATES, SO AS TO PROVIDE FOR APPROVAL OF CLASSIFICATION PLANS BY THE DIRECTOR OF THE DEPARTMENT OF INSURANCE OR HIS DESIGNEE; TO AMEND SECTION 38-77-10, AS AMENDED, RELATING TO THE DECLARATION OF THE PURPOSE OF THE CHAPTER ON AUTOMOBILE INSURANCE, SO AS TO PROVIDE FOR APPROVAL OF RISK AND TERRITORIAL CLASSIFICATION PLANS BY THE DIRECTOR OF THE DEPARTMENT OF INSURANCE OR HIS DESIGNEE, AND DELETE REFERENCE TO A CODE SECTION; TO AMEND SECTION 38-77-120, AS AMENDED, RELATING TO AUTOMOBILE INSURANCE AND THE REQUIREMENTS FOR NOTICE OF CANCELLATION OF OR REFUSAL TO RENEW A POLICY OF INSURANCE, SO AS TO SPECIFY THAT THE CODE SECTION APPLIES TO A POLICY OF AUTOMOBILE LIABILITY INSURANCE; TO AMEND SECTION 38-77-285, AS AMENDED, RELATING TO THE REQUIREMENT THAT ALL AUTOMOBILE INSURANCE COVERAGES MUST BE IN ONE POLICY, SO AS TO DELETE THE EXCEPTION THAT ALL AUTOMOBILE INSURANCE POLICIES IN EFFECT AT A CERTAIN TIME MAY CONTINUE IN FORCE UNTIL THE EXPIRATION DATE OF THE POLICY; BY ADDING SECTION 56-5-5315 SO AS TO PROVIDE THAT A PERSON VIOLATING SECTION 56-5-5310, WHICH MANDATES THAT A MOTOR VEHICLE SHALL NOT BE OPERATED UNLESS ITS EQUIPMENT IS IN GOOD WORKING ORDER AND THE VEHICLE IS IN SAFE MECHANICAL CONDITION, FOR A FIRST OFFENSE HAS TEN DAYS TO REPAIR A TAILLIGHT IF THE VIOLATION WAS FOR NOT HAVING A TAILLIGHT IN GOOD WORKING ORDER AND THAT IF THE PERSON IS FOUND TO BE IN CONTINUING VIOLATION OF SECTION 56-5-5310 AFTER THE TEN-DAY PERIOD, HE MUST BE PUNISHED AS PROVIDED BY LAW; TO AMEND SECTION 38-77-600, AS AMENDED, RELATING TO AUTOMOBILE INSURANCE AND THE REINSURANCE FACILITY'S RECOUPMENT CHARGE, SO AS TO DELETE THE CURRENT PROVISIONS OF THE SECTION, AND ADD PROVISIONS WHICH PROVIDE, AMONG OTHER THINGS, THAT THE INSURANCE PREMIUM CHARGED BY AUTOMOBILE INSURERS FOR LIABILITY COVERAGE UPON EACH PRIVATE PASSENGER AUTOMOBILE AND FOR EACH NONOWNER'S POLICY MUST INCLUDE A BASE RECOUPMENT FEE, THAT FOR THE YEAR JULY 1, 1999 TO JUNE 30, 1999 THAT BASE RECOUPMENT FEE MUST BE THE RECOUPMENT FEE APPROVED FOR SAFE DRIVERS AS OF JULY 1, 1997, THAT BEGINNING DECEMBER 2, 1998, THE BASE RECOUPMENT FEE MUST BE REVIEWED ANNUALLY BY DECEMBER SECOND BY A COMMITTEE, THAT THE BASE RECOUPMENT FEE MUST BE CALCULATED BY FACTORING NO MORE THAN .386 AGAINST THE TOTAL LOSSES OF THE FACILITY FROM THE PRECEDING FACILITY FISCAL YEAR, AND THAT THE RESULTING PRODUCT MUST BE DIVIDED BY THE NUMBER OF INSURED PRIVATE PASSENGER AUTOMOBILES WITHIN THIS STATE; TO AMEND SECTION 38-77-620, AS AMENDED, RELATING TO THE INCLUSION OF THE REINSURANCE FACILITY'S RECOUPMENT CHARGES IN AUTOMOBILE INSURANCE RATES, SO AS TO DELETE THE REFERENCE TO SECTION 38-77-610 AND REPLACE IT WITH A REFERENCE TO SECTION 38-77-600; TO AMEND SECTION 38-77-910, AS AMENDED, RELATING TO THE AUTOMOBILE INSURANCE LAW OF SOUTH CAROLINA AND UNLAWFUL DISTINCTIONS BETWEEN POLICYHOLDERS OR APPLICANTS, SO AS TO PROVIDE FOR APPROVAL OF RATING PLANS FOR THE CLASSIFICATION OF RISKS AND TERRITORIES, AND DELETE REFERENCE TO THE DEPARTMENT OF INSURANCE AND REPLACE IT WITH "DIRECTOR OR HIS DESIGNEE"; TO AMEND SECTION 38-77-950, AS AMENDED, RELATING TO UNREASONABLE OR EXCESSIVE USE OF THE REINSURANCE FACILITY BY AN INSURER AND NOTICE TO A POLICYHOLDER THAT HIS AUTOMOBILE INSURANCE POLICY IS IN THE FACILITY, SO AS TO, AMONG OTHER THINGS, PROVIDE FOR APPROVAL OF A RATING PLAN FOR THE CLASSIFICATION OF RISKS, DELETE CERTAIN LANGUAGE, AND PROVIDE THAT IF AN INSURER CEDES CERTAIN CLASSES OR RATING CATEGORIES WHICH PRODUCE LOSS RATIOS TO THE FACILITY WHICH ARE GREATER THAN THE STATEWIDE AVERAGE FOR THE SAME OR SUBSTANTIALLY SIMILAR CLASSES OR RATING CATEGORIES, THE DIRECTOR OF THE DEPARTMENT OF INSURANCE OR HIS DESIGNEE MAY ORDER THAT INSURER TO ALTER ITS RATING OR CLASS PLAN, OR THE FACILITY'S GOVERNING BOARD MAY IMPOSE A THIRTY-FIVE PERCENT CESSION LIMITATION UPON THAT CLASS OR RATING CATEGORY; AND TO REPEAL SECTIONS 38-73-731, RELATING TO INSURANCE, REMOVAL FROM THE YOUTHFUL DRIVER CLASSIFICATION, AND REFUND OF EXCESS PREMIUM PAID, 38-73-1425, RELATING TO FINAL RATE OR PREMIUM CHARGE FOR PRIVATE PASSENGER AUTOMOBILE INSURANCE RISK CEDED TO THE REINSURANCE FACILITY, 38-77-360, RELATING TO THE PROVISIONS PROHIBITING AN INCREASE IN AUTOMOBILE INSURANCE PREMIUMS AFTER CERTAIN FIRST OFFENSE VIOLATIONS, AND 38-77-610, RELATING TO AUTOMOBILE INSURANCE AND THE FILING OF RECOUPMENT CHARGES.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 38-73-10(a)(2) of the 1976 Code, as last amended by Act 148 of 1989, is further amended to read:
"(2) empower the director or his designee to fix, establish, and promulgate any uniform statistical plan necessary or appropriate to obtain all automobile insurance loss and loss adjustment expense experience, other expense experience, and all other appropriate statistical and financial data from insurers, rating organizations, and advisory organizations engaged in an automobile insurance business in this State to the end that the department director or his designee shall promulgate or approve the risk classification and territorial plans to be used by all insurers of automobile insurance in this State and in order that the director or his designee may test the risk and territorial differentials previously established against the most recently available loss experience;"
SECTION 2. Section 38-73-720 of the 1976 Code, as last amended by Section 783 of Act 181 of 1993, is further amended to read:
"Section 38-73-720. The director or his designee may approve or, through order, fix, establish, and promulgate fair and reasonable risk classifications and territories for automobile insurance risks in accordance with the criteria and standards mentioned in Section 38-73-730 and consistent with the purposes of this chapter and Chapter 77 of this title.
The A classification plan when utilized by insurers of automobile insurance must be introduced actuarially on-balance so that no increase in income level is produced by the filed classification plans. Decreases for income levels are encouraged. The classification plan must be consistent with the classification plans approved for use on a countrywide basis by the rating organization having the largest number of members or subscribers in South Carolina. In addition, the director or his designee shall not permit within the revised risk classification plan a distinction in bodily injury liability premiums charged or property damage liability premiums charged because of the type of private passenger automobile insured Any risk classification or class plan which does not result in an income level increase for an insurer must not be considered a rate change subject to the requirements of Section 38-73-920."
SECTION 3. Section 38-73-730 of the 1976 Code, as last amended by Section 783 of Act 181 of 1993, is further amended to read:
"Section 38-73-730. No distinctions are permitted nor or may be made between policyholders or applicants for automobile insurance as respects coverages, policy terms, rates, premium payment arrangements, claim services, or other services provided by the insurer directly or through its agents or employees except as the distinctions are relevant to and reflected in insurers' the insurer's rating classifications or under risk and territorial classification plans promulgated or approved by the department director or his designee. No risk classification plan may be promulgated or approved unless the criteria used for classifying risks are objective, clear, and unequivocal and based upon factually or statistically supported data, nor or unless the classifications in the rating plan are calculated to render possible the compilation of credible statistical data both for purposes of determining premiums and losses and for comparing the relative relationships between the loss or expense experience or both of the respective classes. The legislative intent is to make it possible for the director or his designee to determine the total profit, or loss, and expense expenses, and operating results of the entire line of automobile insurance and each component thereof and of each automobile insurer transacting insurance within the line and each component and to make price comparisons between the rates and premium charges of the various insurers. It is further the policy of this chapter to render possible the evaluation by the director or his designee of the performance of the total insurance market and to enable him thereby to assist automobile insurance consumers in making appropriate consumer decisions."
SECTION 4. Section 38-73-737(A) and (E) of the 1976 Code, both as added by Act 496 of 1994, are amended to read:
"(A) Premium rates charged for liability coverages and collision coverage under a private passenger automobile insurance policy are subject to an appropriate driver training course credit once satisfactory evidence is presented that an applicant for the credit, who is not subject to the youthful operator-approved driver training course credit mandated by Regulation 69-13.2(C) regulation, by order of the director or his designee, or within any insurer's approved classification plan, has completed successfully an approved driver training course. The amount of the credit may be determined by each individual insurer based upon factually or statistically supported data and is subject to prior approval by the commissioner director or his designee. The credit must be afforded to the operator for thirty-six months from the date the approved driver training course was completed. The insurer may require as a condition of providing and maintaining the credit, that the insured for a three-year period after course completion not be involved in an accident for which the insured is at fault. The credit must be afforded by each insurer in a nondiscriminatory manner to all applicants, other than those considered within Regulation 69-13.2(C) not subject to the youthful operator-approved driver training course credit.
(E) Only the vehicle driven by drivers who have completed successfully the driver training course qualifies for the insurance credit. In order for the credit to apply, the certificate must be furnished by the named insured, principal operator of the insured vehicle, and all occasional operators named in the policy as provided in Department of Insurance Regulation 69-13.1(II)(C). Other vehicles which may be operated by other family members who have not completed the driver training course do not qualify for the insurance credit unless the primary driver of the additional vehicle has successfully completed the driver training course."
SECTION 5. Section 38-73-760 of the 1976 Code, as last amended by Section 783 of Act 181 of 1993, is further amended to read:
"Section 38-73-760. (a) The director or his designee, through the State Rating and Statistical Division, shall fix, establish, and promulgate any uniform statistical plan that may be necessary or appropriate for the gathering and compilation of statistical data from insurers, rating organizations, or advisory organizations transacting or otherwise engaged engaging in the automobile insurance business in the State. In promulgating any uniform statistical plan, consideration may be given to the extent reasonable or practicable to the rules and forms of the plans used for rating systems in other states. Upon the promulgation of any statistical plan for automobile insurance in this State, the same must be adopted and used by every automobile insurer in this State and every automobile insurer shall constitute the State Rating and Statistical Division its statistical agent for automobile insurance in this State.
(b) The statistical plan may be promulgated so as to provide for any and all statistical and financial data necessary or appropriate to the implementation of the policy of this chapter or Chapter 77 of this title or to yield statistical data reasonably and fairly related to any of the purposes of this article, including, but not limited to, the fixing, establishing, approving, and or promulgating of risk and territorial classification plans for automobile insurance; determining the pure loss rate level indications for automobile insurance in South Carolina based upon all South Carolina loss experience and assisting in the translating of this information into usable form for insurance consumers in terms of the final rates or premium charges of each insurer of automobile insurance, determining the reasonability of loss adjustment expenses, other expenses and profit factors applied by insurers to their pure loss components in arriving at their final rates or premium charges for automobile insurance both for purposes of ensuring that the final rates or premium charges are adequate, not excessive, and not unfairly discriminatory and for ensuring that improper and undue burdens are not imposed upon the South Carolina Reinsurance Facility by way of excessive ceding commissions to ceding insurers; determining the amount, validity, and propriety of class and territorial differentials applied to the general pure loss rate levels and testing not less than annually the appropriateness of the existing differentials in the light of the most recent available loss experience data; determining the amount, validity, and propriety of surcharges and discounts referable to any uniform merit rating plan or system which may have been promulgated or approved by the department director or his designee or which may be under consideration for promulgation or approval, the appropriateness of the surcharges and discounts in the light of the most recent available loss experience data; determining the propriety or validity of any plan for the classification of risks which may be in effect or under consideration based upon the propensities of motor vehicles or classes or types of motor vehicles or their equipment to shield occupants from death or serious injury as a result of crash or based upon the relative invulnerability of the motor vehicles or classes or types of motor vehicles to extensive damage as a result of crash or their repairability at modest expense; or obtaining data relevant to studies being made or to be made by the State Rating and Statistical Division in connection with any of the foregoing or in connection with means and methods for providing appropriate rates for insurance consumers or fostering and encouraging competition among insurers.
(c) The functions and responsibilities of the State Rating and Statistical Division acting as statistical agent for automobile insurers may not be delegated, except that the director may, as the result of competitive bidding, make an agreement with some suitable person, firm, corporation, or other organization for the gathering, compilation, recordation, or computerization of the statistical data. However, these functions are always subject to the supervision, direction, and control of the director or his designee and the examination and oversight of insurers in respect to their obligations to furnish statistical data to him remain the direct responsibility of the director or his designee and may never be delegated other than to the State Rating and Statistical Division.
(d) Any merit rating plan or system promulgated by the department pursuant to the authority contained in subsection (b) likewise extends to and includes automobile collision insurance. However, nothing contained in this subsection (d) requires that the same percentage or dollar amounts for discounts or surcharges apply to collision coverage nor does it require that surcharges already assessed in respect to the liability coverages of the policy again be assessed in respect to the collision coverage afforded by the same policy.
(e) The director or his designee shall require all insurers transacting automobile insurance business in this State to assess surcharges and grant safe driver discounts of no less than twenty percent.
(f)(e) All policies of automobile insurance issued in South Carolina must show on the initial policy or on an attachment to the initial policy and on all premium invoices or attached to all premium invoices, in a form to be approved by the director or his designee, the amount of any surcharge (including loss of safe driver discount) that may be applicable to the policy as a result of any merit rating plan or system promulgated or approved by the department director or his designee. Also to be included, presented in a fashion that is readily understandable, is the reason for the applicable surcharge or the loss of safe driver discount. The amount of the applicable safe driver discount also must be shown.
(f) By January 1, 1998, the reinsurance facility shall file with the director for approval a merit rating and risk classification plan to be used by all designated carriers for business written by designated producers. In the alternative, the facility may adopt any merit rating and risk classification plan issued by order of the director or approved for a licensed rating organization."
SECTION 6. Section 38-73-770 of the 1976 Code, as last amended by Section 783 of Act 181 of 1993, is further amended to read:
"Section 38-73-770. Every classification plan promulgated or approved by the department director or his designee must be so structured as to produce rates or premium charges which are adequate, not excessive, and not unfairly discriminatory."
SECTION 7. Section 38-77-10(1) of the 1976 Code, as last amended by Act 326 of 1996, is further amended to read:
"(1) To provide that every automobile insurance risk which is insurable on the basis of the criteria established in this chapter is entitled to bodily injury liability and property damage liability automobile insurance from the automobile insurer of the applicant's choice on the basis of the same rates, policy forms, claims service, and other services provided by the insurer to all other applicants or insureds falling within the classification of risk and territory under the applicable risk and territorial classification plan promulgated or approved by the department director or his designee so long as all these applicants or insureds have satisfied the same objective standards as established in Sections 38-77-280 and Section 38-73-455;"
SECTION 8. Section 38-77-120(a) of the 1976 Code, as last amended by Section 806 of Act 181 of 1993, is further amended to read:
"(a) No cancellation or refusal to renew by an insurer of a policy of automobile liability insurance is effective unless the insurer delivers or mails, to the named insured at the address shown in the policy, a written notice of the cancellation or refusal to renew. This notice:
(1) must be approved as to form by the director or his designee prior to use;
(2) shall state the date not less than fifteen days after the date of the mailing or delivering on which the cancellation or refusal to renew becomes effective;
(3) shall state the specific reason or reasons of the insurer for cancellation or refusal to renew."
SECTION 9. Section 38-77-285 of the 1976 Code, as amended by Act 146 of 1991, is further amended to read:
"Section 38-77-285. All automobile insurance coverages written by an insurer for an insured's automobile must be written in the same policy except that all automobile insurance policies in effect on the effective date of this section may continue in force until the expiration date of the policy. This section applies only to insurance policies covering vehicles eligible to be ceded to the reinsurance facility."
SECTION 10. The 1976 Code is amended by adding:
"Section 56-5-5315. A person violating Section 56-5-5310 for a first offense has ten days to repair a taillight if the violation was for not having a taillight in good working order. If the person is found to be in continuing violation of Section 56-5-5310 after the ten-day period, he must be punished as provided by law."
SECTION 11. Section 38-77-600 of the 1976 Code, as last amended by Section 826 of Act 181 of 1993, is further amended to read:
"Section 38-77-600. The rate or premium charged by insurers of private passenger automobile insurance must include a facility recoupment charge, which must be added to the appropriate base rate or objective standards rate prescribed in Sections 38-73-455 and 38-73-457. The operating losses of the facility for a twelve-month period must be recouped in the subsequent twelve-month period.
(1) Prior to December first of each year, the governing board of the facility shall calculate the recoupment amount, by coverage, by dividing the net facility operating loss, adjusted to reflect prudently incurred expenses, consistent with the provisions of Section 38-73-465, and the time value of money, by mandated coverage for the preceding facility accounting year, by the total number of earned car years in South Carolina, by coverage, for the same period of time. .386 multiplied by the recoupment is to be borne by risks having zero surcharge points under the Uniform Merit Plan promulgated by the department. The remainder of the recoupment (.614 multiplied by the recoupment) represents R in the formula, P(1)X + 2P(2)X + 3P(3)X + 4P(4)X + 5P(5)X + 6P(6)X + 7P(7)X + 8P(8)X + 9P(9)X + 10P(1)+I0X = R. In this formula to be utilized in determining the facility recoupment charge:
(a) P(1) is the percentage of risks which have one surcharge point under the Uniform Merit Rating Plan;
(b) P(2) is the percentage of risks which have two surcharge points under the Uniform Merit Rating Plan;
(c) P(3) is the percentage of risks which are subject to a surcharge of three points under the Uniform Merit Rating Plan;
(d) P(4) is the percentage of risks which are subject to a surcharge of four points under the Uniform Merit Rating Plan;
(e) P(5) is the percentage of risks subject to a surcharge of five points under the Uniform Merit Rating Plan;
(f) P(6) is the percentage of risks subject to a surcharge of six points under the Uniform Merit Rating Plan;
(g) P(7) is the percentage of risks subject to a surcharge of seven points under the Uniform Merit Rating Plan;
(h) P(8) is the percentage of risks subject to a surcharge of eight points under the Uniform Merit Rating Plan;
(i) P(9) is the percentage of risks subject to a surcharge of nine points under the Uniform Merit Rating Plan;
(j) P(1)+I0 or more is the percentage of risks subject to a surcharge of ten or more points under the Uniform Merit Rating Plan;
(k) X is the dollar amount by coverage, to be charged all risks having one surcharge point under the Uniform Merit Rating Plan promulgated by the department. This dollar amount, by coverage, is the facility recoupment charge to be added to the base rate or objective standards rate prescribed in Sections 38-73-455 and 38-73-457 for all risks which have one surcharge point.
(2) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which have one surcharge point under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of one.
(3) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which have two surcharge points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of two.
(4) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of three points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of three.
(5) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of four points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of four.
(6) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of five points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of five.
(7) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of six points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of six.
(8) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of seven points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of seven.
(9) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of eight points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of eight.
(10) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of nine points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of nine.
(11) The facility recoupment charge by coverage to be added to the base rate or objective standards rate for all risks which are subject to a surcharge of ten or more points under the Uniform Merit Rating Plan is calculated by multiplying X by a factor of ten.
(12) In determining the number of surcharge points a risk has for the purposes of this section, no surcharge points assigned under the Uniform Merit Rating Plan because the principal operator of the automobile has not been licensed in any state for at least one year immediately preceding the writing of the risk or as a result of a failure of any motor vehicle equipment requirement may be considered.
(13) This section applies to all private passenger automobile insurance policies issued or renewed after June 30, 1989. However, insurers unable to comply with the provisions of this section and renewal provisions required by law may comply with this section at any time after June 30, 1989, but in no event later than October 1, 1989.
(A) The insurance premium charged by insurers for liability coverage upon each private passenger automobile and for each nonowner's policy must include a base recoupment fee. For the year July 1, 1998, to June 30, 1999, that base recoupment fee must be recoupment fee approved for safe drivers as of July 1, 1997.
(B) Beginning December 2, 1998, that base recoupment fee must be reviewed annually by December second of each year by a committee which includes the consumer advocate or his designee, the director of the Department of Insurance or his designee, the director of the Department of Public Safety or his designee, the director of the Legislative Audit Council or his designee, and a South Carolina Reinsurance Facility governing board consumer representative elected by, and from among, the consumer representatives serving on that governing board. That base recoupment fee must be calculated by factoring no more than .386 against the total losses of the South Carolina Reinsurance Facility from the preceding reinsurance facility fiscal year. The resulting product must be divided by the number of insured private passenger automobiles within the this State. Any data deemed necessary for committee consideration from any individual or entity transacting business within the State, from any state agency, from any locality or municipality, or from the South Carolina Reinsurance Facility must be provided upon request at reasonable cost. If there is to be any increase in the dollar amount of the base recoupment fee from the preceding year, then that dollar increase must be the subject of a public hearing before the administrative law judge division, if requested pursuant to the notice requirements of Section 38-73-910. The administrative law judge assigned to the public hearing must issue his final decision in the matter no later than February first.
(C) The difference between the total base recoupment fee to be collected and the estimated operating losses of the South Carolina Reinsurance Facility, adjusted to reflect prudently incurred expenses consistent with the provisions of Section 38-73-465 and the time value of money, must be collected as a surcharge recoupment fee. That surcharge recoupment fee must be charged by insurers for private passenger automobiles and nonowners' policies and must be assessed for each drivers' license point assigned, pursuant to the Department of Public Safety's Uniform Point System for Evaluating Operating Records of Drivers, to each operator who is an insured under the liability insurance policy covering the private passenger automobile or under a nonowner's policy.
(D) For the year July 1, 1998, to June 30, 1999, the surcharge recoupment fee must be determined by February 15, 1998, by the committee.
(E) A single conviction for a moving traffic violation which results by law in an automatic driver's license suspension must be assessed twenty-five surcharge recoupment fee points. A moving traffic violation which results in drivers' license points as a result of a conviction, guilty plea, or plea of nolo contendere on or after November 1, 1997, must result in a surcharge recoupment fee. A surcharge recoupment fee must be imposed only once for each violation. There is no time limitation upon the imposition of that surcharge recoupment fee; the surcharge recoupment fee for each point assessed ultimately must be collected. All drivers' license points must be surcharged unless the operator was convicted while operating a motor vehicle not cedeable to the South Carolina Reinsurance Facility. However, in the case of convictions for driving under the influence of alcohol or narcotic drugs, surcharge recoupment fee points must be assigned regardless of the type of motor vehicle being operated at the time of violation.
(F) An accident which results in damages exceeding the thresholds for chargeable accidents set within Section 38-73-455(A)(3) must be assessed three surcharge recoupment fee points. Surcharge recoupment fees for an accident and surcharge recoupment fees for moving traffic violations arising out of a single incident may not be totaled. The higher of the total of all applicable moving traffic violation surcharge recoupment fees arising out of the single incident or the accident surcharge recoupment fee must be imposed. In the event that a conviction for a moving traffic violation occurs subsequent to the insurer's imposition of surcharge recoupment fees for the accident, the insurer may add the difference between the initial accident surcharge recoupment fee and the moving traffic violation to any premium due. Surcharge recoupment fees may not be imposed for accidents considered not chargeable by law as a result of the circumstances detailed within Section 38-73-455(A)(3)(a) through Section 38-73-455(A)(3)(h). Provided, however, that the second and each subsequent accident considered not chargeable by law only as a result of the monetary thresholds detailed within Section 38-73-455(A)(3) must result in one surcharge recoupment fee point.
(G) An operator who has driven for sixty months without having been convicted, pled guilty, or pled nolo contendere to any moving traffic violation resulting in driver's license points or having been involved in an accident resulting in surcharge recoupment points must be forgiven for two surcharge recoupment fee points for his first moving traffic violation resulting in four driver's license points or less.
(H) Beginning February 15, 1999, the surcharge recoupment fee must be determined by the committee no later than February fifteenth of each year. Any data deemed necessary for committee consideration from an individual or entity transacting business within this State, from a state agency, locality or municipality, or the South Carolina Reinsurance Facility must be provided upon request at reasonable cost. If there is to be an increase in the dollar amount of the surcharge recoupment fee from the preceding year, then that increase must be the subject of a public hearing before the administrative law judge division, if requested pursuant to the notice requirements of Section 38-73-910. The administrative law judge assigned to the public hearing must issue his final decision determining whether or not the surcharge recoupment fee amount has been calculated correctly no later than March thirty-first.
(I) Insurers issuing policies for insureds must assess surcharge recoupment fees for all drivers' license points incurred by each operator on or after November 1, 1997, unless that operator can provide documentation that the applicable surcharge recoupment fees were paid. Insurers must assess surcharge recoupment fees against new applicants who were previously licensed out-of-state for all points incurred on or after November 1, 1997, or within the twelve months preceding the application date, whichever is less. Insurers must assess surcharge recoupment fees against new applicants who were previously licensed in State but who were not continuously insured before November 1, 1997, for all points incurred on or after November 1, 1997, or within thirty-six months preceding the application date during which time they were uninsured, whichever is greater. In the event that more than one operator is assigned to a private passenger automobile, surcharge recoupment fees must be totaled for all operators. Insured appeals of assignment of surcharge recoupment fees pursuant to this subsection may be taken to the director or his designee.
(J) Insurers must provide a receipt on demand to an insured if surcharge recoupment fees have been paid to that insurer. Base recoupment fees and surcharge recoupment fees may be advanced or financed in conjunction with owed premiums in any manner allowed by law for the advancing or financing of insurance premiums. Any receipt provided must detail the amount of the surcharge recoupment fees paid, and if the applicable surcharge recoupment fees have not been paid in full, any amount still owed. A policy may be endorsed at any time during a policy period to reflect surcharge recoupment fees applicable as a result of moving traffic violations or accidents surchargeable pursuant to this section occurring prior to the policy inception date regardless of whether the accidents or moving traffic violations were disclosed to the insurer at the policy inception date. Insured appeals of insurer refunds or insurer refusals to issue receipts on demand pursuant to this subsection may be taken to the director or his designee.
(K) Nothing within this section precludes an insurer from utilizing reliable accident or moving traffic violation information from sources other than the Department of Public Safety. In the event that a moving traffic violation for which an operator can be fined or convicted is created which is not included within the Department of Public Safety's Uniform Point System, the committee must set the number of surcharge recoupment points to be factored for each operator against the surcharge recoupment fee.
(L) A person who makes a false statement or misrepresentation and a person who knowingly assists, abets, solicits, or conspires with such person to avoid the proper payment of the imposition of a base or surcharge recoupment fee must be punished as provided within Section 38-55-540(1) through (3).
(M) The director or his designee may promulgate regulations or issue orders necessary to implement this section."
SECTION 12. Section 38-77-620 of the 1976 Code, as amended by Act 148 of 1989, is further amended to read:
"Section 38-77-620. The facility recoupment charges approved or established pursuant to Section 38-77-610 38-77-600 must be added to the approved base rate and objective standards rate in effect for each automobile insurer. The combined rate or premium charge is effective on July first of each year and the recoupment charges must remain constant until July first of the following year. The base rate and objective standards rate may change in accordance with Section 38-73-457 and the other applicable requirements of this title pertaining to the approval of rates or premium charges. Facility recoupment charges must be considered in accordance with:
(1) Any recoupment charge paid by policyholders must be considered premium for the purpose of calculating premium taxes and commissions and is subject to normal policy cancellation procedures.
(2) Any net operating gains resulting from the operation of the facility must be retained by the facility, and the gains and any investment income derived from the gains must be used to offset future operating losses.
(3) The total funds recouped by all insurers less commission and premium tax expenses and time value of money considerations must be paid to the reinsurance facility in accordance with the plan of operation. The governing board shall redistribute the funds to the insurers based upon each insurer's share of the reinsurance facility losses. Recoupment must be used solely for the purpose of recovering past facility operating deficits. The plan of operation must provide that the amount ultimately received by an individual company is not more than the company's share of the reinsurance facility losses, plus the time value of money.
(4) In the making and approval of rates for small commercial automobile risks, as defined in Section 38-77-30, consideration must be given to the net gains or losses incurred by insurers as a result of participation in the operating results and actual, prudently incurred expenses, respectively, of the facility."
SECTION 13. Section 38-77-910 of the 1976 Code, as amended by Section 828 of Act 181 of 1993, is further amended to read:
"Section 38-77-910. It is an act of unlawful discrimination for an automobile insurer to make any distinction between automobile insurance policyholders or applicants for automobile insurance with respect to coverage, rates, claims, or other services except as the distinctions are provided for in the rating plans for the classification of risks and territories promulgated or approved by the department director or his designee."
SECTION 14. Section 38-77-950 of the 1976 Code, as last amended by Section 828 of Act 181 of 1993, is further amended to read:
"Section 38-77-950. It is the intent of this chapter that the facility must not be excessively nor unreasonably utilized by automobile insurers for unfairly competitive purposes or for purposes of unfairly discriminating against certain classes or types of automobile insurance risks having the same or similar objective risk characteristics as other risks in the same class under the rating plan for the classification of risks promulgated or approved by the department, nor director or his designee or for the purpose of discriminating against the risks or risks in certain rating territories. The director or his designee shall prohibit unreasonable or excessive utilization of the facility. A prima facie case of excessive or unreasonable utilization is established upon a showing that an automobile insurance insurer or a group of insurers under the same management has ceded or is about to cede more than thirty-five percent of total direct cedeable written premiums on South Carolina automobile insurance as reported in the most recently filed annual statement of the insurer or group. However, if any insurer cedes certain classes or rating categories which produce loss ratios to the reinsurance facility which are greater than the statewide average for the same or substantially similar classes or rating categories, the director or his designee may order that insurer to alter its rating or class plan or the facility's governing board may impose a thirty-five percent cession limitation upon that class or rating category. Upon the written request of the policyholder, insurance companies doing business in this State shall give written notice to the policyholder informing him whether or not he and a driver under the policy is in the automobile has been ceded to the facility. Insurers shall give written notice to the policyholder of a risk ceded to the facility which does not qualify for the safe driver discount in Section 38-73-760(e) Section 38-73-760(d).
Total direct cedeable written premiums as used in this section do not include premiums attributable to risks ceded to the facility that do not qualify for the safe driver discount in Section 38-73-760(e) for twenty-four months following October 1, 1993."
SECTION 15. Sections 38-73-731, 38-73-1425, 38-77-360, and 38-77-610 of the 1976 Code are repealed.
SECTION 16. Except as may otherwise be specifically provided in this act, this act takes effect upon approval by the Governor.