The purpose of this chapter is to promote the public welfare by regulating insurance rates to the end that they shall not be excessive, inadequate or unfairly discriminatory and to authorize and regulate cooperative action among insurers in rate-making and in other matters within the scope of this chapter. Nothing in this chapter is intended:
(1) To prohibit or discourage reasonable competition; or
(2) Prohibit or encourage, except to the extent necessary to accomplish the aforementioned purpose, uniformity in insurance rates, rating systems, rating plans or practices.
This chapter shall be liberally interpreted to carry into effect the provisions of this section.
'Advisory organization' means every group, association or other organization of insurers, whether located within or without this state, which assists insurers which make their own filings or rating organizations in rate-making by collection and furnishing of loss or expense statistics or by the submission of recommendations, but which does not make filings under Articles 2 or 3 of this chapter.
Every advisory organization assisting any rating organization or any insurer whose rates are subject to regulation under Article 2 of this chapter or any rating organization or any insurer whose rates are subject to regulation under Article 3 of this chapter, as a condition precedent to the rendering of such assistance, shall comply with the provisions of this article and any, and all, duly promulgated rules or regulations or orders of the commissioner relative to insurance rates, rate-making or assistance therein.
(a) Every advisory organization shall file with the commissioner:
(1) A copy of its constitution, its articles of agreement or association or its certificate of incorporation and its bylaws, rules and regulations governing its activities;
(2) A list of its members;
(3) The name and address of a resident of this state upon whom notices or orders of the commissioner or process issued at his direction may be served; and
(4) An agreement that the commissioner may examine such advisory organization in accordance with the provisions of this section.
(b) If, after a hearing, the commissioner finds that the furnishing of such information or assistance involves any act or practice which is unfair or unreasonable or otherwise inconsistent with the provisions of Articles 2 or 3 of this chapter, as the case may be, he may issue a written order specifying in what respects such act or practice is unfair or unreasonable or otherwise inconsistent with the provisions of Articles 2 or 3 of this chapter and requiring the discontinuance of such act or practice.
(c) No insurer which makes its own filings nor any rating organization shall support its filings by statistics or adopt rate-making recommendations furnished to it by an advisory organization which has not complied with this article or with an order of the commissioner involving such statistics or recommendations issued under subsection (b) of this section. If the commissioner finds such insurer or rating organization to be in violation of this subsection, he may issue an order requiring the discontinuance of such violation.
(a) Every advisory organization rendering assistance to a rating organization or to an insurer whose rates are subject to regulation under Article 2 of this chapter shall agree to be subject to examination in the same manner, and upon the same terms and conditions, as rating organizations and insurers making their own rates are pursuant to Section 27-13-36.
(b) Every advisory organization rendering assistance to a rating organization or to an insurer whose rates are subject to regulation under Article 3 of this chapter shall agree to be subject to examination in the same manner, and upon the same terms and conditions, as rating organizations and insurers making their own rates are pursuant to Section 21-13-74.
The commissioner is authorized, and directed, to enforce this article, and he is hereby authorized to make such orders, rules and regulations as are reasonable and proper to facilitate the administration hereof.
The provisions of this article are supplemental and shall be construed in pari materia with other laws relating to insurance rates and rate-making.
(a) Any rates, rating schedules, or rating manuals submitted to or filed with the Commissioner of the Department of Insurance for private passenger automobile liability insurance and private passenger automobile physical damage insurance shall include an appropriate reduction in premium charges if the principal operator is 55 years of age or older and has successfully completed a motor vehicle accident prevention course approved pursuant to this article.
(b) Upon successful completion of an approved motor vehicle accident prevention course, each participant shall be issued, by the course's sponsoring entity, a certificate of completion which shall be the basis of the qualification for the reduction in the automobile insurance premium.
(c) The premium reduction required in this section shall be effective for an insured for a three-year period after successful completion of the approved course, except that the insurer may require, as a condition of providing and maintaining the premium reduction, that the insured not be involved in an accident for which the insured is at fault nor be found guilty of a moving violation during the three-year period after course completion.
(d) Any discount used by an insurer shall be presumed appropriate unless credible evidence data demonstrates otherwise.
(e) This section shall not apply if the approved course is taken by a person who is specified by a court or other governmental entity resulting from a moving traffic violation.
(f) Each participant shall take an approved course every three years to continue to be eligible for the reduction in premiums provided in this section.
To qualify for the insurance premium reduction described in Section 27-13-120, the motor vehicle accident prevention course shall be sponsored by the National Safety Council, the American Automobile Association, or the American Association of Retired Persons or shall be an equivalent program approved by the Department of Public Safety. The program shall consist of not less than eight classroom hours of instruction, the instructors for the program shall be certified by the sponsoring entity, and the contents of the course shall be outlined by the sponsoring entity.
The provisions of this article shall not apply to individuals 55 years of age or older that are already receiving a rate reduction, based on attained age, from their insurance company.
The commissioner is charged with the duty of the administration of all laws now relating, or hereafter relating, to insurance rates and rating systems of all companies authorized to do business in the State of Alabama, with the exception of rates of life and health and accident business and rates of title insurance.
For the purposes of this article, unless otherwise stated, the following terms shall have the meanings respectively ascribed to them by this section.
(1) RATE. The unit charge by which the measure of exposure or the amount of insurance specified in a policy of insurance or covered thereunder is multiplied to determine the premium.
(2) PREMIUM. The consideration paid, or to be paid, to an insurer for the issuance and delivery of any binder or policy of insurance.
(3) RATE-MAKING. The examination and analysis of every factor and influence related to, and bearing upon, the hazard and risk made the subject of insurance, the collection and collation of such factors and influences into rating systems and the application of such rating systems to individual risks.
(4) RATING SYSTEM. Every schedule, class, classification, rule, guide, standard, manual, table, rating plan, policy, policy form or compilation, by whatever name described, containing the rates used by any rating organization or by any insurer or used by any insurer or by any rating organization in determining or ascertaining a rate.
(5) RATING ORGANIZATION. Every person or persons, corporation, partnership, company, society, bureau or association, whether located within or outside this state, engaged in the business of rate-making for two or more insurers.
(6) INSURER. Any person or persons, corporation, association, partnership, reciprocal exchange or company authorized by the laws of this state to transact the business of insurance in this state.
(7) RISK. Any property, real or personal, described in any policy, exposed to any hazard or peril named in such policy.
(8) UNREASONABLY HIGH RATES. No rate shall be held to be unreasonably high unless:
a. Such rate is unreasonably high for the insurance provided; and
b. A reasonable degree of competition does not exist in the area with respect to the classification to which such rate is applicable.
(9) INADEQUATE RATE. No rate shall be held to be inadequate which upon reasonable assumptions of prospective loss and expense experience will produce an underwriting profit.
The provisions of this article shall apply to insurance against loss to property located in this state, or to any valuable interest therein, by fire, lightning, windstorm, explosion or by theft or physical damage to motor vehicles and all other kinds of insurance which fire insurance companies are authorized to write in this state, except this article shall not apply to reinsurance, aviation insurance and marine insurance, which term shall mean, and include, insurance and reinsurance against any, and all, kinds of loss or damage to the following subject matters of insurance and interests therein:
(1) Hulls, vessels and craft of every kind;
(2) Aids to navigation;
(3) Dry docks and marine railways, including marine builders' and repairers' risks, and whether complete or in process of, or awaiting, construction;
(4) All marine protection and indemnity risks; and
(5) All goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interest and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any and all risks or perils of navigation, transit or transportation on or under any seas, lakes, rivers or other waters, or in the air or on land in connection with, or incident to, export, import or waterborne risks, or while being assembled, packed, crated, baled, compressed or similarly prepared for such shipment, or while awaiting the same, or during any delays, storage, transshipment or reshipment incident thereto, including the insurance of war risks in respect to any or all of the aforesaid subject matters of insurance.
The provisions of this article shall, however, apply to inland marine insurance in the manner provided in Section 27-13-22.
The provisions of this section shall apply to all insurance which is now or hereafter defined by statute, by ruling of the commissioner or by lawful custom as inland marine insurance, but this article shall not apply to insurance of vessels or craft, their cargoes, marine builder's risks, marine protection and indemnity or other risks commonly insured under marine insurance policies:
(1) As to all classes of inland marine insurance for which class rates or rating plans are customarily fixed by rating organizations or associations of underwriters, rates or rating plans shall be filed by all authorized insurers writing such classes, with the department in such manner and form as it shall direct, and also special rates fixed by any such rating organization or association shall be similarly filed. All such rates shall be reasonable, adequate and not unfairly discriminatory. Due consideration shall be given to past experience within the state and outside the state when necessary, and due consideration may be given to prospective loss experience within the state and without when necessary, including catastrophe hazards, to a reasonable margin for profit and contingencies, to policyholders' dividends in the case of participating insurers and to all other relevant factors within the state and without the state when necessary;
(2) Any filing made pursuant to this section shall be approved by the commissioner unless he finds that such filing does not meet the requirements of this section. As soon as reasonably possible after the filing has been made, the commissioner shall in writing approve or disapprove the same; provided, however, that any filing of class rates, special rates or rating plans shall be deemed approved unless disapproved within 30 days. The commissioner may investigate rates not required to be filed under the provisions of this section and may require the filing of any particular rate not otherwise required to be filed; and
(3) An insurer may satisfy its obligation to make such filings by becoming a member of, or a subscriber to, a licensed rating organization which makes such filings and by authorizing the department to accept such filings on its behalf. An insurer may belong or subscribe to an inland marine rating organization for inland marine insurance and also to other rating organizations for other types of insurance.
Nothing in this article shall apply to any town or county farmers' mutual fire insurance association restricting their operations to not more than one county or to domestic insurance companies, associations, orders or fraternal benefit societies now doing business in this state on the assessment plan.
(a) No rating organization shall do business in this state unless it shall have been licensed to do so by the commissioner. Application for such license shall be made on such forms as the commissioner shall prepare for that purpose. Upon applying for such license, every rating organization shall file with the department:
(1) A copy of its constitution, its articles of agreement or association or its certificate of incorporation and of its bylaws or rules governing the conduct of its business or such of the foregoing, if any, as such rating organization may have;
(2) A list of insurers who are, or who have agreed to become, members of, or subscribers to, such rating organization;
(3) The name and address of a person, or persons, in this state upon whom notices or orders of the commissioner affecting such rating organization may be served; and
(4) Such other information as the commissioner may require.
(b) If the commissioner finds that the applicant for a license:
(1) Has complied with the provisions of this article;
(2) Is equipped with an adequate staff of experts and clerks qualified in rate-making;
(3) Is otherwise qualified to function as a rating organization; and
(4) Maintains necessary service offices throughout Alabama beginning with at least three, viz: one in Mobile, Montgomery and Birmingham, he shall issue a license to such rating organization authorizing it to engage in rate-making for the kinds of insurance specified in such license.
(c) The service offices described in the preceding sentence shall be adequately staffed and equipped and keep on hand a complete supply of all forms, clauses, permits, rules and such other information and data as the commissioner may prescribe for writing fire insurance in such territory. These service offices are, however, not to be required in the handling of any types of insurance serviced by special organizations. Such offices are to be kept open on all customary business days. Rating organizations having a membership of less than 25 members shall not be required to maintain such offices unless the department shall require same. If the commissioner shall determine that the applicant is not entitled to a license, he shall make an order denying its application, specifying his reasons for such denial. Licenses issued pursuant to this section shall be renewed on or before July 1, of each year in the manner provided by this article. Every rating organization doing business in the state on January 1, 1972, may continue to transact such business thereafter, subject to the provisions of this article, pending its application to the department, to be made within 180 days after January 1, 1972, for a license to do business as required by this section. A fee of $25.00 shall be paid annually to the department for such license issued under this section.
Every rating organization shall make reasonable provision in its bylaws, rules, constitution or otherwise to permit any insurer engaged in the kind of insurance for which rate-making is done by such rating organization to become a member or subscriber thereof upon application therefor by such insurer. An insurer may be a member of, or a subscriber to, more than one rating organization, but not for the purpose of rating the same risk. No insurer shall use any rate or rating systems made by a rating organization of which it is not a member or subscriber or by another insurer. No rating organization shall discriminate unfairly between insurers in the conditions imposed for admission as subscribers or in the services rendered to either members or subscribers. The refusal of any rating organization to admit an insurer as a subscriber shall, at the request of such insurer, be reviewed by the commissioner at a hearing held upon at least 10 days' notice to such rating organization and such insurer. If the commissioner shall find that the insurer has been refused admittance to such rating organization as a subscriber without justification, he shall make an order directing such rating organization to admit such insurer as a subscriber. If he shall find that the action of the rating organization in refusing admittance to an insurer as a subscriber is justified, he shall make an order affirming its action.
Every rating organization shall notify the department within 10 days upon the withdrawal or expulsion therefrom of any member or subscriber. Should a rating organization expel or otherwise exclude a subscriber for the refusal or failure of such subscriber to pay such rating organization the subscribership fee agreed upon, such rating organization shall readmit such subscriber upon payment to it of any delinquent charges. No insurer shall, after expulsion or withdrawal from a rating organization, use any rate or rating system made by such rating organization during the period that such expulsion or withdrawal continues.
Every rating organization and every insurer which makes its own rates shall make rates that are not unreasonably high or inadequate for the safety and soundness of the insurer and which do not unfairly discriminate between risks in this state involving essentially the same hazards and shall, in rate-making and in making rating systems:
(1) Adopt basis classifications, which shall be used as the basis of all manual, minimum, class, schedule or experience rates;
(2) Adopt reasonable standards for construction, for protective facilities and for other conditions that materially affect the hazard or peril, which shall be applied in the determination or fixing of rates;
(3) Give consideration to past experience within the state and without the state when necessary, and due consideration may be given to prospective loss experience within the state and without the state when necessary, over such period of years as appears to be fairly representative of the frequency of the occurrence of the particular hazard or peril, including, where pertinent, the conflagration and catastrophe hazards, if any; and
(4) Give consideration to all factors reasonably related to the kind of insurance involved, including a reasonable profit for the insurer and, in the case of participating insurers, to policyholders' dividends. In the case of fire insurance, consideration shall be given to the latest available experience of the fire insurance business, other than fire insurance covering motor vehicles, during a period of not less than five years preceding the year in which rates are made or revised.
Every insurer shall file annually, on or before July 1, with the rating organization of which it is a member or subscriber, or with such other common agency representing a group of insurers as the department may approve, and with the department a statistical report showing a classification schedule of its premiums and its losses on all kinds of insurance to which this article is applicable, together with such other information as the department may deem necessary for the proper determination of the reasonableness and adequacy of rates. Such statistical report filed with the rating organization may be consolidated and filed by such common agency. Such data shall be kept and reports made in such manner and on such forms as may be prescribed by the commissioner. All such annual filings with the department shall be kept under lock and key, and any official or employee of the department who shall divulge the contents or permit the examination thereof, except for the purpose of properly administering the provisions of this article or upon the order of court, shall be guilty of a misdemeanor and shall be subject to a fine of not more than $50.00, and shall thereafter be ineligible to be an employee or agent of said department. A mutual fire insurance company or reciprocal fire exchange which confines its business chiefly to the insurance of sprinklered risks and which pays no commission or brokerage for the acquisition of business shall be deemed to comply with the provisions of this section if it files its statistical reports of premium deposits and losses on the basis of comprehensive coverage.
Beginning 180 days after January 1, 1972, every insurer shall, before using or applying any rate to any kind of insurance coming within the scope of this article, file with the department a copy of the rating system upon which such rate is based or by which such rate is fixed or determined. The filing required in this section may be made on behalf of such insurer by a rating organization of which such insurer is a member or subscriber. The provisions of this section shall be deemed to have been complied with by any insurer which had, before January 1, 1972, been a member or subscriber of a rating organization doing business in the state. From and after the date of the filing of such rating systems, every insurer shall charge and receive rates fixed or determined in strict conformity therewith, except as in this article otherwise expressly provided.
The commissioner shall have authority to require any insurer engaged in any of the businesses in Alabama as enumerated in this article to file with the department any data or information required or necessary in the performance of the duties of the commissioner, said data or information to be filed in such manner and on such forms as may be prescribed by said commissioner.
If, after examination thereof, the commissioner shall find that such rating systems filed by, or on behalf of, an insurer provide for, result in or produce rates that are unreasonably high or excessive, or are not adequate for the safeness and soundness of the insurer or are unfairly discriminatory between risks in this state involving essentially the same hazards, he shall issue an order to such insurer, or to the rating organization of which such insurer is a member or subscriber, directing that such rating systems be altered in the manner, and to the extent, stated in such order to produce rates that are reasonable and adequate and not unfairly discriminatory. If the commissioner shall find that such rating systems provide for, result in or produce rates that are not unreasonably high, are not inadequate for the safeness and soundness of the insurer and are not unfairly discriminatory between risks in this state involving essentially the same hazards, he shall approve such rating systems, and such approval shall continue in effect until he shall, by order, direct that such rating systems be changed or modified as in this section provided. As soon as reasonably possible after the filing has been made the commissioner shall, in writing, approve or disapprove the same; provided, however, that unless disapproved within 30 days, such rating systems shall be deemed to be approved by him. Whenever the commissioner shall find that rating systems theretofore approved by him, or which pursuant to Section 27-13-37 are effective without approval, provide for, result in or produce rates which are unreasonable or inadequate or which discriminate unfairly between risks in this state involving essentially the same hazards, he shall issue an order to all insurers employing such rating systems, or to the rating organizations of which such insurers are members or subscribers, directing that such rating systems be altered or revised in the manner, and to the extent, stated in such order to provide for, result in or produce rates which are reasonable, adequate and do not discriminate unfairly between risks in this state involving essentially the same hazards. Rating systems filed with the department on, or before, January 1, 1972, pursuant to the provisions of this section shall be deemed to have been approved by the commissioner, such approval to continue in effect until the commissioner shall, by order, direct that such rating system be altered or modified as in this section provided. Changes in rates resulting from an order of the commissioner directing or approving alterations or revisions in rating systems shall become effective following the date of such order as fixed by the commissioner and shall be applied to policies written on, or after, such effective date. Under such rules and regulations as he shall adopt, the commissioner may, by written order, suspend or modify the requirement of filing as to any kind of insurance subdivision, or combination thereof, or as to classes of risks, the rates for which cannot practicably be filed before they are used. Such orders, rules and regulations shall be made known to insurers and rating organizations affected thereby. The commissioner may make such examination as he may deem advisable to ascertain whether any rates affected by such order are excessive, inadequate or unfairly discriminatory.
Every rating organization, and every insurer which does its own rate-making, shall keep in its office a written survey of every risk rated upon schedule after inspection and shall, upon request, furnish a copy of such survey to the interested insured or his duly authorized representative.
Every rating organization, and every insurer which does its own rate-making, shall provide reasonable means within this state, to be approved by the department, whereby any person, or persons, affected by rate made by it may be heard on an application to reduce such rate. If such rating organization or such insurer shall refuse to reduce such rate, the person or persons affected thereby may make a like application to the commissioner within 30 days after receipt of notice in writing that the application for reduction of rate has been denied by such rating organization or by such insurer. If, upon the expiration of 20 days after application for the reduction of a rate, such rating organization or such insurer fails to grant or reject the application, the person, or persons, affected may make the application to the commissioner in the same manner as if the application had been rejected by such rating organization or by such insurer. The commissioner shall fix a time and place for hearing on such application, upon not less than 10 days' notice by registered or certified mail, for the applicant and such rating organization or such insurer to be heard. The commissioner shall make such order as he shall deem just and lawful upon the evidence placed before him at such hearing.
Any insurer may apply to the commissioner for permission to effect a uniform percentage increase or decrease in the rates applied to all risks of a particular class in the state in a particular kind, or kinds, of insurance. Upon the filing of such application, the commissioner shall give notice thereof by registered or certified mail to the rating organization, if any, of which such insurer is a member or subscriber and shall fix a time and place for a hearing upon the merits of such application. At such hearing, such insurer and such rating organization, or their representatives, shall be entitled to be heard and to present evidence in support of, or against, such application. The commissioner shall, upon the conclusion of such hearing, make such order as he shall deem consistent with the establishment and maintenance of reasonable, adequate and non-discriminatory rates. If the application is granted, such increase or decrease shall remain in force unless withdrawn by the insurer with the consent of, or by order of, the commissioner. If the commissioner shall find that such increase or decrease will result in rates that are unreasonable, inadequate or unfairly discriminatory, he shall make an order denying the application. Notwithstanding the foregoing, but subject to the provisions of Section 27-13-30, to the extent not inconsistent therewith, when a filing of adjustments of rates for existing rating systems is made under this section and does not involve a change in the relationship between such rates and the expense portion thereof or does not involve a change of the element of expenses which are paid as a percentage of premiums and does not involve a change in rate relativities among such classifications on any basis other than loss experience, such filing shall become effective upon the date, or dates, specified in the filing and shall be deemed to meet the requirements of this title. A rate in excess of that promulgated by such rating organization may be charged on any specific risk provided such higher rate is charged with the knowledge and written consent of both the insured and the commissioner.
Any insurer, individually or as a member of a pool, group or association, engaged in the business of insuring special types or classes of risks in connection with a particular inspection or engineering service or with respect to which a set of standards has been maintained to the satisfaction of the commissioner may submit its loss experience data, forms and proposed rates and negotiate with the commissioner for his approval of such rates and forms either directly in its own behalf or through a unified facility of the group created, licensed as a rating organization and maintained entirely or in part for such purpose. In evaluating the forms and rates of such an insurer, or pool or association of insurers, the commissioner shall act with due regard for the previous record of such insurer or group of insurers and with due appreciation of previous and prospective loss trends, both within and outside the state, and to any other factors reasonably related to the classes or types of insurance written by such insurer or group of insurers. If approved, such forms and rates shall be filed with the rating organization, licensed to make rates on such types or classes of risks, of which such insurer is a member or subscriber. Nothing contained in this section shall be construed as exempting any insurer, pool, group or association of insurers from all other provisions of this article.
In every case where, pursuant to the provisions of this article, the commissioner is authorized or required to determine whether rates are reasonable and adequate and not unfairly discriminatory, he shall consider:
(1) The factors applied by insurers and rating organizations generally in determining the bases for rates;
(2) The financial condition of the insurer;
(3) The method of operation of such insurer;
(4) The past loss experience of the insurer within the state and without the state when necessary and may give consideration to prospective loss experience within the state and without the state when necessary, over such period of years as shall appear to be fairly representative of the frequency of the occurrence of the particular hazard or peril, including, where pertinent, the conflagration and catastrophe hazards, if any;
(5) All factors reasonably related to the kind of insurance involved; and
(6) A reasonable profit for the insurer and, in the case of participating insurers, to policyholders' dividends.
In the case of fire insurance, he shall consider the latest available experience of the fire insurance business, other than fire insurance covering motor vehicles, during a period of not less than five years preceding the year in which such rates are reviewed by him.
The commissioner may, whenever he deems it expedient, but at least once in every five years, make, or cause to be made, an examination of the business, affairs and method of operation of every rating organization doing business in this state and a like examination of an insurer making its own rates. The cost of such examination shall be fixed in the same manner as provided for in this title and shall be paid by the rating organization or insurer making its own rates being examined. The commissioner may, in his discretion, waive such examination upon proof that such rating organization has, within a reasonably recent period, been examined by a public official or department of another state pursuant to the laws of such state and upon the filing with the department of a certified copy of the report of such examination. The officers, managers, agents and employees of such rating organization or insurer making its own rates shall exhibit all its books, records, documents or agreements governing its method of operation, its rating systems and its accounts for the purpose of such examination. The commissioner, or his representative, may, for the purpose of facilitating and furthering such examination, examine, under oath, the officers, managers, agents and employees of such rating organization or insurer making its own rates.
A rating organization, or any insurer making its own rates, may, with the approval of the commissioner, from time to time, alter, supplement or amend its rating systems, or any part thereof, by filing with the department copies of such alterations, supplements or amendments, together with a statement of the reason, or reasons, for such alteration, supplement or amendment. If such alteration, supplement or amendment shall have the effect of increasing or decreasing rates, the commissioner shall determine whether the rates as altered thereby are reasonable, adequate and not unfairly discriminatory. If the commissioner shall determine that the rates as so altered are not unreasonably high, or inadequate or unfairly discriminatory, he shall make an order approving them. If he shall find that the rates as altered are unreasonable, inadequate or unfairly discriminatory, he shall issue an order disapproving such alteration, supplement or amendment. Notwithstanding the foregoing, but subject to the provisions of Section 27-13-30, to the extent not inconsistent with this section, when a filing of adjustments of rates for existing classifications of risks does not involve a change in the relationship between such rates and the expense portion thereof, or does not involve a change of the element of expenses which are paid as a percentage of premiums or does not involve a change in rate relativities among such classifications on any basis other than loss experience, such filing shall become effective upon the date, or dates, specified in the filing and shall be deemed to meet the requirements of this title.
No insurer, or employee thereof, and no broker or agent shall knowingly charge, demand or receive a premium for any policy of insurance except in accordance with the respective rating systems on file with, and approved by, the commissioner. No insurer, or employee thereof, and no broker or agent shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to insurance or after insurance has been effected, any rebate, discount, abatement, credit or reduction of the premium named in a policy of insurance, or any special favor or advantage in the dividends, or other benefits to accrue thereon or any valuable consideration or inducement whatever not specified in the policy of insurance, except to the extent that such rebate, discount, abatement, credit, reduction, favor, advantage or consideration may be provided for in rating systems filed by, or on behalf of, such insurer and approved by the commissioner. No insured named in a policy of insurance, nor any employee of such insured, shall knowingly receive or accept, directly or indirectly, any such rebate, discount, abatement or reduction of premium or any such special favor, or advantage, or valuable consideration or inducement. Nothing contained in this section shall be construed as prohibiting the payment of commissions or other compensation to regularly appointed and licensed agents and to brokers duly licensed by this state nor as prohibiting any participating insurer from distributing to its policyholders dividends, savings or the unused, or unabsorbed, portion of premiums and premium deposits.
No insurer, and no officer, agent or employee thereof, shall give false or misleading information to any rating organization of which it is a member or subscriber or to the department which will in any manner affect the proper determination of reasonable, adequate and nondiscriminatory rates.
The commissioner shall, from time to time, promulgate such rules and regulations as he may deem necessary to carry out the provisions of this article and, upon request, shall furnish to any interested party a copy of such rules and regulations.
Any rating organization which violates any provisions of this article shall be subject to suspension of its license, and any insurer making its own rates which violates any provision of this article shall be subject to suspension of its certificate of authority to do business in this state. Failure of a rating organization, or insurer making its own rates, to comply with the provisions of any order of the commissioner within 30 days after such order, or any extension thereof as the commissioner may, in his discretion, grant shall automatically suspend the license of such rating organization or insurer.
If the commissioner shall find, after due notice and hearing, that any rating organization, insurer, officer, agent or representative thereof has willfully violated any of the provisions of this article, he may issue an order revoking or suspending the license of any such insurer, agent, broker or representative thereof.
The commissioner shall not make any order under the provisions of this article without giving every rating organization and insurer who may be affected thereby reasonable notice and a hearing, if hearing is requested. All hearings provided for in this article shall be held at such time and place as shall be designated in a notice which shall be given in writing by registered or certified mail to such rating organization and insurer, or the officers, agents and representatives thereof, which may be affected thereby, at least 30 days before the date designated therein, which notice shall state the subject of the order. At the conclusion of such hearing, or within 30 days thereafter, the commissioner shall make such order, or orders, as he may deem necessary in accordance with his findings.
Any final order made by the commissioner as provided by law may, upon appropriate petition filed by the Attorney General on behalf of the state or by any interested party, at any time within 30 days from the date of said order, be reviewed by the Circuit Court of Montgomery County, Alabama, on a writ of certiorari. Upon the filing of such petition, the petitioner shall file with the register or clerk of said court a bond, with good and sufficient sureties, to be approved by the register or clerk, conditioned to pay all costs which may be assessed against the petitioner in such proceedings. The Circuit Court of Montgomery County, Alabama, or the Court of Civil Appeals of Alabama, on appeal to it, may affirm said order or modify or repeal the same, in whole or in part. From the judgment of the Circuit Court of Montgomery County, Alabama, either the state or the interested party taking the appeal may appeal directly to the Court of Civil Appeals of Alabama, within 42 days from the entry of the judgment; the interested party so appealing to the Court of Civil Appeals shall give security for costs of such appeal to be approved by the register or clerk of said court.
Whenever, under the provisions of this article, the commissioner is authorized or required to do any act, he may designate an assistant, or any salaried employee of the department, to act in his place and stead, who shall report to the commissioner and advise the commissioner on the nature of the matter delegated. The commissioner shall make such order, based upon such advice and report, as he shall, in his discretion, determine, and such order shall have the same force and effect as if the commissioner had acted thereon personally.
Any rating organization, any insurer, officer, agent or representative thereof failing to comply with, or otherwise willfully violating, any of the provisions of this article shall be guilty of a misdemeanor and, upon conviction, be punished by a fine of not less than $100.00 nor more than $500.00.
Any licenses collected from any rating organization by the commissioner shall be paid into the treasury of the State of Alabama.
This chapter may be referred to as 'The Rating Law.'
For the purposes of this article, unless otherwise stated, the following terms shall have the meanings respectively ascribed to them by this section:
(1) RATE. The unit charge by which the measure of exposure or the amount of insurance specified in a policy of insurance or covered thereunder is multiplied to determine the premium.
(2) PREMIUM. The consideration paid or to be paid to an insurer for the issuance and delivery of any binder or policy of insurance.
(3) RATE-MAKING. The examination and analysis of every factor and influence related to and bearing upon the hazard and risk made the subject of insurance; the collection and collation of such factors and influences into rating plans; systems; and the application of such rating systems to individual risks.
(4) RATING PLAN. Every schedule, class, classification, rule, guide, standard, manual, table, rating plan, policy, policy form or compilation by whatever name described, containing the rates used by any rating organization or by any insurer, or used by any insurer or by any rating organization in determining and ascertaining a rate.
(5) RATING ORGANIZATION. Every person or persons, corporation, partnership, company, society, bureau or association, whether located within or outside this state, engaged in the business of rate-making for two or more insurers.
(6) INSURER. Any person or persons, corporation, association, partnership, reciprocal exchange or company authorized by the laws of this state to transact the business of insurance in this state.
(7) CASUALTY INSURANCE. As used herein this term is to be construed in its generally accepted trade sense.
(8) UNREASONABLY HIGH RATE. No rate shall be held to be unreasonably high unless
a. Such rate is unreasonably high for the insurance provided and
b. A reasonable degree of competition does not exist in the area with respect to the classification to which such rate is applicable.
(9) INADEQUATE RATE. No rate shall be held to be inadequate which upon reasonable assumptions of prospective loss and expense experience will produce an underwriting profit.
The provisions of this article shall apply to all lines of casualty insurance, including workmen's compensation, employer's liability, fidelity, surety and guaranty bonds, and all other kinds of insurance which casualty and surety insurance companies are authorized to write in this state, except reinsurance, aviation insurance and accident and health insurance.
No rating organization shall do business in this state until it shall have been licensed to do so by the commissioner. Application for such license shall be made on such forms as the commissioner shall prepare for that purpose. Upon applying for such license, every rating organization shall file with the department:
(1) A copy of its constitution, its articles of agreement or association or its certificate of incorporation and of its bylaws or rules governing the conduct of its business or such of the foregoing, if any, as such rating organization may have;
(2) A list of insurers who are or, who have agreed to, become members of, or subscribers to, such rating organization;
(3) The name and address of a person, or persons, in this state upon whom notices or orders of the commissioner affecting such rating organization may be served; and
(4) Such other information as the commissioner may require.
If the commissioner finds that the applicant for license:
If the commissioner shall determine that the applicant is not entitled to a license, he shall make an order denying its application, specifying his reasons for such denial. Licenses issued pursuant to this section shall be renewed on, or before, July 1, of each year in the manner provided by this article. Every rating organization doing business in this state on January 1, 1972, may continue to transact such business thereafter, subject to the provisions of this article, pending its application to the department, to be made within 180 days after January 1, 1972, for a license to do business as required by this section. A fee of $25.00 shall be paid annually to the department for such license issued under this section.
Every rating organization shall make reasonable provision in its bylaws, rules, constitution or otherwise to permit any insurer engaged in the kind of insurance for which rate-making is done by such rating organization to become a member or subscriber to its rating services for any kind of insurance, or subdivisions thereof, upon application therefor by such insurer. No rating organization shall discriminate unfairly between insurers in the condition imposed for admission as subscribers or in the services rendered to either members or subscribers. No rating organization shall adopt any rule the effect of which would be to prohibit or regulate the payment of dividends, savings or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members or subscribers. The refusal of any rating organization to admit an insurer as a subscriber shall, at the request of such insurer, be reviewed by the commissioner at a hearing held upon at least 10 days' notice to such rating organization and such insurer. If the commissioner shall find that the insurer has been refused admittance to such rating organization as a subscriber without justification, he shall make an order directing such rating organization to admit such insurer as a subscriber. If he shall find that the action of the rating organization in refusing admittance to an insurer as a subscriber is justified, he shall make an order affirming its action.
Every rating organization shall notify the department within 10 days upon the admission, withdrawal or expulsion therefrom of any member or subscriber. Should a rating organization expel or otherwise exclude a subscriber for the refusal or failure of such subscriber to pay such rating organization the subscribership charges agreed upon, such rating organization shall readmit such subscriber upon payment to it of any delinquent charges.
Every rating organization and every insurer which makes its own rates shall make rates that are not unreasonably high or inadequate for the safety and soundness of the insurer and which do not unfairly discriminate between risks in this state and shall, in rate-making and in making rating plans:
(1) Adopt basis classifications, which shall be used as the basis of all manual, minimum, class, schedule or experience rates;
(2) Give consideration to past experience within the state and without the state, when necessary, and due consideration may be given to prospective loss experience within the state and without the state, when necessary, over such period of years as appears to be fairly representative of the frequency of the occurrence of the particular risk; and
(3) Give consideration to all factors reasonably related to the kind of insurance involved, including a reasonable profit for the insurer and, in the case of participating insurers, to policyholders' dividends.
The systems of expense provisions included in the rates for use by insurers or groups of insurers may differ from those of other insurers or groups of insurers to reflect the requirements of the operating methods of any such insurer or group with respect to any kind of insurance, or any subdivision or combination thereof, for which the commissioner approves the application of separate expense provisions.
Every insurer shall file annually on, or before, July 1, with the rating organization of which it is a member or subscriber, or with such other common agency representing a group of insurers as the department may approve, and with the department a statistical report showing its premiums and its losses on all kinds of insurance to which this article is applicable, together with such other information as the department may deem necessary for the proper determination of the reasonableness and adequacy of rates. Such statistical report filed with the rating organization may be consolidated and filed by such common agency. Such data shall be kept and reports made in such manner and on such forms as may be prescribed by the commissioner. All such annual filings with the department shall be kept under lock and key, and any official or employee of the department who shall divulge the contents or permit the examination thereof, except for the purpose of properly administering the provisions of this article or upon the order of court, shall be guilty of a misdemeanor and shall be subject to a fine of not more than $50.00 and shall thereafter be ineligible to be an employee or agent of said department. Reasonable rules and plans may be promulgated by the commissioner, after consultation with all insurers and rating organizations affected thereby, for the interchange of loss experience necessary for the application of rating plans. In order to further uniform administration of rating laws, the commissioner and every insurer and rating organization may exchange information and experience data with insurance supervisory officials, insurers and rating organizations in other states and may consult and cooperate with them with respect to rate-making and the application of rating systems. The commissioner may make reasonable rules and regulations necessary to effect the purposes of this article.
Beginning 180 days after January 1, 1972, every insurer shall, before using or applying any rate to any kind of insurance coming within the scope of this article, file with the department a copy of the rating plan upon which such rate is based or by which such rate is fixed or determined. The filing required in this section may be made on behalf of such insurer by a rating organization of which such insurer is a member or subscriber. From and after the date of the filing of such rating plans, every insurer shall charge and receive rates fixed or determined in strict conformity therewith, except as in this article otherwise expressly provided.
If, after examination thereof, the commissioner shall find that such rating plans filed by, or on behalf of, an insurer provide for, result in or produce rates that are unreasonably high or excessive, or are not adequate for the safeness and soundness of the insurer or are unfairly discriminatory between risks in this state involving essentially the same risks, he shall issue an order to such insurer, or to the rating organization of which such insurer is a member or subscriber, directing that such rating plans be altered in the manner, and to the extent, stated in such order to produce rates that are reasonable and adequate and not unfairly discriminatory. If the commissioner shall find that such rating plans provide for, result in or produce rates that are not unreasonably high, are not inadequate for the safeness and soundness of the insurer and are not unfairly discriminatory between risks in this state, he shall approve such rating plans and rates, and such approval shall continue in effect until he shall, by order, direct that such rating plans and rates be changed or modified as in this section provided. As soon as reasonably possible after the filing has been made, the commissioner shall, in writing, approve or disapprove the same; provided, however, that unless disapproved within 30 days such rating plans and rates shall be deemed to be approved by him. Whenever the commissioner shall find that rating plans theretofore approved by him or which pursuant to Section 27-13-75 are effective without approval, provide for, result in or produce rates which are unreasonable or inadequate or which discriminate unfairly between risks in this state, he shall issue an order to all insurers employing such rating plans, or to the rating organizations of which such insurers are members or subscribers, directing that such rating plans be altered or revised in the manner, and to the extent, stated in such order to provide for, result in or produce rates which are reasonable, adequate and do not discriminate unfairly between risks in this state. Rating plans and rates filed with the department on, or before, January 1, 1972, pursuant to the provisions of this section, shall be deemed to have been approved by the department, such approval to continue in effect until the commissioner shall, by order, direct that such rating system be altered or modified as in this section provided. Changes in rates resulting from an order of the department directing or approving alterations or revisions in rating plans shall become effective following the date of such order as fixed by the commissioner and shall be applied to policies written on, or after, such effective date. Under such rules and regulations as he shall adopt, the commissioner may, by written order, suspend or modify the requirement of filing as to any kind of insurance, subdivision or combination thereof or as to classes of risks, the rates for which cannot practicably be filed before they are used. Such orders, rules and regulations shall be made known to insurers and rating organizations affected thereby. The commissioner may make examination as he may deem advisable to ascertain whether any rates affected by such order are excessive, inadequate or unfairly discriminatory.
Any member of, or subscriber to, a rating organization may appeal to the commissioner from the decision of such rating organization in approving or rejecting any proposed change in, or addition to, the filings of such rating organization; and the commissioner shall, after a hearing held on not less than 10 days' written notice to the appellant and to such rating organization, issue an order approving the decision of such rating organization or directing it to give further consideration to such proposal. If such appeal is based upon the failure of the rating organization to make a filing on behalf of such member or subscriber which is based on a system of expense provisions which differs, in accordance with the right granted in this article, from the system of expense provisions included in a filing made by the rating organization, the commissioner shall, if he grants the appeal, order the rating organization to make the requested filing for use by the appellant.
Every rating organization and every insurer which makes its own rates shall, after receiving written request therefor from the department, furnish to any person affected by a rate made by it, or to the authorized representative of such person, all pertinent information as to such rate.
Every rating organization and every insurer which does its own rate-making shall provide reasonable means within this state, to be approved by the department, whereby any person, or persons, affected by a rate made by it may be heard on a written application to reduce such rate. If such rating organization or such insurer shall refuse to reduce such rate, the person, or persons, affected thereby may make a like application to the commissioner within 30 days after receipt of notice in writing that the application for reduction of rate has been denied by such rating organization or by such insurer. If, upon the expiration of 20 days after application for the reduction of a rate, such rating organization or such insurer fails to grant or reject the application, the person, or persons, affected may make the application to the commissioner in the same manner as if the application had been rejected by such rating organization or by such insurer. The commissioner shall fix a time and place for hearing on such application, upon not less than 10 days' notice by registered or certified mail, for the applicant and such rating organization or such insurer to be heard. The commissioner shall make such order as he shall deem just and lawful upon the evidence placed before him at such hearing.
(a) Any insurer may apply to the commissioner for permission to effect a uniform percentage increase or decrease in the rates applied to all kinds of a particular class in the state in a particular kind, or kinds, of insurance. Upon the filing of such application, the commissioner shall give notice thereof by registered or certified mail to the rating organization, if any, of which such insurer is a member or subscriber and shall fix a time and place for a hearing upon the merits of such application. At such hearing, such insurer and such rating organization, or their representatives, shall be entitled to be heard and to present evidence in support of, or against, such application. The commissioner shall, upon the conclusion of such hearing, make such order as he shall deem consistent with the establishment and maintenance of reasonable, adequate and nondiscriminatory rates. If the application is granted, such increase or decrease shall remain in force unless withdrawn by the insurer with the consent of, or by order of, the commissioner. If the commissioner shall find that such increase or decrease will result in rates that are unreasonable, inadequate or unfairly discriminatory, he shall make an order denying the application.
(b) Notwithstanding the foregoing, but subject to the provisions of Section 27-13-68, to the extent not inconsistent with this section, when a filing of adjustments of rates for existing classifications of risks is made under this section and does not involve a change in the relationship between such rates and the expense portion thereof, or does not involve a change of the element of expenses which are paid as percentage of premiums, and does not involve a change in rate relativities among such classifications on any basis other than loss experience, such filings shall become effective upon the date, or dates, specified in the filing and shall be deemed to meet the requirements of this article.
(c) A rate in excess of that promulgated by such rating organization may be charged on any specific risk, provided such higher rate is charged with the knowledge and written consent of both the insured and the commissioner.
(d) Subsection (b) of this section shall not apply to workmen's compensation or employer's liability insurance.
In every case where, pursuant to the provisions of the article, the commissioner is authorized or required to determine whether rates are reasonable and adequate and not unfairly discriminatory, he shall consider the factors and standards set forth in Section 27-13-65.
The commissioner may, whenever he deems it expedient, but at least once in every five years, make, or cause to be made, an examination of the business, affairs and method of operation of each rating organization doing business in this state and a like examination of each insurer making its own rates. The costs of such examination shall be fixed in the same manner as provided for in Section 27-2-25 and shall be paid by the rating organization or insurer making its own rates examined. The commissioner may, in his discretion, waive such examination upon proof that such rating organization has, within a reasonably recent period, been examined by a public official or department of another state, pursuant to the laws of such state, and upon the filing with the department of a certified copy of the report of such examination. The officers, managers, agents and employees of such rating organization or insurer making its own rates shall exhibit all its books, records, documents or agreements governing its method of operation, its rating systems and its accounts for the purpose of such examination. The commissioner, or his representative, may, for the purpose of facilitating and furthering such examination, examine, under oath, the officers, managers, agents and employees of such rating organization or insurer making its own rates.
A rating organization or any insurer making its own rates may, with the approval of the commissioner, from time to time, alter, supplement or amend its rating plans, or any part thereof, by filing with the department copies of such alterations, supplements or amendments, together with a statement of the reason, or reasons, for such alteration, supplement or amendment. If such alteration, supplement or amendment shall have the effect of increasing or decreasing rates, the commissioner shall determine whether the rates as altered thereby are reasonable, adequate and not unfairly discriminatory. If the commissioner shall determine that the rates as so altered are not unreasonably high, or inadequate or unfairly discriminatory, he shall make an order approving them. If he shall find that the rates as altered are unreasonable, inadequate or unfairly discriminatory, he shall issue an order disapproving such alteration, supplement or amendment. Notwithstanding the foregoing, but subject to the provisions of Section 27-13-68, to the extent not inconsistent with this section, when a filing of adjustments of rates for existing classifications of risks does not involve a change in the relationship between such rates and the expense portion thereof, or does not involve a change of the element of expenses which are paid as a percentage of premiums or does not involve a change in rate relativities among such classifications on any basis other than loss experience, such filing shall become effective upon the date, or dates, specified in the filing and shall be deemed to meet the requirements of this article. The foregoing provisions shall not apply to workmen's compensation and employers' liability insurance.
No insurer, or employee thereof, and no broker or agent shall knowingly charge, demand or receive a premium for any policy of insurance except in accordance with the respective rating systems on file with, and approved by, the commissioner. No insurer, or employee thereof, and no broker or agent shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit or reduction of the premium named in a policy of insurance, or any special favor or advantage in the dividends or other benefits to accrue thereon or any valuable consideration or inducement whatever not specified in the policy of insurance, except to the extent that such rebate, discount, abatement, credit, reduction, favor, advantage or consideration may be provided for in rating systems filed by, or on behalf of, such insurer and approved by the commissioner. No insured named in a policy of insurance nor any employee of such insured shall knowingly receive or accept, directly or indirectly, any such rebate, discount, abatement or reduction of premium, or any such special favor or advantage, or valuable consideration or inducement. Nothing contained in this section shall be construed as prohibiting the payment of commissions or other compensation to regularly appointed and licensed agents and to brokers duly licensed by this state nor as prohibiting any participating insurer from distributing to its policyholders dividends, savings or the unused or unabsorbed portion of premiums and premium deposits.
No insurer and no officer, agent or employee thereof shall give false or misleading information to any rating organization of which it is a member or subscriber or to the department which will in any manner affect the proper determination of reasonable, adequate and nondiscriminatory rates.
Any rating organization which violates any provision of this article shall be subject to suspension of its license, and any insurer making its own rates which violates any provisions of this article shall be subject to suspension of its certificate of authority to do business in this state. Failure of a rating organization or an insurer making its own rates to comply with the provisions of any order of the commissioner within 30 days after such order, or any extension thereof, as the commissioner may, in his discretion, grant shall automatically suspend the license of such rating organization or insurer.
If the commissioner shall find, after due notice and hearing, that any rating organization, insurer, officer, agent or representative thereof has willfully violated any of the provisions of this article, he may issue an order revoking or suspending the license of any such insurer, agent, broker or representative thereof.
The commissioner shall not make any order under the provisions of this article without giving every rating organization and insurer who may be affected thereby reasonable notice and a hearing, if hearing is requested. All hearings provided for in this article shall be held at such time and place as shall be designated in a notice which shall be given in writing by registered or certified mail to such rating organization and insurer, or the officers and agents and representatives thereof, which may be affected thereby, at least 30 days before the date designated therein, which notice shall state the subject of the order. At the conclusion of such hearing, or within 30 days thereafter, the commissioner shall make such order, or orders, as he may deem necessary in accordance with his findings.
Any final order made by the commissioner as provided by law may, upon appropriate petition filed by the Attorney General on behalf of the state or by any interested party at any time within 30 days from the date of said order, be reviewed by the Circuit Court of Montgomery County, Alabama, on a writ of certiorari. Upon the filing of such petition, the petitioner shall file with the register or clerk of said court a bond, with good and sufficient sureties, to be approved by the register or clerk, conditioned to pay all costs which may be assessed against the petitioner in such proceedings. The Circuit Court of Montgomery County, Alabama, or the Court of Civil Appeals of Alabama, on appeal to it, may affirm said order or modify or repeal the same, in whole or in part. From the judgment of the Circuit Court of Montgomery County, Alabama, either the state or the interested party taking the appeal may appeal directly to the Court of Civil Appeals of Alabama within 42 days from the entry of the judgment; the interested party so appealing to the Court of Civil Appeals shall give security for the costs of such appeal to be approved by the register or clerk of said court.
Whenever, under the provisions of this article, the commissioner is authorized or required to do any act, he may designate an assistant or any salaried employee of the department to act in his place and stead, who shall report to the commissioner and advise the commissioner on the nature of the matter delegated. The commissioner shall make such order, based upon such advice and report, as he shall, in his discretion, determine, and such order shall have the same force and effect as if the commissioner had acted thereon personally.
Any rating organization, and any insurer, officer, agent or representative thereof, failing to comply with, or otherwise willfully violating, any of the provisions of this article shall be guilty of a misdemeanor and, upon conviction, be punished by a fine of not less than $100.00 nor more than $500.00.
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