Senate Bill No. 4–Senator Townsend
Prefiled January 11, 2001
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Referred to Committee on Commerce and Labor
SUMMARY—Makes various changes regarding insurance. (BDR 57‑734)
FISCAL NOTE: Effect on Local Government: No.
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EXPLANATION
– Matter in bolded italics is new; matter
between brackets [omitted material] is material to be omitted.
Green numbers along
left margin indicate location on the printed bill (e.g., 5-15 indicates page 5, line 15).
AN ACT relating to insurance; providing that a competitive market exists for certain types
of insurance unless the commissioner of insurance specifically finds to the
contrary; revising the provisions governing the filing and approval of rates of
insurers in a competitive market; authorizing the commissioner to require
certain insurers to file additional supporting data; providing for the issuance
by the commissioner of orders to discontinue a rate; and providing other
matters properly relating thereto.
THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN
SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:
1-1 Section
1. NRS 686B.050 is hereby
amended to read as follows:
1-2 686B.050 1. Rates
must not be excessive, inadequate or unfairly
1-3 discriminatory, nor may an insurer charge any rate
which if continued will
1-4 have or tend to have the effect of destroying
competition or creating a
1-5 monopoly.
1-6 2. Competition
shall be deemed to exist unless the commissioner
1-7 specifically
finds, after a hearing and a review of the structure,
1-8 performance and
conduct of the insurers in the market, that:
1-9 (a) There is no reasonable degree of
competition among the insurers;
1-10 and
1-11 (b) The interaction among the insurers is not
competitive.
1-12 A finding by the
commissioner pursuant to this subsection that the
1-13 market is not
competitive expires 1 year after the date on which the
1-14 finding is
issued.
1-15 3. The commissioner may
disapprove rates on the ground
that the
1-16 rates are
excessive only if the commissioner
determines that there is not a
1-17 reasonable degree of price competition at the
consumer level with respect
1-18 to the class of business to which they apply [.] and that the rates are likely
2-1 to produce a
long-run profit that is unreasonably high in relation to the
2-2 riskiness of the
class of business or the expenses are unreasonably high
2-3 in relation to
the services rendered. In determining whether a reasonable
2-4 degree of price competition exists, the commissioner
shall consider all
2-5 relevant tests, including:
2-6 (a) The
number of insurers actively engaged in the class of business and
2-7 their shares of the market;
2-8 (b) The
existence of differentials in rates in that class of business;
2-9 (c) Whether
long-run profitability for insurers generally of the class of
2-10 business is unreasonably high in relation to its
riskiness;
2-11 (d) Consumers’
knowledge in regard to the market in question; and
2-12 (e) Whether
price competition is a result of the market or is artificial.
2-13 [If competition
does not exist, rates are excessive if they are likely to
2-14 produce a long-run
profit that is unreasonably high in relation to the
2-15 riskiness of the
class of business, or if expenses are unreasonably high in
2-16 relation to the
services rendered.
2-17 3.] 4. Rates are inadequate if they
are clearly insufficient, together with
2-18 the income from investments attributable to them, to
sustain projected
2-19 losses and expenses in the class of business to
which they apply.
2-20 [4.] 5. One rate is unfairly discriminatory in
relation to another in the
2-21 same class if it clearly fails to reflect equitably
the differences in expected
2-22 losses and expenses. Rates are not unfairly
discriminatory because different
2-23 premiums result for policyholders with similar
exposure to loss but
2-24 different expense factors, or similar expense
factors but different exposure
2-25 to loss, so long as the rates reflect the
differences with reasonable accuracy.
2-26 Rates are not unfairly discriminatory if they are
averaged broadly among
2-27 persons insured under a group, franchise or blanket
policy.
2-28 Sec. 2. NRS
686B.070 is hereby amended to read as follows:
2-29 686B.070 1.
Every authorized insurer
and every rate service
2-30 organization licensed under NRS 686B.130 which has
been designated by
2-31 any insurer for the filing of rates under subsection
2 of NRS 686B.090
2-32 shall file with the commissioner all:
2-33 [1.] (a) Rates and proposed
increases thereto;
2-34 [2.] (b) Forms of policies to
which the rates apply;
2-35 [3.] (c) Supplementary rate
information; and
2-36 [4.] (d) Changes and amendments
thereof,
2-37 made by it for use in this state.
2-38 2. Except
as otherwise provided in this section and NRS 686B.110,
2-39 unless the
commissioner has determined that the market is not
2-40 competitive, an
insurer shall file the information required by subsection
2-41 1 on or before
the date on which the changes are to become effective.
2-42 3. In
a competitive market, if the commissioner determines that the
2-43 rates of an
insurer require closer supervision by the commissioner
2-44 because of the
financial condition of the insurer or because the insurer
2-45 has engaged in
rating practices which are unfairly discriminatory, the
2-46 commissioner may
require the insurer to file supporting data pursuant to
2-47 NRS 686B.100 or
may subject the rates to review pursuant to NRS
2-48 686B.110.
3-1 4. The
commissioner shall review filings made pursuant to this
3-2 section as soon
as practicable to:
3-3 (a) Ensure the sufficiency of the financial
condition of the insurer;
3-4 and
3-5 (b) Determine if the insurer has engaged in
rating practices which are
3-6 unfairly
discriminatory.
3-7 5. Rates
for title insurance, surety insurance and liability insurance
3-8 for medical
malpractice must be approved before the insurer may use the
3-9 rates. If the
commissioner does not approve or disapprove a filing
3-10 involving the
rates for such insurance within 60 days after the date of the
3-11 filing, the rates
shall be deemed to be approved.
3-12 Sec. 3. NRS
686B.100 is hereby amended to read as follows:
3-13 686B.100 1. [By rule, the commissioner may require the filing of
3-14 supporting data as
to any or all kinds or lines of insurance or subdivisions
3-15 thereof or classes
of risks or combinations thereof as he deems necessary
3-16 for the proper
functioning of the process for monitoring and regulating
3-17 rates.] If
the commissioner determines that the market is not competitive,
3-18 the commissioner
shall require an insurer to file supporting data for its
3-19 rates if the
commissioner determines pursuant to NRS 686B.070 that the
3-20 rates of the
insurer require closer supervision.
3-21 2. The supporting data must
include:
3-22 (a) The
experience and judgment of the filer, and, to the extent it wishes
3-23 or the commissioner requires, of other insurers or
rate service
3-24 organizations;
3-25 (b) Its
interpretation of any statistical data relied upon;
3-26 (c) Descriptions
of the actuarial and statistical methods employed in
3-27 setting the rates; and
3-28 (d) Any other
relevant matters required by the commissioner.
3-29 [2.] 3. Whenever a filing of a proposed increase in a
rate is not
3-30 accompanied by such information as the commissioner
has required [under
3-31 subsection 1,] pursuant
to this section, he may so inform the insurer and
3-32 the filing shall be deemed to be made when the
information is furnished.
3-33 Sec. 4. NRS
686B.110 is hereby amended to read as follows:
3-34 686B.110 1. [The]
If the commissioner has determined
that:
3-35 (a) Pursuant to NRS 686B.050, the market is
not competitive;
3-36 (b) Pursuant to NRS 686B.180, essential
insurance coverage is not
3-37 readily available
in a voluntary market; or
3-38 (c) Pursuant to NRS 686B.070, the rates of the
insurer require closer
3-39 supervision and
that the rates are subject to review pursuant to this
3-40 section,
3-41 the commissioner shall consider
each proposed increase or decrease in the
3-42 rate of any kind or line of insurance or subdivision
thereof filed with him
3-43 pursuant to NRS 686B.070. If the commissioner finds
that a proposed
3-44 increase will result in a rate which is not in
compliance with NRS
3-45 686B.050, he shall disapprove the proposal. The
commissioner shall
3-46 approve or disapprove each proposal [no] not later than 60 days
after it is
3-47 determined by him to be complete pursuant to
subsection 4. If the
3-48 commissioner fails to approve or disapprove the
proposal within that
3-49 period, the proposal shall be deemed approved.
4-1 2. Whenever an insurer has no legally effective
rates as a result of the
4-2 commissioner’s disapproval of rates or other act,
the commissioner shall on
4-3 request specify interim rates for the insurer that
are high enough to protect
4-4 the interests of all parties and may order that a
specified portion of the
4-5 premiums be placed in an escrow account approved by
him. When new
4-6 rates become legally effective, the commissioner
shall order the escrowed
4-7 [funds] money
or any overcharge in the interim rates to be distributed
4-8 appropriately, except that refunds to policyholders
that are de minimis
4-9 must not be required.
4-10 3. If the commissioner disapproves a proposed
rate and an insurer
4-11 requests a hearing to determine the validity of his
action, the insurer has the
4-12 burden of showing compliance with the applicable
standards for rates
4-13 established in NRS 686B.010 to 686B.1799, inclusive.
Any such hearing
4-14 must be held:
4-15 (a) Within 30
days after the request for a hearing has been submitted to
4-16 the commissioner; or
4-17 (b) Within a
period agreed upon by the insurer and the
commissioner.
4-18 If the hearing is not held within the period
specified in paragraph (a) or (b),
4-19 or if the commissioner fails to issue an order
concerning the proposed rate
4-20 for which the hearing is held within 45 days after
the hearing, the proposed
4-21 rate shall be deemed approved.
4-22 4. The commissioner shall by regulation specify
the documents or any
4-23 other information which must be included in a
proposal to increase or
4-24 decrease a rate submitted to him pursuant to [subsection 1.]
NRS
4-25 686B.070. Each such proposal shall be
deemed complete upon its filing
4-26 with the commissioner, unless the commissioner,
within 15 business days
4-27 after the proposal is filed with him, determines
that the proposal is
4-28 incomplete because the proposal does not comply with
the regulations
4-29 adopted by him pursuant to this subsection.
4-30 5. If,
in a competitive market, the commissioner finds that a rate no
4-31 longer meets the
requirements of this chapter, the commissioner may
4-32 order the
discontinuance of the rate. An order for the discontinuance of
4-33 a rate may be
issued only after a hearing with at least 10 days’ notice for
4-34 all insurers and
rate organizations that would be affected by such an
4-35 order. The order
must be in writing and include, without limitation:
4-36 (a) The grounds pursuant to which the order was
issued;
4-37 (b) The date on which the order to discontinue
the rate becomes
4-38 effective; and
4-39 (c) The date, within a reasonable time after
the date on which the
4-40 order becomes
effective, on which the order will expire.
4-41 An order for the
discontinuance of a rate does not affect any contract or
4-42 policy made or
issued before the date on which the order becomes
4-43 effective.
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