Bulletin 2007-15 Implementation Requirements for Mitigation Discounts and Credits \ Bulletin 2007-16 Notice Forms - Mitigation Discounts and Credits
Q. Which territories must be provided with the discounts and credits in § 38-73-1095. The statute itself reads ''rating plans for essential property insurance in the coastal or in the seacoast area, shall include discounts and credits or surcharges and debits calculated upon the following factors:" However, DOI Bulletin 2007-15 states "The plain language of the statute indicates that rating plans for property coverage in the seacoast and coastal areas of the state must contain discounts and credits." Must discounts be provided in the coastal area (all coastal counties), or only the smaller seacoast area? A. Discounts must be provided in the coastal area as well as the seacoast area. While the statute uses the word "or" it does not allow insurers a choice between the two areas, but rather mandates discounts and credits for property insurance on property located in the seacoast area (all areas in Horry, Georgetown, Berkeley, Charleston, Dorchester, Colleton, Beaufort, and Jasper Counties) as well as the coastal area (which is within the seacoast area). Q. Proposed Rule R.69-66, Section 3. requires insurers to offer discounts, credits or rate differentials on policies “for residential or commercial property.” Section 38-75-1095(C) and Bulletin 2007-15 require changes to rating plans for “essential property insurance in the coastal and seacoast areas.” The Proposed Rule would appear to be broader than the statute and Bulletin. Therefore, we would appreciate clarification on the following:
Do the rating plan requirements outlined in Section 2. of the Proposed Rule apply only to policies in the coastal and seacoast areas as defined in Section 38-75-310? Do the Credits and Discounts for certain fixtures and construction techniques addressed in Section 3. of the Proposed Rule also apply only to policies in the coastal and seacoast areas? Is implementation beyond the coastal and seacoast areas optional?
A. The law mandates discounts and credits for property insurance on property located in the seacoast area (all areas in Horry, Georgetown, Berkeley, Charleston, Dorchester, Colleton, Beaufort, and Jasper Counties) as well as the coastal area (which is within the seacoast area). It is anticipated that legislation will be introduced during the 2008 Legislative Session to extend mitigation credits and discounts to the entire state.
Q. Bulletin 2007-16 states that Section 38-75-755 "requires insurers to provide notice of available premium discounts for residential and commercial property insurance coverage." I do not see any limitation as to seacoast and coastal areas. I'm wondering if the two bulletins are related or if they are mutually exclusive.
A. Both Bulletins reference the mitigation credits/discounts. 38-73-1095 requires the discounts in the seacoast and coastal areas and 38-75-755 requires the notice. They are not mutually exclusive.
Q. Are Sections 2. and 3. of the Proposed Rule intended to require two separate rating programs?
A. No
Q. Are the rating plan requirements (and notice requirements of Section 38-75-755 and Bulletin 2007-16) required on policies where the insurer has excluded “windstorm” coverage as defined in the Proposed Rule?
A. Yes
Q. Are rating “discounts and credits or surcharges and debits” on the listed rating factors under Section 2. of the Proposed Rule intended to be applicable only to the windstorm portion of the premium?
Q. Section 38-75-1095(C) provides that “rating plans for essential property insurance in the coastal area or seacoast area, shall include discounts and credits or surcharges and debits…” The Proposed Rule is entitled only “Premium Discounts for Property Insurance;” however, under Section 2., Applicability, the Rule re-states the language found in Statute. Is it the Department’s intent to allow justified surcharges or debits, as well as discounts or credits, based on specific rating factors outlined under Section 2. of the Proposed Rule?
Q. Do mitigation discounts and credits apply to commercial lines?
Q. Do the rating factors and rating plans need to be submitted for commercial lines?
A. No, Regulation 69-64 exempts commercial lines rates and rules from being filed; therefore they do not need to be submitted. However, a desk copy needs to be maintained and furnished to the Department upon request.
Q. What is essential property?
A. Code 38-75-310 (1) provides the definition of essential property insurance.
Q. The legislation states that the mitigation discounts apply only to Primary homes, not secondary homes. Since our company does not write owner occupied Dwelling Fire policies, we assume we would not have to file mitigation discounts for the Dwelling Fire form.
A. Code 38-75-310 (1) refers to essential property and (4) refers to insurable interest and does not limit property to the primary residences. Therefore, the mitigation discounts are required.
Q. Can you confirm that §§ 6-9 of the Coastal Property Act (new §§ 38-75-755, 38-73-260, and 38-73-1095(C)) will not apply to eligible surplus lines insurers? A. It is the Department’s position that the mitigation discounts do not apply to Surplus Lines.
Q. In order to provide an appropriate transition period, an insurer may implement an approved rating plan over a period of years subject to the approval of the Department. An insurer electing to phase in its rating plan must provide an informational notice to the Department setting out its schedule for implementation of the phase-in rating plan. How long is a 'period of years'?
A. By January 1, 2009, all factors/discounts must be incorporated into the rating plan and available to consumers.
Q. When is the informational filing (Phase-In Plan) due?
A. December 31, 2007
Q. In light of the January 1, 2008 effective date, how is this reconciled with the 'phase-in' of a rating plan over a period of years?
A. The phase-in plan will specify the deadlines and any company requiring the extra time will be required to make pro-rata premium refunds.
Q. What are the filing requirements for a phase-in rating plan in lieu of the January 1, 2008 effective date?
A. The phase-in plan should include dates for the factor development, programming, testing, and implementation, not to exceed the timeframe set for January 1, 2009 for full implementation.
Q. In preparation for our mobile home program rate filing, which will include discounts and credits for certain rating factors to mitigate windstorm damage, we had the following questions: Do the discounts, credits or other rate differentials for any fixtures or construction techniques for residential or commercial property, under item A. of Section 3: Credits and Discounts of proposed regulation R69-66, also apply to mobile homes? We are aware that item D. of Section 3 states that discounts, credits or other rate differentials must be provided for mobile homes, but wanted to confirm that only the American Society of Civil Engineers Standard ANSI/ASCE 7-88 compliance items will apply to our mobile home program.
A. No, it states in section (D) that compliance with all appropriate tie-down requirements of SC laws is applicable.
Q. Section 4: Calculation Methodology of proposed regulation R69-66 states that the department will use available studies providing data and information on estimated loss reduction for wind resistant building features to evaluate the discounts offered by insures. Can and/or will the department make these studies available or provide the sources so insurers have examples of the type of support the department will require for insurers to support the discounts and credits?
A. The Department can not provide specific studies, however, reinsurance intermediaries, modeling organizations and others can provide guidelines.
Q. In reviewing South Carolina Bulletin 2007-16 which requires commercial property insurance policies to contain a notice that advises the policyholder that a reduction in premium may be available. There are no attachments with "Exhibit 1, 2, 3 or 4," however, there are worksheets attached, but there are only 3 different sheets. Please confirm whether or not these three samples are what is referenced in the Bulletin.
A. They are. The Department provided 3 examples of the forms for reference.
Q. Can you clarify the effective/ implementation dates?
A. The law applies to policies issued or renewed with an effective date after December 31, 2007.
Q. The law requires filings to be submitted “60 days in advance of the anticipated effective date.” Can you clarify how this corresponds with the additional time needed for compliance?
A. The 60 day period is the time allotted to the Department to review the filing. The law applies to policies issued or renewed with an effective date after December 31, 2007. The phase-in will allow companies the time to incorporate all of the changes. The plan must specify the deadlines for each phase. Any company requiring the extra time will be required to make pro-rata premium refunds. By January 1, 2009, all factors/discounts must be incorporated into the rating plan and available to consumers.
Q. Proposed Rule R.69-66, Section 3, Credits and Discounts, subsection B. and Bulletin 2007-15 indicate that an insurer may implement an approved rating plan over a period of years. Is subsection B., regarding a phased-in plan, intended to apply to both the rating plan requirements of Section 2. and/or the credits and discounts for meeting certain building code standards or construction techniques as outlined in Section 3?
A. These are the same. The rating plan will provide for debits/credits for the factors as specified by law.
Q. Is subsection B. intended to allow an insurer to phase in the rating plan over its entire book of business over a period of years; to phase in discount percentages; to phase in consideration for applicable fixtures and/or rating factors; or all of the above?
A. The law applies to policies issued or renewed with an effective date after December 31, 2007. The phase-in will allow companies the time to incorporate all of the changes. The plan must specify the deadlines for each phase. Any company requiring the extra time will be required to make pro-rata premium refunds. By January 1, 2009, all factors/discounts must be incorporated into the rating plan and available to consumers.
Q. How would a phased in plan affect the notice requirements of Section 38-75-755 and Bulletin 2007-16?
A. Section 38-75-755 "requires insurers to provide notice of available premium discounts for residential and commercial property insurance coverage." The law applies to policies issued or renewed with an effective date after December 31, 2007. The Notice Requirements must be made specifying the availability, with proper mention to the discounts/credits under development.
Q. With respect to the building code or construction technique requirements enumerated in Section 3. of the Proposed Rule, it appears that it is the Department’s intent to only allow discounts or credits or other rating considerations beneficial to the policyholder for meeting certain building construction criteria, as opposed to allowing surcharges or debits for construction standards that do not meet minimum requirements. However, it is unclear what is intended by subsection C. of Section 3. We request that the Department provide further clarification on subsection C.
A. The intent of the statute is to promote mitigation measures.
Q. What will the South Carolina Department of Insurance accept as justification for the intended discounts? Are third-party studies and nationwide information acceptable for use in demonstrating premium reductions?
A. Yes.
Q. Section 4. of the Proposed Rule addresses the calculation methodology for reductions in rates or discounts, however Section 38-75-1095(C) also permits surcharges and debits. Will surcharge or debit plans be considered where an insurer can demonstrate a reasonable correlation between rating factor and loss?
Q. Bulletin 2007-16 provides the sample notice forms to be sent to policyholders. The "Description of Mitigation Measures" chart makes it clear that insurers may preprint the premium discount range in the form. However, the "Wind and Hail Deductible Options" section on the second page of the form seems to require that insurers print the actual deductible amount for that specific insured. May companies revise the form to provide a range of deductibles? Doing so would allow companies to produce one form applicable to all policyholders, rather than to produce policy-specific forms.
Q. Sample forms published on the Department’s website are marked as “draft.” Does the Department intend to make further changes to the sample documents?
A. No, these are examples.
Q. Bulletin 2007-16 provides implementation guidance on Section 38-75-755, but neither the Section nor the Bulletin indicate the specific lines of business or types of policies for which the notices are required. In the absence of specific guidance, the notice requirements could be interpreted to apply to all policies subject to Article 9, including policies where windstorm coverage has been excluded and tenants’ policies.
A. The statute states that the law applies to all residential and commercial property. It does not exclude property that excludes wind.
Bulletin 2006-11 UNDERWRITING RESTRICTIONS BASED ON GEOGRAPHY
As part of the Property & Casualty Personal Lines Insurance Modernization Act of 2004, Section 38-75-1240 of the South Carolina Insurance Code requires all insurers to provide annually a listing of underwriting restrictions based on geography. Because the statute specifies “all insurers,” both admitted and non-admitted insurers are required to respond. Bulletin 2006-11 requires that (1) a listing of underwriting restrictions based on geography as of January 1, 2005, and (2) any changes to those underwriting restrictions as of December 31, 2006, be provided by January 31, 2007 and updated by January 31st of each year. Admitted insurers are expected to respond to the Department directly. Non-admitted insurers may respond through their South Carolina licensed surplus lines broker responsible for managing the non-admitted insurer’s program in South Carolina. Surplus lines brokers who merely place business with a non-admitted carrier through the surplus lines broker responsible for managing the non-admitted insurer’s program in South Carolina are not required to, and should not, respond.
The following specific questions were asked regarding the bulletin:
Q. Who has to file?
A. All insurers, including admitted and non-admitted insurers. Surplus lines brokers that have binding authority for a surplus lines insurer.
Q. Who doesn't have to file?
A. Producers, surplus lines brokers that place business through another surplus lines broker with responsibility for managing a South Carolina property program fro a surplus lines insurer.
Q. Why do we have to file this information?
A. See S.C. Code Ann. Sections 38-75-1240 and 38-13-160.
Q.What will the South Carolina Department of Insurance do with this information?
A. It is intended to give the Department a better understanding of property insurance marketplace in South Carolina. The statute provides that this information is confidential.
Q. Will the deadline be extended?
A. The deadline is extended to February 6, 2007. Insurers not responding by that date will be deemed to be in violation of the statute.
Q. What lines of insurance do we have to submit information?
A. All forms of commercial and residential property insurance, as well as fire and allied inland marine flood policies on risks located in South Carolina.
Q. How do you want this information submitted?
A. As per Bulletin 2006-11, please provide separate listings for each company by line and sub-line of business. For Admitted Carriers: Please provide the company name, address and direct telephone number of a contact person who can answer questions from the Department about the information provided in response to this bulletin. For Surplus Lines Brokers: Please provide the broker name, name of the surplus lines company and the name and number of a contact person who can answer questions from the Department about the information provided in response to this bulletin.
Q. What do I do if I have already responded to this bulletin?
A. If you have already submitted the information outlined above, you do not need to resubmit the information.
Q. What if I have submitted this information previously in a filing? Do I have to submit it?
A. Yes. The statute requires an annual listing. Moreover, we have no way of knowing which companies have previously filed this information.
Q. How should I submit this information?
A. You may submit the information via mail or e-mail.
Q. I am just an insurance agent. Do I have to submit this information?
A. No.
Q. What do I do if the surplus lines company I represent wants to send in the information directly to the Department?
A. Non-admitted carriers are not authorized to do business in South Carolina except through licensed surplus lines brokers. The carrier should submit the information through its surplus lines broker managing its property program in South Carolina.
Q. What do I do if the surplus lines company I represent refuses to provide me that information?
A. The name of the company should be provided to the Department. Disciplinary action may be taken against any carrier refusing to comply with the statute.
Q. Will you send out additional notices about who should submit this information?
Q. Does a non-resident broker have to file?
Q. If a company adopted ISO guidelines, do they still have to submit the data?
Q. Do geographic restrictions include protection types and class codes?
A. Yes. Any criteria that is treated differently based on geography is to be reported.
Q. The surplus lines broker might have many surplus lines markets, so do they report for all of them?
A. A surplus lines broker is only required to provide information for those surplus lines carrier for which he or she manages a South Carolina property program.
Q. A surplus lines company might have hundreds of surplus lines brokers, so again do all brokers report for the company?
Q. Sometimes a broker has a binding authority agreement with a surplus lines company, as well as an open brokerage relationship with the company. Does the broker report in both capacities? The underwriting restrictions might differ from the binding authority business to the open brokerage individual risk business.
A. Yes. One response may be submitted with a notation of the different restrictions based upon the different capacities of the broker. Again, only a surplus lines broker is only responsible for reporting on behalf of a surplus lines carrier for which he or she is the South Carolina property program manager.
Q. A surplus lines company may have different restrictions for different brokers depending upon what they write, their reinsurance contracts, their existing broker contracts, their expertise, their limits of authority, their geography. Will you track different restrictions placed on different brokers? Are you only looking for the report of an underwriting restriction placed on all risks regardless of the insured's circumstances?
A. The statute requires only that underwriting restrictions based upon geography be reported.
Q. It is not uncommon for there to be no appointment, no contract, and no formal agreement between the surplus lines company and a surplus lines broker. A company is not technically "represented" by a broker so the terminology of the bulletin does not necessarily work in the surplus lines context. Do the brokers report for every company with which they placed business with written premium in the prior year? Do they report for every company for which they made a submission? If the broker has no idea what underwriting restrictions are used by a particular company, are they nevertheless obligated to find out what restrictions exist and make a report?
A. The surplus lines insurer is required to report the information specified in the statute. Since surplus lines carriers are not authorized to do business in South Carolina except through licensed surplus lines brokers, the carrier should submit the information through its surplus lines broker managing its property program in South Carolina. If the surplus lines carrier has many brokers, the carrier should designate which broker is to supply the information to the Department so that the information is only provided once for each of the carrier’s program.
Q. Am I correct that Bulletin 2006-11 applies to property insurance only? At one point, it mentions property so can we assume it applies to property only?
A. The bulletin applies to all forms of property insurance, commercial and residential, as well as fire and allied inland marine flood policies on risks located in South Carolina.
Q. If a surplus lines company applies a wind exclusion late in 2006 because it has reached accumulation levels, but previously wrote without the wind exclusion prior to reaching the accumulation levels, does the broker still report the limit regarding accumulation levels as an underwriting restriction?
A. Yes, if there was no restriction as of January 1, 2006 but there was by December 31, 2006.
Q. If a surplus lines company declines to provide this competitive information to a broker, will a broker be penalized in some way? Many companies will be reluctant to provide competitive information to brokers or the state. The surplus lines broker and the surplus lines company do not have an "agency" relationship so penalizing a broker seems inappropriate. The surplus lines companies are considered "non-admitted" so penalizing the surplus lines company would also be inappropriate. If some Lloyd's syndicates fail to respond, who would be penalized?
A. Brokers need to inform the Department if a company fails to respond or indicates that it will not provide the information to enable the broker to respond.
Bulletin 2006-08 Service and Administrative Fees
Q. Are the Optional Fees listed the only fees allowed?
A. No, fees for services other than those listed may be permissible but must first be submitted to the Department for approval not less than 30 days prior to the effective date of the policy to which such fees apply.
Q. How will auto agents know what information to file with the Department?
A. The Department has created a standard form that can be used in filing the fee schedule; it is Exhibit B, as attached.
Q. Will auto insurance agents be allowed to charge a fee ($4) for having to verify auto liability insurance coverages to DMV under the ALIR program?
A. If agents wish to charge a fee for verifying liability insurance coverage to the DMV under the ALIR program, they must make a filing with the Department as set forth in Bulletin 2006-08. This type of fee could be considered a convenience fee, which is specifically addressed, or the agent can file for a separate ALIR Fee, but must include evidence of the actual cost of providing such service.
Q. If the fees currently being used are equal to or below the listed fee, do they still have to be filed?
Q. If an agent is charging fees for consulting services, such as risk management in addition to those provided by the carrier, how is this fee handled? Would this constitute a fee for service not related to the contract? If so, do these fees have to be filed with the Department?
A. Bulletin 2006-08 specifically refers to risk management fees which may only be charged by insurers and only if set forth in the policy, declarations page or endorsements and reflected in the premium rate charged for the policy. An agent may only charge fees for 'Optional Services', as defined in Bulletin 2006-08.
Q. How does an insurance company file with the DOI the Maximum Optional Fee Schedule Filing?
A. Insurance Companies must submit the Maximum Optional Fee Schedule Filing as a Form Filing, include a SC DOI Form 2004, submit the filing in duplicate, and include a self-addressed stamped envelope.
Q. How does an insurance agent(s)/agencies file with the DOI the Maximum Optional Fee Schedule Filing?
A. Insurance Agents/Agencies must submit the Maximum Optional Fee Schedule Filing in duplicate, and include a self-addressed stamped envelope.
Bulletin 2006-04 Cancellation of Automobile Insurance Policies within 60 Days - Language for Non-payment for 30 Days
Q. Does this apply to commercial private passenger vehicles?
A. Yes. 56-10-210, et seq, refers to motor vehicles generally, with no distinction between commercial and private passenger vehicles.
Q. The effective date of the law change is August 1, 2006. Does it apply to all policies currently in-force or only policies effective on or after August 1, 2006?
A. The change in law applies to policies effective on or after August 1, 2006.
Q. If the initial payment is a bad check can they still cancel immediately?
A. Yes. The only change to the law was the addition of (4) "the insured fails to pay when due the premium for the policy, an installment of the premium, or an installment payment under a premium service contract. The contract or policy of insurance must remain in effect for at least thirty days." All other provisions of 56-10-280 remain unchanged.
Bulletin 2006-03 Increases in Minimum Liability Limits 25/50/25
Q. When are these limits effective?
A. These limits only apply to new or renewal policies with effective dates on or after January 1, 2007.
Q. If an endorsement is made after Janaury 1, 2007 on a policy effective prior to January 1, 2007, do the new limits apply?
Q. Regulation (SIC) 38-77-150 states that the uninsured motorist provision must also provide for no less than $10,000 coverage, does this new law replace this?
A. The minimum uninsured motorists limits that must be offered are 25/50/25, with a $200 deductible for the UMPD.
Q. If an insurer has to increase rates for the new limit, does this constitute a rate filing and count toward the filing limitations?
A. If the insurer has only filed rates for 15/30/10 limits, has not previously filed rates for 25/50/25 limits and is only making a rate filing for the 25/50/25 limits, such filing does not constitute a 'rate change' for purposes of 38-73-910. If the insurer has previously filed rates for 25/50/25 within the previous 12 months and wishes to increase those rates, such filing does constitute a rate change and will be subject to Prior Approval.
Q. What are the rate filing limitations?
A. See Sec. 38-73-910.
Q. Do the increased limits apply to Commercial Lines and Personal Lines business?
Q. When will Form # 2006 be revised and put out on the web?
A. The new form will be posted Monday, August 14, 2006.
Q. If the insured previously declined the additional and optional coverages, do they have to sign another form?
A. There is no legal requirement that a new form be completed. However, forms completed before June 14, 2006 do not create a conclusive presumption for an informed, knowing selection of coverage. It is, therefore, recommended that insurers and producers obtain newly completed forms.
Q. When the Form is filled in, do the applicable premium levels get filled in at the time of submission or at the time the policy is being issued?
A. Premiums are to be entered at the time the form is completed in order that the insured can make an informed decision as to his or her options with respect to additional uninsured or optional underinsured motorist coverage.
Q. When does the new form have to be submitted in order to be approved in time for renewals going out prior to the January 1, 2007 effective date?
A. All forms should be submitted 60 days prior to use.
