ORDERS:
ORDER
This matter is before me upon the Petition of the South Carolina Reinsurance Facility ("Facility") to approve an 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 and contested case hearing was
held before me in Columbia, South Carolina on October 18, 2000.
STATEMENT OF THE CASE
On August 10, 2000, the South Carolina Reinsurance Facility filed an application with the South Carolina Department of Insurance
requesting approval of revised, actuarially sound private passenger automobile liability and physical damage rates to become
effective on and after March 1, 2001.
A request for a contested case and public hearing was filed by the Department of Insurance with the Division on August 28, 2000.
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. Without objection, the Consumer Advocate's Motion for Leave to Intervene was granted.
On September 6, 2000, the Facility filed a Motion to Expedite Hearing of the within matter, due to the statutorily imposed effective
date of March 1, 2000, and the necessity for furnishing new rates to various carriers for renewal notices being sent prior to March
1, 2000 for business renewing on and after March 1. On September 7, 2000, a Notice of Rate Hearing was issued setting a
hearing on the merits of the requested rate increase for October 18, 2000.
At the hearing of this matter, all parties were present and represented by counsel. The Petitioner Facility was represented by
Thomas C. Salane, Esquire. Respondent Department was represented by T. Douglas Concannon, Esquire, Assistant General
Counsel. Respondent Consumer Advocate was represented by Hana Pokorna-Williamson, Esquire, Staff Attorney, 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. This is a private passenger automobile insurance premium rate increase request filed by the South Carolina Reinsurance
Facility with the South Carolina Department of Insurance pursuant to Section 38-77-596 of the South Carolina Code of Laws
(1976), as amended by Section 30 of Act No. 154 of 1997.
2. The indicated increase contained in the filing was calculated and prepared by an independently retained actuarial service and
was based upon a review of the Facility's actual loss experience for calendar/accident years 1997, 1998 and 1999, utilizing Facility
financial data for business produced by its designated agents. Since only designated agent renewals will be subject to the
proposed rate during the period when these rates will be in effect, full credibility was given to the experience for the year 1999
which reflected the experience of that designated agent produced business. The indications developed from this experience
produced an overall indicated rate level change of +36.2 percent. However, since Section 38-77-596(C) capped any annual
increase at +10.0 percent, the Facility limited its filing request to an overall +10.0 percent increase to be applied across all
coverages and territories. The proposed rate increase was requested to become effective March 1, 2001, and is applicable for
renewal business ceded to the Facility on or after that date.
3. 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 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 those risks eligible for cession to the
Facility during the period for which such rate changes were 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, 2001, as requested.
4. 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 no objection was being taken 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. 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).
2. Section 38-77-596 requires the Facility annually to develop and file private passenger automobile loss components and expense
components based upon the actual experience of risks ceded to the Facility "which are actuarially sound and supported by
statistical evidence" and which, for periods commencing on or after March 1, 1999 "must be capped at an overall ten percent
increase each year." The last annual rate filing for the Facility became effective March 1, 2000. The current rate filing is proposed
to become effective March 1, 2001, for all policies ceded to the Facility on or after that date.
3. 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 proposed rate changes reflect the actual loss
experience of the Facility, weighted to account for the fact that only designated business currently ceded to the Facility will be
eligible for cession upon renewal during the projected period of rate use. These changes are actuarially sound and supported by
the statistical data and exhibits entered into evidence as well as all other relevant considerations required by law. Despite an
indicated overall premium increase of +36.2 percent, the filing request is limited to an overall premium increase of +10.0 percent
in compliance with the capping provisions 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 filings proposed overall premium increase, by coverage, will produce
rates which are neither excessive, inadequate nor unfairly discriminatory. Accordingly, the proposed, filed rates should be
approved for use by the Facility for all ceded risks renewed on or after March 1, 2001.
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 renewed in and ceded to the Facility on or after March 1, 2001.
_____________________________________
RAY N. STEVENS
Administrative Law Judge
October 18, 2000
Columbia, S.C. |
