N.Y. Comp. Codes R. & Regs. tit. 11 § 160.2

Current through Register Vol. 46, No. 50, December 11, 2024

Section 160.2 - Rates

(a) Basis for rates in competitive markets. The purpose of the law is to encourage the freest and fastest response of prices to competitive and cost conditions, recognizing the special difficulties in rate-making in the insurance industry, with the fewest regulatory restraints on competition consistent with the public interest. In constructing rates, insurers and rating organizations must in good faith consider and base rates upon the factors named in sections 2303 and 2304 of the Insurance Law. In refining and applying these factors, management shall be guided by sound judgment, accepted financial and insurance practices, the opinions of qualified technical experts within the areas of their expertise, and prevailing and anticipated conditions. The past interpretations and standards of the Insurance Department are not necessarily controlling. Ordinarily, in the construction of a rate or of rates, an insurer or rating organization will rely upon past loss and expense experience likely to have reliability as a predictor of the costs which may be experienced on the business which it is anticipated will be written at the rate or rates. In the exercise of informed and technically competent judgment, such experience may consist of an insurer's own past experience, the past experience of other insurers, or reasonable combination of both. For the rating organization, such experience may consist of the loss and expense experience of members, or members and subscribers, or of other insurers or rating organizations, or a reasonable combination of these. Where past expense or loss experience or both is not credible or is incomplete or where conditions affecting the validity of the experience have changed, or where it is reasonably anticipated that conditions affecting the validity of the experience are likely to change, rates may be predicated on informed judgment fairly exercised on the basis of the best available data.

(b) Expenses; allocation. Expense costs except where otherwise reasonably allocable ordinarily shall be spread over all insureds or classes on a fair and consistent basis, giving due consideration to the provisions of section 2304 of the Insurance Law relating to expenses.

(c) Rates pursuant to plan or system. Ordinarily, insurers must charge rates in accordance with a plan or system of classifications and rates established or adopted by the insurer. The plan or system may include provisions for modification of rates under prescribed circumstances or conditions, provided that any such modifications shall apply to all risks under the same or substantially the same circumstances or conditions. An insurer may satisfy this requirement by adopting the advisory plan or system of classifications and rates currently issued by a licensed rating organization. Nothing in these regulations shall preclude two or more insurers coming within the definition of insurer in section 160.l(a) of these regulations from using different rates, classifications, territories, rating plans, rating systems, underwriting rules or policy forms.

(d) Advisory rate. The fact that two or more authorized insurers, whether or not members or subscribers of a rating or advisory organization or of an actuarial, forms, rating or other committees thereof, use either consistently or intermittently the advisory rates or rating systems made or adopted by a rating organization, or the rules, classifications, policy or bond forms prepared by a rating or advisory organization, or, as members or subscribers, participate in the operations and functions of such rating or advisory organization, or the fact that two or more insurers, either consistently or intermittently, authorize such a rating organization to act in their behalf pursuant to section 2316 of the Insurance Law shall not be deemed to constitute an agreement to charge or to adhere to the rates, rating plans, rating systems, rules, classifications, territories, or forms, or otherwise constitute anticompetitive behavior.

(e) Support for rates. Insurers must maintain in their files accessible to the department evidence of the factors and data considered in the making of rates. Such evidence may consist in whole or part of the rates promulgated by licensed rating organizations. Rating organizations shall make available to members and subscribers the information underlying the schedules of rates, rating plans, rules, classifications and territories, made or adopted by such rating organization. Such information shall be available in such form and detail as will reasonably permit the management of each member and subscriber insurer to ascertain the basis on which the schedule of rates, rating plans, rules, classifications and territories are constructed.

(f) Review of rates. Insurers and rating organizations shall review their rates at reasonable intervals to ascertain whether changes in conditions or developed loss and expense experience or other considerations indicate a need for adjustment of rates. If such review indicates a need for rate adjustment, an insurer or rating organizations shall promptly undertake the process of effecting such adjustment. An insurer may comply with this subdivision by relying upon the review at reasonable intervals by the rating organizations of which it is a member or a subscriber, provided it has reasonable grounds to believe that the rating organization itself remains in compliance with this subdivision. What constitutes a reasonable interval will vary with the kind or class or insurance involved, the volume written, and other factors and should be determined by the exercise of sound judgment and with reference to the reasonable and customary practices of business.

(g) Prevention of improperly charged rates. Insurers shall establish adequate procedures to minimize the occurrence of improperly charged rates and shall in fact pursue such procedures. Use of the audit services of a licensed rating organization shall constitute an adequate such procedure unless the superintendent informs the insurer otherwise. The fact that an insurer has, in writing, authorized a rating organization to act upon its behalf in complying with any of its obligations under article 23 of the Insurance Law until such time as the authorization is supplemented, amended or revoked shall not be deemed to be in violation of the requirements of section 2316 of the Insurance Law.

N.Y. Comp. Codes R. & Regs. Tit. 11 § 160.2