Section 2199.3.6 - Standards for Review of Manuals' Effect on Competition(a) Absent a finding of an agreement by insurers to adhere to the manual as described in paragraph (c), an applicant shall be deemed to have met its burden of proving that a manual does not contemplate activities or practices that are unfair, unreasonable or otherwise inconsistent with the Insurance Code based on the grounds of an adverse effect on competition by presenting evidence sufficient to show that: (1) the statewide market concentration, as measured by the Herfindahl-Hirschman Index, of all insurers licensed to write the lines of insurance for such market (using the statewide total written premium for the applicable lines of business as reported on the Annual Statement Statutory Page 14 for the most recently available calendar year) is less than 1000; or(2) if the statewide market concentration of all insurers exceeds the standard set forth in 2199.3.6(a)(1) the statewide market concentration of insurers authorized to use the advisory organization manual (as demonstrated by records of the advisory organization submitted to the Commissioner), as measured by the Herfindahl-Hirschman Index (using the statewide total written premium for the applicable lines of business as reported on the Annual Statement Statutory Page 14 for the most recently available calendar year), for such insurers is less than 1000.(b) If the applicant has met its burden of proof on this issue by showing that statewide market concentrations of all insurers or insurers authorized to use the advisory organization manual satisfy either of the standards of 2199.3.6(a)(1) or 2199.3.6(a)(2) any party claiming that the manual has an adverse effect on competition has the burden of proving this issue with evidence which would be sufficient for a plaintiff to establish that the distribution and use of the manual in the market as defined in section 2199.2.4(g) of this regulation is anticompetitive in violation of the California antitrust laws. In determining whether such party has met its burden of proof on that issue, the Commissioner shall consider the standards of sections 2199.3.6(a)(1) and 2199.3.6(a)(2) of this regulation and any and all other relevant evidence including but not limited to: (1) the existence of significant variation in insurers' statewide filed rate levels in effect for the applicable lines of insurance with respect to insurers authorized to use the manual over the last three calendar years; and(2) the existence of significant change in statewide market shares (using the Annual Statement Statutory Page 14 written premium of insurers for the applicable lines of insurance) over the last ten calendar years; and(3) the entries and exits of insurers measuring one-tenth of one percent of the market (using the Annual Statement Statutory Page 14 written premium of insurers for the applicable lines of insurance) over the last ten calendar years; and(4) whether one or more insurers, alone or in conjunction with each other, control the business of the advisory organization, or decide or determine the contents of the advisory organization manual according to the documents governing the operation of the advisory organization that have been submitted to the Commissioner.(c) A manual may be found to contemplate activities or practices that are unfair, unreasonable or otherwise inconsistent with the Insurance Code on the grounds of an adverse effect on competition if the Commissioner determines that there is an agreement to adhere to the manual as prohibited by section 1855.4 of the Insurance Code, which is supported by direct evidence. However, pursuant to section 1855.4 of the Insurance Code, the following shall be insufficient evidence, alone or taken together, to establish an agreement to adhere to the manual: (1) the fact that two or more insurers participate in the activities of the advisory organization submitting the manual;(2) the fact that two or more insurers use or may use, either consistently or intermittently, the manual or other manuals of the advisory organization; or(3) the fact that the advisory organization manual contains information authorized by statute or regulation.(d) The Commissioner can, by regulation, at any time, change the standards set forth in section 2199.3.6(a)(1) and 2199-3.6(a)(2). The Commissioner can change the specified Herfindahl-Hirschman Index to a different index or change the 1000 score on that or any other index after considering evidence that some other index or some other point on this index is a better measurement of the degree of competition.Cal. Code Regs. Tit. 10, § 2199.3.6
1. New section filed 6-26-96; operative 7-26-96 (Register 96, No. 26).
2. Change without regulatory effect amending subsection (d) filed 7-14-2021 pursuant to section 100, title 1, California Code of Regulations (Register 2021, No. 29). Filing deadline specified in Government Code section 11349.3(a) extended 60 calendar days pursuant to Executive Order N-40-20.1. New section filed 6-26-96; operative 7-26-96 (Register 96, No. 26).
2. Change without regulatory effect amending subsection (d) filed 7-14-2021 pursuant to section 100, title 1, California Code of Regulations (Register 2021, No. 29). Filing deadline specified in Government Code section 11349.3(a) extended 60 calendar days pursuant to Executive Order N-40-20.