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 January 4,
1999.
STATEMENT OF THE CASE
On August 27, 1998, the Governing Board of 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
most recent three-year actual loss experience within the Facility, to become effective on and after
March 1, 1999.
A request for a contested case and public hearing was filed by the Department of
Insurance with the Division on October 5, 1998. 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 November 20, 1998, the Consumer Advocate's Motion for Leave to
Intervene was granted.
On November 19, 1998, 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 carriers for renewal notices being sent prior to March 1, 1999 for
business renewing on and after March 1. On November 23, 1998, and after pre-hearing consultation
with the parties, a Notice of Rate Hearing was issued setting a hearing on the merits of the requested
rate increase for January 4, 1999.
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 Nancy Vaughn Coombs, Esquire, Deputy Consumer Advocate. 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 for the most recent three-year period 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, 1999, for both new and renewal business ceded to the Facility.
2. Public notice of the hearing on this matter was published more than 30 days in
advance of the scheduled hearing date in five (5) newspapers of general publication in South
Carolina. Affidavits of Publication of the Notice of Hearing were admitted into evidence.(1)
3. The filing materials properly displayed the actual loss experience of risks
ceded to the Facility for the most recent three year period for which such information was available,
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 premium increase
of more than twelve (12%) percent, but was limited to a requested overall premium increase of ten
(10%) as required by Section 38-77-596(C). The requested overall 10 percent premium increase was
split or weighted among coverages to reflect a 24 percent increase in bodily injury liability premiums
and a 9.3 percent increase in physical damage liability premiums. No change in comprehensive and
collision physical damage coverage premiums was requested.
4. Thomas J. Chisolm, 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 three year period. The filing displayed all
adjustments and other statistical evidence used to develop the indicated rate changes by coverage
being requested by the filing. Based upon his experience and qualifications as an actuary, Chisolm
testified that the rate changes reflected by the filing gave due consideration to the actual loss
experience of the Facility for the most recent three year period 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 the ten (10%) percent overall premium increase limitation and all
other relevant statutory criteria.
5. Dean F. Kruger, the Department's Chief Casualty Actuary and Director of
Forms and Rates, testified that he had 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 complied with all other relevant statutory requirements. Mr.
Kruger also observed that due consideration had been given to the total experience of all risks ceded
to the Facility during the most recent three year period for which such information was available and
that the requested increase was both actuarially sound and supported by the statistical evidence. He
also observed that the filing complied with the ten (10%) 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, 1999.
6. 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 it 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).
2. Public notice of this hearing was provided by publication of the Notice of
Hearing dated November 23, 1998, in newspapers of general, statewide circulation at least thirty
(30) days in advance of the scheduled hearing date. The notices so published stated the time and
place of the hearing and the subject matter that was to be considered. No person or member of the
public appeared or participated in the public or contested hearing of this matter in response to these
notices.
4. 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 to develop and file private passenger
automobile loss components and expense components "based on the total experience of all 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."
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 rate changes as filed correctly reflect the actual loss experience of
the Facility for the most recent three year period 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 of more than 12 percent, the filing request is limited to an overall premium
increase of 10 percent in compliance with the 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 filing's proposed overall premium increase, by coverage, will produce rates which are neither
excessive, inadequate or unfairly discriminatory and should be approved for use by the Facility for
all risks ceded to the Facility after March 1, 1999.
NOW, THEREFORE, IT IS HEREBY ORDERED that the Facility's proposed
overall premium increase as set forth in the filing of the Facility's Governing Board is hereby
approved for use as filed for all business ceded to the Facility after March 1, 1999.
______________________________________
STEPHEN P. BATES
ADMINISTRATIVE LAW JUDGE
January 4, 1999
Columbia, South Carolina
1. Publication of the Notice of Rate Hearing appeared in the Rock Hill Herald, The State, the Charleston
Post and Courier, The Greenville News and the Darlington News and Press, Inc., more than 30 days prior to the
date of the hearing. |
