Florida Regulations 69O-170.004: Rating Plans: Discounts, Credits, Surcharges
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(1) This rule applies to all commercial property and casualty insurance which is subject to Florida Statutes § 627.062(2), and which is voluntarily written by an insurer in accordance with a rating plan. It is intended to establish guidelines and procedures for determining whether discounts, credits or surcharges applied under a rating plan are producing rates which are not excessive, inadequate, or unfairly discriminatory. This rule does not apply to workers’ compensation and employer’s liability insurance, to private passenger motor vehicle insurance, or to risks that are individually rated (pursuant to SubFlorida Statutes § 627.062(3)), or subject to excess rate procedures (pursuant to Florida Statutes § 627.171).
(2) As used in this rule:
(a) “”Rating plan”” means any schedule rating plan, experience rating plan, retrospective rating plan, individual risk premium modification plan, rule, procedure, plan, underwriting rule, schedule, or other such device for modifying filed manual rates and rating rules.
(b) “”Subjective discount, credit or surcharge plan”” means any rating plan which (i) applies to a specific policy at the discretion of the insurer, or (ii) uses subjective, non-quantifiable standards for determining the rate modification, or (iii) does not specify the exact amount of the modification. These plans include, but are not limited to, plans commonly called Schedule Rating Plans and Individual Risk Premium Modification Plans. These plans enumerate a number of individual risk characteristics and a range of modifications or modification factors which may be applied to the otherwise applicable manual rate in order to recognize individual risk characteristics. However, individual risk characteristics shall not include the degree of competition for the risk or the rates which may be offered by other insurers. The effect of the modification is to increase (debit) or decrease (credit) the otherwise applicable manual rate.
(c) “”Manual rate”” means the rate developed using the filed manual rates and premium determination rules prior to the application of any rating plan.
(d) “”Experience rating plan”” means any rating plan or part of a rating plan used to modify an otherwise applicable manual rate based on the past loss experience of the individual insured.
(3) All rating plans shall clearly define the eligibility standards for the plan as approved by the Office. Experience rating plans shall be mandatory for all eligible insureds. The eligibility for a subjective discount, credit, or surcharge plan shall depend upon manual premium which shall not be less than $1000 in manual premium.
(4) Unless otherwise specified in the premium determination rules, concurrent applications of rating plans shall be multiplicative in determining the final rate. Unless otherwise specified in a subjective discount, credit, or surcharge plan, concurrent application of discounts, credits, and surcharges shall be additive in the determination of the final debit or credit.
(5)(a) An insurer utilizing a subjective discount, credit, or surcharge plan on a particular policy shall maintain documentation which supports the rate modification. Appropriate documentation includes loss control reports, inspection reports, financial analyses, photographs, and safety plans. Documentation must be maintained for five years. The modification shall remain in effect for all the renewals of that policy or for any replacement policy. If the insurer changes the modification upon renewal or replacement of that policy, the insurer shall maintain appropriate documentation of the revised modification and justify the change in the modification. Documentation for the change must be maintained for five years.
(b) All subjective rating for a particular line of insurance shall be consolidated into a single subjective discount, credit, or surcharge plan. The maximum debit or credit for any individual policy developed by a subjective discount, credit, or surcharge plan shall not exceed 25%.
(c) A credit given under a subjective discount, credit, or surcharge plan may not result in modified premium which is less than the premium that made the risk eligible for the subjective discount, credit, or surcharge plan.
(6) Section 627.062(2)(e)6., F.S., requires premium discounts, credits, or surcharges to bear a reasonable relationship to the expected loss and expense experience among various groups of risks. For policies which have received a premium modification under a subjective discount, credit, or surcharge plan, the insurer shall maintain documentation by line of business showing the policy number, the otherwise applicable manual premium for that policy, the premium debit or credit for that policy, and the incurred loss experience for that policy. For each policy year for each line of business, the insurer shall determine the loss ratio for all policies which have received a premium debit under the subjective discount, credit or surcharge plan, the loss ratio for all policies which have received a premium credit under the subjective discount or surcharge plan, and the loss ratio for all policies which received neither a debit or a credit under the subjective discount, credit, or surcharge plan. The insurer shall maintain such documentation for Office inspection and review. A subjective discount, credit, or surcharge plan which does not bear a reasonable relationship among loss ratios for the debit group, the credit group, and the non-debit/credit group shall be deemed unfairly discriminatory.
Rulemaking Authority Florida Statutes § 624.308(1). Law Implemented 624.307(1), 624.316, 624.418(2), 624.4211, 627.062(1),(2) FS. History-New 5-19-88, Amended 6-9-91, Formerly 4-72.004, Amended 7-30-00, Formerly 4-170.004.
(2) As used in this rule:
(a) “”Rating plan”” means any schedule rating plan, experience rating plan, retrospective rating plan, individual risk premium modification plan, rule, procedure, plan, underwriting rule, schedule, or other such device for modifying filed manual rates and rating rules.
(b) “”Subjective discount, credit or surcharge plan”” means any rating plan which (i) applies to a specific policy at the discretion of the insurer, or (ii) uses subjective, non-quantifiable standards for determining the rate modification, or (iii) does not specify the exact amount of the modification. These plans include, but are not limited to, plans commonly called Schedule Rating Plans and Individual Risk Premium Modification Plans. These plans enumerate a number of individual risk characteristics and a range of modifications or modification factors which may be applied to the otherwise applicable manual rate in order to recognize individual risk characteristics. However, individual risk characteristics shall not include the degree of competition for the risk or the rates which may be offered by other insurers. The effect of the modification is to increase (debit) or decrease (credit) the otherwise applicable manual rate.
(c) “”Manual rate”” means the rate developed using the filed manual rates and premium determination rules prior to the application of any rating plan.
(d) “”Experience rating plan”” means any rating plan or part of a rating plan used to modify an otherwise applicable manual rate based on the past loss experience of the individual insured.
(3) All rating plans shall clearly define the eligibility standards for the plan as approved by the Office. Experience rating plans shall be mandatory for all eligible insureds. The eligibility for a subjective discount, credit, or surcharge plan shall depend upon manual premium which shall not be less than $1000 in manual premium.
(4) Unless otherwise specified in the premium determination rules, concurrent applications of rating plans shall be multiplicative in determining the final rate. Unless otherwise specified in a subjective discount, credit, or surcharge plan, concurrent application of discounts, credits, and surcharges shall be additive in the determination of the final debit or credit.
(5)(a) An insurer utilizing a subjective discount, credit, or surcharge plan on a particular policy shall maintain documentation which supports the rate modification. Appropriate documentation includes loss control reports, inspection reports, financial analyses, photographs, and safety plans. Documentation must be maintained for five years. The modification shall remain in effect for all the renewals of that policy or for any replacement policy. If the insurer changes the modification upon renewal or replacement of that policy, the insurer shall maintain appropriate documentation of the revised modification and justify the change in the modification. Documentation for the change must be maintained for five years.
(b) All subjective rating for a particular line of insurance shall be consolidated into a single subjective discount, credit, or surcharge plan. The maximum debit or credit for any individual policy developed by a subjective discount, credit, or surcharge plan shall not exceed 25%.
(c) A credit given under a subjective discount, credit, or surcharge plan may not result in modified premium which is less than the premium that made the risk eligible for the subjective discount, credit, or surcharge plan.
(6) Section 627.062(2)(e)6., F.S., requires premium discounts, credits, or surcharges to bear a reasonable relationship to the expected loss and expense experience among various groups of risks. For policies which have received a premium modification under a subjective discount, credit, or surcharge plan, the insurer shall maintain documentation by line of business showing the policy number, the otherwise applicable manual premium for that policy, the premium debit or credit for that policy, and the incurred loss experience for that policy. For each policy year for each line of business, the insurer shall determine the loss ratio for all policies which have received a premium debit under the subjective discount, credit or surcharge plan, the loss ratio for all policies which have received a premium credit under the subjective discount or surcharge plan, and the loss ratio for all policies which received neither a debit or a credit under the subjective discount, credit, or surcharge plan. The insurer shall maintain such documentation for Office inspection and review. A subjective discount, credit, or surcharge plan which does not bear a reasonable relationship among loss ratios for the debit group, the credit group, and the non-debit/credit group shall be deemed unfairly discriminatory.
Rulemaking Authority Florida Statutes § 624.308(1). Law Implemented 624.307(1), 624.316, 624.418(2), 624.4211, 627.062(1),(2) FS. History-New 5-19-88, Amended 6-9-91, Formerly 4-72.004, Amended 7-30-00, Formerly 4-170.004.