211 CMR 79.04 - Rate Standards

Current through Register 1466, April 1, 2022

(1) The Commissioner shall disapprove any Rate Filing, or portion thereof, that results in a Rate that is excessive, inadequate or unfairly discriminatory.

(2) Excessive Rates. No Rate shall be held to be excessive unless such Rate is unreasonably high for the insurance provided. Evidence that a reasonable degree of competition exists in the area with respect to the Classification to which such Rate is applicable shall be considered as material, but not conclusive, evidence that such Rate is not excessive.

(3) Inadequate Rates. No Rate shall be held to be inadequate unless:

(a) such Rate is unreasonably low for the insurance provided; and

(b) the continued use of such Rate endangers the solvency of the Insurer using the same; or unless

(c) such Rate is unreasonably low for the insurance provided and the use of such Rate by the Insurer using the same has, or if continued will have, the effect of destroying competition or creating a monopoly.

(4) Unfairly Discriminatory Rates. An unfairly discriminatory Rate exists if, after allowing for practical limitations, price differentials fail to reflect equitably the differences in expected losses and Expenses. Rates are not unfairly discriminatory if different Premiums result for policyholders with like loss exposures but different expense factors, or like expense factors but different loss exposures, as long as the Rates reflect the differences with reasonable accuracy. A Rate is not unfairly discriminatory if it is averaged broadly among persons insured under a group, franchise or blanket policy or a mass marketed plan.

(5) Rates and Classification Plans. An Insurer may utilize any sound actuarial method in determining Rates and Rate plans. Consideration shall be given, to the extent applicable, to past and prospective loss experience within and outside Massachusetts, to catastrophe hazards, to a reasonable rate of return on capital after provision for investment income, to past and prospective Expenses both country-wide and those specially applicable to Massachusetts, and to all other factors, including judgment factors, deemed relevant within and outside Massachusetts. Consideration also may be given in the making and use of Rates to dividends, savings or unabsorbed Premium deposits allowed or returned by Insurers to their policyholders, members or subscribers.

(6) Risks May Be Grouped by Classifications for the Establishment of Rates and Minimum Premiums. Rates may be modified to produce premiums for individual risks in accordance with rating plans that establish standards for measuring variations in hazards or expense provisions, or both. Such standards may measure any differences among risks that can be demonstrated to have a probable effect upon losses or Expenses. No risk Classification, however, shall be based upon sex, marital status, race, creed, national origin, religion, gender identity, sexual orientation or age, except to produce the reduction in Rates for insureds 65 years of age or older required by M.G.L. c. 175E, § 4.

(7) Merit Rating Plans. Rate Filings may include Merit Rating plans; provided, however, that such plans shall not utilize any motor vehicle at-fault accidents or traffic violations that pre-date the relevant policy effective date by more than six years, and the utilization of any particular motor vehicle at-fault accident or traffic violation shall not affect the Premium of a motor vehicle for more than five years. Rate Filings that include independent Merit Rating plans must also include accompanying rules in the Rating Manual.

(8) Territories. The Commissioner shall, from time to time as deemed necessary, publish a bulletin setting forth a designation of no fewer than 15 territories.

(9) Profits. Rates may contain a provision for contingencies and a reasonable profit. In determining the reasonableness of the profit, evaluation shall include consideration of all investment income attributable to the line of insurance.

(10) The Commissioner may disapprove, after a hearing, or suspend any Rate Filing, Classification Plan, rule or Rate, rating plan or modification of any of the foregoing if he or she finds that any of such elements fail to meet the requirements of the General Laws or are violative of public policy, and, therefore, subject to suspension and disapproval pursuant to M.G.L. c. 175E, § 8.

(11) Rating Factors Prohibited. Classification Plans, rules or Rates, rating plans or modification of any of the foregoing based in whole or in part on any of the following factors shall be deemed to violate public policy and are subject to disapproval pursuant to 211 CMR 79.04(10):

(a) sex;

(b) marital status;

(c) race;

(d) creed;

(e) national origin;

(f) religion;

(g) age, except to produce the reduction in Rates for insureds 65 years of age or older required by M.G.L. c. 175E, § 4;

(h) occupation;

(i) income;

(j) education;

(k) homeownership;

(l) gender identity; and

(m) sexual orientation.

(12) Underwriting Factors Prohibited. No Insurer or Insurance Company Group shall refuse to issue, renew or execute as surety a private passenger motor vehicle liability policy or bond, or any other insurance based on the ownership or operation of a motor vehicle because of any of the following factors, or otherwise use such factors to determine placement in a particular affiliate within an Insurance Company Group:

(a) sex;

(b) marital status;

(c) race;

(d) creed;

(e) national origin;

(f) religion;

(g) age;

(h) occupation;

(i) income;

(j) principal place of garaging of the vehicle;

(k) education;

(l) homeownership;

(m) gender identity; and

(n) sexual orientation.

(13) No credit information contained on a consumer report obtained from a consumer reporting agency pursuant to M.G.L. c. 93, § 50 shall be used in private passenger motor vehicle insurance:

(a) rating, including its use in any Classification Plans, rules or Rates, rating plans or modification of any of the foregoing; or

(b) underwriting, including its use to determine whether to issue, renew or execute as surety a private passenger motor vehicle liability policy or bond, or any other insurance based on the ownership or operation of a motor vehicle, or to determine the placement in a particular affiliate within an Insurance Company Group.

Nothing in 211 CMR 79.04(13) shall be construed to restrict any Insurer from obtaining or using information contained in an insurance claims history report, a motor vehicle or driver history report, or any other report from the Massachusetts Registry of Motor Vehicles or its out-of-state equivalent.

Notes

211 CMR 79.04

Amended by Mass Register Issue 1355, eff. 12/29/2017. Amended by Mass Register Issue 1365, eff. 12/29/2017.