Florida Regulations 69O-188.010: Rating Plan: Discounts, Credits, Surcharges
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(1) This rule applies to all commercial property and casualty insurance which is written by a commercial self-insurance fund, as defined in Section 624.460-.488, F.S., 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 that are not excessive, inadequate or unfairly discriminatory. This part does not apply to workers’ compensation or employer’s liability insurance.
(2) As used in this rule:
(a) “”Rating plan”” means the rate manual and any schedule rating plan, experience rating plan, individual risk premium modification plan, rule, procedure, plan, underwriting rule, schedule or other such device for modifying manual rates.
(b) “”Subjective discount, credit or surcharge plan”” means any part of the rating plan that (i) applies to a specific policy at the discretion of the fund or the insured, or (ii) uses subjective non-quantifiable standards for determining the rate modification, or (iii) does not specify the exact amount of the modification. Also called rate modification plans, these plans usually provide various risk characteristics or conditions and a range of modification factors which may be applied to the manual rate of a particular insurance risk in recognition of such characteristics or conditions. The effect of the modification factor is to increase (debit) or decrease (credit) the rate to be charged. These plans include, but are not limited to, plans commonly called Schedule Rating Plans and Individual Risk Premium Modification Plans.
(c) “”Manual rate”” means the rate developed from the rating plan prior to the application of any subjective discount, credit or surcharge plan. Generally, the manual rate is designed to apply on a generic basis to similar risks and is published in a rate manual by a fund or rating organization. Package rates produced by application of package modification factors to monoline rates are considered to be manual rates.
(d) “”Experience rating plan”” means any part of a rating plan used to modify an otherwise applicable rate based on the past loss experience of the individual insured.
(e) “”Fund”” means a commercial self-insurance fund authorized to write one or more property or casualty lines of business in the State of Florida under Sections 624.460-.488, F.S.
(3) All experience rating plans shall clearly define the eligibility standards for the plan as approved by the Office. These plans shall be mandatory for all eligible insureds.
(4) Unless otherwise specified in the rating plan, concurrent applications of discounts, credits and surcharges shall be multiplicative in determining the final rate.
(5)(a) Application of subjective discount, credit or surcharge plans to a specific policy shall be based on “”informed”” judgment which is supported in the file by appropriate documents, e.g. a loss control report, financial analysis, inspection reports, photographs, and the insured’s formal safety plans.
(b) For an individual insured, the total effect of application of subjective discount, credit or surcharge plans may not result in a debit or credit of more than 25% on any policy with an effective date on or after October 1, 1991.
(6)(a) Each fund shall report information on Form OIR-CSF, “”Application of Subjective Discounts, Credits, Surcharges and Experience Rating Reporting Form/Commercial Self-Insurance Fund,”” rev. 5/91, which, with its Instructions, is hereby adopted and incorporated by reference, to enable the Office to monitor the relationship of aggregate premium actually charged policyholders by each fund to the premium that would have been charged by application of the fund’s filed manual rates. The form may be obtained from the Bureau of Property and Casualty Rate and Reserve Analysis, Division of Insurer Services, Office of Insurance Regulation, Larson Building, Tallahassee, FL 32399-0300. The report is due on or before April 1st of each year, beginning with the report which is due April 1, 1992. Failure to file reports on time will result in administrative sanctions pursuant to Section 624.418(2)(a), F.S., which provides that the Office may take action against any fund which violates any rule of the Office. A form which is not complete will be considered a failure to report on time.
(b) The Department may require the information reported on Form OIR-CSF to be submitted in a specified computer-readable form in place of the format provided on the present OIR-CSF reporting form.
(c) Any fund with an insignificant number of policies and/or premium volume written under a rating plan in this state may be exempted from reporting on Form OIR-CSF by completing and submitting Form OIR-CSE, “”Florida – Discounts, Credits, Surcharges/Exemption – Fl. Admin. Code R. 69O-188.010,”” rev. 5/91, which is hereby adopted and incorporated by reference. The exemption shall be requested annually and shall not be effective until the fund has received approval from the Office. The form may be obtained from and shall be submitted to the Bureau of Property and Casualty Rate and Reserve Analysis, Division of Insurer Services, Office of Insurance Regulation, Larson Building, Tallahassee, Florida 32399-0300. A fund with $250,000.00 or less in annual written premiums for a specific line of business reported under this rule written on Florida risks will be approved without the need for further justification. However, for amounts greater than $250,000.00 or for numbers of policies of 50 or more, the fund shall attach further information to justify a determination of “”insignificant.””
(d) Any fund with no business written under a rating plan in this state need not submit Form OIR-CSF to the Department for any future reporting period but must advise the Office of this fact in writing.
(7)(a) If the combined effect of modifications for any line as shown in Column B on Form OIR-CSF shows a departure from the manual rate in excess of plus or minus 5% for the current reporting period, the fund shall limit the application of subjective discounts, credits or surcharges for that line to plus or minus 15% on an individual policy basis beginning not more than 120 days after the notification is sent to the fund by the Office. For the next full reporting period, if the total departure from the manual rates continues to exceed plus or minus 5%, the fund shall limit the application of subjective credits or surcharges for that line to plus or minus 5% on an individual policy basis, beginning not more than 120 days after the notification is sent by the Office, until the departure from manual rates does not exceed plus or minus 5% for one full reporting period.
(b) Use of the full range of subjective discount, credit or surcharge plans for the line may resume as specified in paragraph (5)(b), above, only when the fund has experienced for one full reporting period results which are within the prescribed total limits guidelines, for the line as shown in Column B on Form OIR-CSF, as adopted in this rule.
(8) The effect on manual premiums of experience rating and subjective rating shall be excluded when calculating indicated manual rates and manual rate changes unless it can be shown that their inclusion does not result in excessive, inadequate or unfairly discriminatory rates.
(9)(a) For filings submitted after January 1, 1994, for any line shown on Form OIR-CSF, adequate supporting information which is acceptable to the Office shall be submitted with every rate filing required under Florida Statutes § 624.482, and every rate filing subject to subsection (8), above, substantiating that the relationship between subjective discount, credit or surcharge rate modifications and the expected loss and expense experience for the exposures is such that the subjective discount, credit or surcharge plans do not result in excessive, inadequate or unfairly discriminatory rates. The information provided must include an analysis of the experience resulting from the application of the subjective discount, credit or surcharge plan. Each fund must maintain the necessary experience, including the premiums, paid losses, reserved losses and allocated loss adjustment expenses paid or reserved for analysis. Funds which are affiliated with a licensed rating organization for filing purposes and use the rating organization’s schedule rating plan may rely upon that organization to file on their behalf the information required under paragraph (9)(a). The experience must be accumulated in at least three categories, including debit rated risks, credit rated risks, and risks rated at the manual level. Generally accepted actuarial procedures shall be used in the analysis of this experience.
(b) If a fund lacks sufficient data for full credibility it may use data from other states or industry data to the extent needed to give credible results when making the analysis in paragraph (a), above.
(c) Failure to prove that a subjective discount, credit or surcharge plan does not result in excessive, inadequate or unfairly discriminatory rates will result in disapproval of such plan.
(10) If a fund fails to comply with the provisions of this rule, the department is authorized by Florida Statutes:
(a) To suspend or revoke the certificate of authority of the fund, under the provisions of Sections 624.418(2)(a), (b), (c), (d), (e), and (g), F.S.; or,
(b) In lieu of such discretionary suspension or revocation, to impose a fine and require restitution, pursuant to the provisions of Florida Statutes § 624.4211 Fines for willful violations may be as much as $100,000.
Rulemaking Authority Florida Statutes § 624.308(1). Law Implemented 624.307(1), 624.418, 624.4211, 624.470, 624.482 FS. History-New 8-15-91, Formerly 4-78.010, 4-188.010.
Terms Used In Florida Regulations 69O-188.010
- Restitution: The court-ordered payment of money by the defendant to the victim for damages caused by the criminal action.
(a) “”Rating plan”” means the rate manual and any schedule rating plan, experience rating plan, individual risk premium modification plan, rule, procedure, plan, underwriting rule, schedule or other such device for modifying manual rates.
(b) “”Subjective discount, credit or surcharge plan”” means any part of the rating plan that (i) applies to a specific policy at the discretion of the fund or the insured, or (ii) uses subjective non-quantifiable standards for determining the rate modification, or (iii) does not specify the exact amount of the modification. Also called rate modification plans, these plans usually provide various risk characteristics or conditions and a range of modification factors which may be applied to the manual rate of a particular insurance risk in recognition of such characteristics or conditions. The effect of the modification factor is to increase (debit) or decrease (credit) the rate to be charged. These plans include, but are not limited to, plans commonly called Schedule Rating Plans and Individual Risk Premium Modification Plans.
(c) “”Manual rate”” means the rate developed from the rating plan prior to the application of any subjective discount, credit or surcharge plan. Generally, the manual rate is designed to apply on a generic basis to similar risks and is published in a rate manual by a fund or rating organization. Package rates produced by application of package modification factors to monoline rates are considered to be manual rates.
(d) “”Experience rating plan”” means any part of a rating plan used to modify an otherwise applicable rate based on the past loss experience of the individual insured.
(e) “”Fund”” means a commercial self-insurance fund authorized to write one or more property or casualty lines of business in the State of Florida under Sections 624.460-.488, F.S.
(3) All experience rating plans shall clearly define the eligibility standards for the plan as approved by the Office. These plans shall be mandatory for all eligible insureds.
(4) Unless otherwise specified in the rating plan, concurrent applications of discounts, credits and surcharges shall be multiplicative in determining the final rate.
(5)(a) Application of subjective discount, credit or surcharge plans to a specific policy shall be based on “”informed”” judgment which is supported in the file by appropriate documents, e.g. a loss control report, financial analysis, inspection reports, photographs, and the insured’s formal safety plans.
(b) For an individual insured, the total effect of application of subjective discount, credit or surcharge plans may not result in a debit or credit of more than 25% on any policy with an effective date on or after October 1, 1991.
(6)(a) Each fund shall report information on Form OIR-CSF, “”Application of Subjective Discounts, Credits, Surcharges and Experience Rating Reporting Form/Commercial Self-Insurance Fund,”” rev. 5/91, which, with its Instructions, is hereby adopted and incorporated by reference, to enable the Office to monitor the relationship of aggregate premium actually charged policyholders by each fund to the premium that would have been charged by application of the fund’s filed manual rates. The form may be obtained from the Bureau of Property and Casualty Rate and Reserve Analysis, Division of Insurer Services, Office of Insurance Regulation, Larson Building, Tallahassee, FL 32399-0300. The report is due on or before April 1st of each year, beginning with the report which is due April 1, 1992. Failure to file reports on time will result in administrative sanctions pursuant to Section 624.418(2)(a), F.S., which provides that the Office may take action against any fund which violates any rule of the Office. A form which is not complete will be considered a failure to report on time.
(b) The Department may require the information reported on Form OIR-CSF to be submitted in a specified computer-readable form in place of the format provided on the present OIR-CSF reporting form.
(c) Any fund with an insignificant number of policies and/or premium volume written under a rating plan in this state may be exempted from reporting on Form OIR-CSF by completing and submitting Form OIR-CSE, “”Florida – Discounts, Credits, Surcharges/Exemption – Fl. Admin. Code R. 69O-188.010,”” rev. 5/91, which is hereby adopted and incorporated by reference. The exemption shall be requested annually and shall not be effective until the fund has received approval from the Office. The form may be obtained from and shall be submitted to the Bureau of Property and Casualty Rate and Reserve Analysis, Division of Insurer Services, Office of Insurance Regulation, Larson Building, Tallahassee, Florida 32399-0300. A fund with $250,000.00 or less in annual written premiums for a specific line of business reported under this rule written on Florida risks will be approved without the need for further justification. However, for amounts greater than $250,000.00 or for numbers of policies of 50 or more, the fund shall attach further information to justify a determination of “”insignificant.””
(d) Any fund with no business written under a rating plan in this state need not submit Form OIR-CSF to the Department for any future reporting period but must advise the Office of this fact in writing.
(7)(a) If the combined effect of modifications for any line as shown in Column B on Form OIR-CSF shows a departure from the manual rate in excess of plus or minus 5% for the current reporting period, the fund shall limit the application of subjective discounts, credits or surcharges for that line to plus or minus 15% on an individual policy basis beginning not more than 120 days after the notification is sent to the fund by the Office. For the next full reporting period, if the total departure from the manual rates continues to exceed plus or minus 5%, the fund shall limit the application of subjective credits or surcharges for that line to plus or minus 5% on an individual policy basis, beginning not more than 120 days after the notification is sent by the Office, until the departure from manual rates does not exceed plus or minus 5% for one full reporting period.
(b) Use of the full range of subjective discount, credit or surcharge plans for the line may resume as specified in paragraph (5)(b), above, only when the fund has experienced for one full reporting period results which are within the prescribed total limits guidelines, for the line as shown in Column B on Form OIR-CSF, as adopted in this rule.
(8) The effect on manual premiums of experience rating and subjective rating shall be excluded when calculating indicated manual rates and manual rate changes unless it can be shown that their inclusion does not result in excessive, inadequate or unfairly discriminatory rates.
(9)(a) For filings submitted after January 1, 1994, for any line shown on Form OIR-CSF, adequate supporting information which is acceptable to the Office shall be submitted with every rate filing required under Florida Statutes § 624.482, and every rate filing subject to subsection (8), above, substantiating that the relationship between subjective discount, credit or surcharge rate modifications and the expected loss and expense experience for the exposures is such that the subjective discount, credit or surcharge plans do not result in excessive, inadequate or unfairly discriminatory rates. The information provided must include an analysis of the experience resulting from the application of the subjective discount, credit or surcharge plan. Each fund must maintain the necessary experience, including the premiums, paid losses, reserved losses and allocated loss adjustment expenses paid or reserved for analysis. Funds which are affiliated with a licensed rating organization for filing purposes and use the rating organization’s schedule rating plan may rely upon that organization to file on their behalf the information required under paragraph (9)(a). The experience must be accumulated in at least three categories, including debit rated risks, credit rated risks, and risks rated at the manual level. Generally accepted actuarial procedures shall be used in the analysis of this experience.
(b) If a fund lacks sufficient data for full credibility it may use data from other states or industry data to the extent needed to give credible results when making the analysis in paragraph (a), above.
(c) Failure to prove that a subjective discount, credit or surcharge plan does not result in excessive, inadequate or unfairly discriminatory rates will result in disapproval of such plan.
(10) If a fund fails to comply with the provisions of this rule, the department is authorized by Florida Statutes:
(a) To suspend or revoke the certificate of authority of the fund, under the provisions of Sections 624.418(2)(a), (b), (c), (d), (e), and (g), F.S.; or,
(b) In lieu of such discretionary suspension or revocation, to impose a fine and require restitution, pursuant to the provisions of Florida Statutes § 624.4211 Fines for willful violations may be as much as $100,000.
Rulemaking Authority Florida Statutes § 624.308(1). Law Implemented 624.307(1), 624.418, 624.4211, 624.470, 624.482 FS. History-New 8-15-91, Formerly 4-78.010, 4-188.010.