Section 1. Background and Purpose. It has
come to the attention of the South Carolina Insurance Commission that some
Workmen's Compensation insurers and agents may be using unfairly discriminatory
and other misleading practices in connection with policyholder dividend plans.
In order to aid the South Carolina Insurance Commission in its efforts to
prevent such practices and enforce the insurance laws of this state pertaining
to such unlawful practices, the following regulation is deemed
necessary.
Section 2. Rules for
Filing of Dividend Plans. Each insurer which intends to issue Workmen's
Compensation policies on a participating basis in South Carolina shall file
with the Chief Insurance Commissioner of South Carolina any dividend plan or
plans already implemented or intended to be implemented by such insurer
including any amendments thereto. Each such insurer shall also attach to every
workmen's compensation policy an endorsement thereto reading as follows:
The insured shall participate in the earnings of the company,
only in accordance with law and with a plan applicable to this policy which has
been filed with the Chief Insurance Commissioner of South Carolina, provided
the insured has complied with all the terms of this policy with respect to the
payment of premium.
Neither dividends nor any factor in their calculation may be
guaranteed. By purchasing this policy, the insured obtains no contractual right
to a dividend. Dividends are declared in the sole discretion of the governing
body of the insurer, in accordance with law. Any representations to the
contrary are false.
In lieu of an endorsement, the same or substantially similar
wording may be incorporated as condition 18 of the standard Workmen's
Compensation policy.
Section
3. Compliance with Insurance Laws and Regulations. Any dividend
plan or plans filed pursuant to this regulation may provide for a reasonable
classification of risks for purposes of determining dividends, but may not
provide for rebates of premium or unfair discrimination in favor of individuals
between insureds of the same class and hazard, as described in Section
38-55-50.
Specifically, any dividend plan which provides for higher rates of dividend and
lower rates of commission, to risks with other characteristics affecting losses
and expenses remaining the same, shall be deemed to be in violation of Section
38-55-50.
Any dividend plan which provides that dividends may not be paid under a policy
unless the policy is renewed in the same company shall be deemed to be in
violation of Section
38-57-130.
This regulation in no way modifies or extends any of the sections
dealing with unfair trade practices, Sections
38-57-20,
et seq., and violations shall be treated pursuant to the procedures set forth
in Sections
38-57-200
through
38-57-320
of the South Carolina Code of Laws of
1976, as amended.
Section 4. Effective Date. This regulation
shall take effect 120 days after it is filed with the Secretary of State except
that insurers may immediately upon the filing of the Regulation with the
Secretary of State submit such dividend plans to the Chief Insurance
Commissioner in accordance with this Regulation. (Based on Insurance Commission
designation R
11-76.)
