§1452. Purpose of rate regulation; construction; definitions

A. The purpose of this Subpart is to promote the public welfare by regulating insurance rates to the end that they shall not be excessive, inadequate, or unfairly discriminatory and to authorize and regulate cooperative action among insurers in ratemaking and in other matters within the scope of this Subpart. Nothing in this Subpart is intended:

(1) To prohibit or discourage reasonable competition.

(2) To prohibit or encourage, except to the extent necessary to accomplish the aforementioned purpose, uniformity in insurance rates, rating systems, rating plans, or practices.

B. This Subpart shall be liberally interpreted to carry into effect the provisions of this Section.

C. As used in this Subpart, the following definitions shall be applicable:

(1) "Advisory organization" means any entity or organization which has five unrelated members and which assists insurers as authorized by R.S. 22:1471. It does not include joint underwriting organizations, actuarial or legal consultants, single insurers, any employees of an insurer, or insurers under common control or common management of their employees or managers.

(2) "Classification system" or "classification" means the process of grouping risks with similar risk characteristics so that differences in costs may be recognized.

(3) "Commercial risk" means any kind of risk which is not a personal risk.

(4) "Competitive market" means any market except those which have been found to be noncompetitive pursuant to R.S. 22:1453.

(5) "Developed losses" means losses adjusted, including loss adjustment expenses, using standard actuarial techniques, to eliminate the effect of differences between current payment or reserve estimates and those which are anticipated to provide actual ultimate loss payments, including loss adjustment expenses.

(6) "Excessive" means a rate that is likely to produce a long-term profit that is unreasonably high for the insurance provided. No rate in a competitive market shall be considered excessive.

(7) "Expenses" means that portion of a rate attributable to acquisition, field supervision, collection expenses, general expenses, taxes, licenses, and fees and does not include loss adjustment expenses.

(8) "Experience rating" means a rating procedure utilizing past insurance experience of the individual policyholder to forecast future losses by measuring the policyholder's loss experience against the loss experience of policyholders in the same classification to produce a prospective premium credit, debit, or unity modification.

(9) "Inadequate" means a rate which is unreasonably low for the insurance provided and either the continued use of which endangers the solvency of the insurer using it or will have the effect of substantially lessening competition or creating a monopoly in any market.

(10) "Joint underwriting" means an arrangement established to provide insurance coverage for a risk, pursuant to which two or more insurers contract with the insured for a price and policy terms agreed upon between or among the insurers.

(11) "Large commercial policyholder" means a commercial policyholder with the size, sophistication, and insurance buying expertise to negotiate with insurers in a largely unregulated environment, as further prescribed by the commissioner by regulation.

(12) "Line of insurance" means those lines identified in this Title or as otherwise specified by the commissioner.

(13) "Loss adjustment expense" means the expense incurred by the insurer in the course of settling and paying claims.

(14) "Market" means the interaction between buyers and sellers in the procurement of a line of insurance pursuant to the provisions of this Subpart.

(15) "Noncompetitive market" means a market which is subject to a ruling pursuant to R.S. 22:1453 that a reasonable degree of competition does not exist. Residual markets and pools are noncompetitive markets for purposes of this Subpart.

(16) "Personal risk" means homeowners, tenants, nonfleet private passenger motor vehicles, mobile homes, and other property and casualty insurance for personal, family, or household needs, including any property and casualty insurance that is otherwise intended for noncommercial coverage.

(17) "Pool" means an arrangement pursuant to which two or more insurers participate in the sharing of risks on a predetermined basis. A pool may operate as an association, syndicate, or in any other generally recognized manner.

(18) "Prospective loss cost" means that portion of a rate that does not include provisions for expenses or profit and is based on historical aggregate losses adjusted through development to their ultimate value, projected through trending to a future point in time, and adjusted for other considerations expected to materially affect future loss payments.

(19) "Rate" means that cost of insurance per exposure unit, whether expressed as a single number or as a prospective loss cost, with an adjustment to account for the treatment of loss adjustment expenses, expenses, profit, and variation in expected future loss experience, prior to any application of individual risk variations based on actual past loss or expense considerations, and does not include minimum premiums.

(20) "Residual market mechanism" means an arrangement, either voluntary or mandated by law, involving participation by insurers in the equitable apportionment of risks among insurers for insurance which may be afforded applicants who are unable to obtain insurance through ordinary methods.

(21) "Special assessments" means guaranty fund assessments, special indemnity fund assessments, vocational rehabilitation fund assessments, and other similar assessments. Special assessments shall not be considered as either expenses or losses.

(22) "Supplementary rate information" means any manual or plan of rates, classification, rating schedule, minimum premium, policy fee, rating rule, and any other similar information needed to determine an applicable rate in effect or to be in effect.

(23) "Supporting information" means the experience and judgment of the filer and the experience or data of other insurers or organizations relied upon by the filer, the interpretation of any statistical data relied upon by the filer, descriptions of methods used in making the rates, and other similar information relied upon by the filer.

(24) "Trending" means any procedure for projecting losses to the average date of loss, or premiums or exposures to the average date of writing, for the period during which the policies are to be effective.

(25) "Unfairly discriminatory" means not capable of being actuarially justified or based on race, color, creed, or national origin. It does not refer to rates that produce differences in premiums for policyholders with different loss exposures, so long as the rate is actuarially justified and reflects such differences with reasonable accuracy.

Acts 1958, No. 125. Amended by Acts 1960, No. 296, §1; Acts 2007, No. 459, §1, eff. Jan. 1, 2008; Redesignated from R.S. 22:1402 by Acts 2008, No. 415, §1, eff. Jan. 1, 2009.

NOTE: Former R.S. 22:1452 redesignated as R.S. 22:21 by Acts 2008, No. 415, §1, eff. Jan. 1, 2009.