ORDERS:
ORDER
This matter is before me upon the Petition of the South Carolina Reinsurance Facility ("Facility") to approve its private
passenger automobile insurance rate increase request previously submitted to the Director of Insurance ("Director") in
accordance with Section 8 of Act No. 154 of 1997, currently codified as Section 38-77-596 of the South Carolina Code of
Laws (1976), as amended. Pursuant to the provisions of the Administrative Procedures Act, as required by Section 38-77-596(C), a public hearing was held before me in Columbia, South Carolina on January 7, 2000.
STATEMENT OF THE CASE
On November 12, 1999, the South Carolina Reinsurance Facility filed an application with the South Carolina Department of
Insurance requesting approval of actuarially sound private passenger automobile liability and physical damage rates, based
upon the 1997 Calendar/Accident year actual loss experience within the Facility, to become effective on and after March 1,
2000.
A request for a contested case and public hearing was filed by the Department of Insurance with the Division on November
17, 1999. On December 6, 1999, pursuant to Section 37-6-604 of the South Carolina Code of Laws (1976), as amended,
and Rule 20(C) of the Rules of Procedure for the Administrative Law Judge Division, the Consumer Advocate filed a
Motion for Leave to Intervene as a formal party of record. By Order dated December 7, 1999, the Consumer Advocate's
Motion for Leave to Intervene was granted.
On November 24, 1999, the Facility filed a Motion to Expedite Hearing of the within matter, due to the statutorily imposed
effective date of March 1, 1999, and the necessity for furnishing new rates to various servicing carriers for renewal notices
being sent prior to March 1, 2000 for business renewing on and after March 1. On December 1, 1999, and after consultation
with the parties, a Notice of Hearing was issued setting a hearing on the merits of the requested rate increase for January 7,
2000.
At the hearing of this matter, all parties were present and represented by counsel. The Facility was represented by Thomas
C. Salane, Esquire. The Department was represented by T. Douglas Concannon, Esquire, Assistant General Counsel. The
Consumer Advocate was represented by Hana Porkorna-Williamson, Esquire, Staff Attorney for the Department of
Consumer Affairs. No other person appeared at the hearing or sought admission as a party to the proceedings.
After due consideration and based upon the evidence, testimony and exhibits presented at the hearing, I make the following
findings of fact and conclusions of law.
FINDINGS OF FACT
1. The filing is a private passenger automobile property and casualty insurance rate filing submitted by the Facility
pursuant to Section 8 of Act No. 154 of 1997, Section 38-77-596 of the South Carolina Code of Laws (1976), as amended.
The indicated increase contained therein was calculated by an independently retained actuarial service and based upon the
Facility's actual loss experience as required by Section 38-77-596, South Carolina Code of Laws (1976), as amended. The
proposed rate increase was requested to become effective March 1, 2000, and is applicable for renewal business ceded to the
Facility on or after that date.
2. The filing materials properly displayed the actual loss experience of designated risks ceded to the Facility for the 1997
Calendar/Accident year, together with all other statistical evidence necessary to develop an actuarially sound rate for use
during the projected rating period. The filing demonstrated an indicated overall statewide rate level change of +24.2% which
was limited to a requested overall premium increase of +10.0% as required by Section 38-77-596(C). The requested capped,
overall +10.0% premium increase was split or weighted among the various coverages as follows: (a) +15.0 percent increase
in bodily injury liability coverage premiums (versus an indicated change of +39.8%); (b) +25.0% increase in uninsured
motorist coverage premiums (versus an indicated change of +71.8%); (c) 0.0% change in underinsured motorist coverage
premiums; and (d) +4.0% percent increase in combined physical damage premiums (versus an indicated change of +6.2%).
3. Thomas J. Chisholm, ACAS, MAAA, Assistant Actuary for AIPSO, testified that the filing had been prepared by him
and under his direct supervision on behalf of the Facility, utilizing the actual loss experience of the Facility for the most
recent Calendar/Accident year. The filing exhibits displayed all adjustments and other statistical evidence used to develop
the indicated rate changes by coverage being requested. Because only designated agent business can be renewed in the
Facility during the period when the proposed rate will be in effect, that portion of the Facility experience reflecting the loss
experience of designated business was given full weight in developing the proposed rate level. Based upon his experience
and qualifications as an actuary, Mr. Chisholm testified that the requested rate changes reflected by the filing gave due
consideration to the actual loss experience of the Facility and were both actuarially sound and supported by the statistical
evidence. It was his opinion that the rates developed by the filing were neither excessive, inadequate nor unfairly
discriminatory and fully complied with the directives of Section 38-77-596, including its +10.0% overall premium increase
limitation, as well as all other relevant statutory criteria.
4. Dean F. Kruger, the Department's Chief Casualty Actuary and Director of Forms and Rates, testified that he had
independently reviewed the Facility's filing on behalf of the Department and had concluded that the premium changes as
displayed in the filing had been calculated in strict accordance with Section 38-77-596 and otherwise complied with all other
relevant statutory requirements. Mr. Kruger also observed that due consideration had been given to the loss experience of
all risks eligible for cession to the Facility during the period for which such rate changes are proposed to be used. Mr.
Kruger concluded that the requested increase was both actuarially sound and supported by the statistical evidence contained
in the filing exhibits. He also observed that the filing complied with the +10.0% overall premium increase limitation of
Section 38-77-596(C) and recommended on behalf of the Department that the filing be approved with an effective date of
March 1, 2000, as requested.
5. At the hearing, counsel for the Consumer Advocate stated that its independently retained, consulting actuary had also
reviewed the filing and had similarly concluded that the filing complied with requirements of Section 38-77-596 and all other
relevant statutory criteria. Accordingly, the Consumer Advocate expressly stated that he had no objection to approval of the
proposed rate changes as filed, subject to the ten (10%) overall premium increase limitation reflected by the filing and
required by Section 38-77-596(C).
CONCLUSIONS OF LAW
1. This action involves the determination of whether the Facility's proposed private passenger automobile liability insurance
rate changes were properly calculated in accordance with the provisions of Section 38-77-596. See S.C. Code Ann. § 38-77-596 (Cum. Supp. 1998). Subject matter jurisdiction of the Director is established by Section 38-77-596(C) and subject
matter jurisdiction of the Administrative Law Judge Division is established by Sections 1-23-600(B) and 38-77-596(C). See
S.C. Code Ann. §§ 1-23-600(B) and 38-77-596(C) (Cum. Supp. 1998).
3. This is an automobile insurance rate increase request by the South Carolina Reinsurance Facility pursuant to Section 8 of
Act No. 154 of 1997, codified in S.C. Code Ann. § 38-77-596 (Cum. Supp. 1998), which requires the Facility annually to
develop and file private passenger automobile loss components and expense components based on the actual experience of
risks ceded to the Facility "which are actuarially sound and supported by statistical evidence" and which, for the period
commencing on or after March 1, 1999 "must be capped at an overall ten percent increase each year."
4. The proposed rate changes prepared and filed by the Facility with the Director were properly calculated in accordance
with the provisions of Section 38-77-596 and all other relevant statutory criteria. The rate changes as filed correctly reflect
the actual loss experience of the Facility for the 1997 Calendar/Accident year, are weighted to account for the fact that only
designated business will be eligible for cession during the projected period of rate use, and are actuarially sound and
supported by the statistical evidence as well as all other relevant considerations required by law. Despite an indicated overall
premium increase in excess of 24 percent, the filing request is limited to an overall premium increase of +10.0% in
compliance with the capping provision of Section 38-77-596(C). Consistent with the statutory requirements of Section 38-77-596, the final rate or premium charge generated under the filing's proposed overall premium increase, by coverage, will
produce rates which are neither excessive, inadequate nor unfairly discriminatory and should be approved for use by the
Facility for all ceded risks renewed on or after March 1, 2000.
NOW, THEREFORE, IT IS HEREBY ORDERED that the Facility's proposed overall premium increase as set forth in
the Facility's filing is hereby approved for use as filed for all business ceded to the Facility on or after March 1, 2000.
IT IS SO ORDERED.
______________________________________
Ralph King Anderson, III
Administrative Law Judge
January 7, 2000
Columbia, South Carolina |