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90_HB0298ham001
LRB9000329JSccam01
1 AMENDMENT TO HOUSE BILL 298
2 AMENDMENT NO. . Amend House Bill 298 by replacing
3 everything after the enacting clause with the following:
4 "Section 5. The Illinois Insurance Code is amended by
5 changing Sections 472.1, 474.1, 1483.2, and 484.2, the
6 caption to Article XXX1/2, and adding Sections 475.1a and
7 480.1a as follows:
8 (215 ILCS 5/Art. XXX1/2 heading)
9 ARTICLE XXX1/2. ACCIDENT AND HEALTH INSURANCE
10 CASUALTY RATES OTHER THAN WORKERS'
11 (215 ILCS 5/472.1) (from Ch. 73, par. 1065.18-1)
12 Sec. 472.1. Purpose of Article. The purpose of this
13 Article is to promote the public welfare by regulating
14 insurance rates as herein provided to the end that they shall
15 not be excessive, inadequate or unfairly discriminatory, to
16 authorize the existence and operation of qualified rating
17 organizations and advisory organizations and require that
18 specified rating services of such rating organizations be
19 generally available to all admitted companies, and to
20 authorize cooperation between companies in rate making and
21 other related matters. It is the express intent of this
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1 Article to permit and encourage competition between companies
2 on a sound financial basis to the fullest extent possible and
3 to establish a mechanism to ensure the provision of adequate
4 insurance at reasonable rates to the citizens of this State
5 nothing in this Article is intended to give the Director
6 power to fix and determine a rate level by classification or
7 otherwise.
8 This Article shall be effective and apply to the matters
9 provided for herein on and after the effective date of this
10 amendatory Act of 1997 only until August 1, 1971, unless the
11 General Assembly extends the term of or removes this
12 restriction on the period during which this Article is to be
13 applicable.
14 (Source: P.A. 76-943.)
15 (215 ILCS 5/474.1) (from Ch. 73, par. 1065.18-3)
16 Sec. 474.1. Scope of Article. The provisions of this
17 Article shall apply to accident and health insurance. on
18 risks or on operations in this State, described in classes 2
19 and 3 of Section 4 of this Code, except:
20 (a) Reinsurance, other than joint reinsurance to the
21 extent stated in Section 481.1.
22 (b) Accident and health insurance.
23 (c) Insurance of vessels or craft, their cargoes, marine
24 builders' risks, marine protection and indemnity, or other
25 risks commonly insured under marine, as distinguished from
26 inland marine insurance policies. Inland marine insurance
27 shall be deemed to include insurance now or hereafter defined
28 by statute, or by interpretation thereof, or if not so
29 defined or interpreted, by ruling of the Director or as
30 established by general custom of the business, as inland
31 marine insurance.
32 (d) Insurance against loss of or damage to aircraft,
33 insurance of hulls of aircraft, including their accessories
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1 and equipment, or insurance against liability arising out of
2 the ownership, maintenance or use of aircraft.
3 (e) Workers' compensation and employer's liability and
4 insurance incidental thereto.
5 (f) Title insurance.
6 This Article shall apply to all companies, including
7 stock and mutual companies, Lloyds associations, and
8 reciprocal and interinsurance exchanges which, under any
9 provisions of the laws of this State, write any of the kind
10 kinds of insurance to which this Article applies, except any
11 farm, county, district or township mutual insurance company
12 transacting business under an Act entitled, "An Act relating
13 to local mutual district, county and township insurance
14 companies," approved March 13, 1936, or acts amendatory
15 thereof or supplementary thereto nor to such company
16 operating under a special charter.
17 (Source: P.A. 81-992.)
18 (215 ILCS 5/475.1a new)
19 Sec. 475.1a. Classes of rates.
20 (a) The rates for accident and health insurance to which
21 the provisions of this Article are applicable shall not be
22 excessive, inadequate or unfairly discriminatory.
23 (b) As to all classes of insurance:
24 (1) Insurers or rating organizations shall establish and
25 use rates, rating schedules, or rating manuals to allow the
26 insurer a reasonable rate of return on classes of insurance
27 written in this State. A copy of rates, rating schedules,
28 rating manuals, and premium credits or discount schedules,
29 and changes thereto, shall be filed with the Department as
30 soon as possible following their effective date, but no later
31 than 30 days after that date. A copy of rates, rating
32 schedules, rating manuals, and premium credits or discount
33 schedules, and changes thereto, that provide for an increase
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1 greater than the increase in the medical care component of
2 the Consumer Price Index for the region or city of the United
3 States having the greatest increase the previous calendar
4 year shall be filed with and approved by the Department prior
5 to their effective date.
6 (2) Upon receiving a rate filing, the Department shall
7 review the rate filing to determine if a rate is excessive,
8 inadequate, or unfairly discriminatory. In making that
9 determination, the Department shall, in accordance with
10 generally accepted and reasonable actuarial techniques,
11 consider all of the following factors:
12 (A) Past loss experience within and without this
13 State.
14 (B) Past expenses both allocated and unallocated.
15 (C) The degree of competition among insurers for
16 the risk insured.
17 (D) Investment income reasonably expected by the
18 insurer, consistent with the insurer's investment
19 practices, from investable premiums anticipated in the
20 filing, plus any other expected income from currently
21 invested assets representing the amount expected on
22 unearned premium reserves and loss reserves. The
23 Department may promulgate rules utilizing reasonable
24 techniques of actuarial science and economics to specify
25 the manner in which insurers shall calculate investment
26 income attributable to the classes of insurance written
27 in this State and the manner in which that investment
28 income shall be used in the calculation of insurance
29 rates.
30 (E) The reasonableness of the judgment reflected in
31 the filing.
32 (F) Dividends, savings, or unabsorbed premium
33 deposits allowed or returned to Illinois policyholders,
34 members, or subscribers.
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1 (G) The adequacy of loss reserves.
2 (H) The cost of reinsurance.
3 (I) Trend factors, including trends in actual
4 losses per insured unit for the insurer making the
5 filing.
6 (J) A reasonable margin for profit and
7 contingencies.
8 (K) Other relevant factors that impact upon the
9 frequency or severity of claims or upon expenses.
10 (3) In addition to the rate standards provided in item
11 (2), a rate may be found by the Department to be excessive,
12 inadequate, or unfairly discriminatory based upon any of the
13 following standards:
14 (A) Rates shall be deemed excessive if they are
15 likely to produce a profit from Illinois business that is
16 unreasonably high in relation to the risk involved in the
17 class of business or if expenses are unreasonably high in
18 relation to services rendered.
19 (B) Rates shall be deemed excessive if, among other
20 things, the rate structure established by a stock
21 insurance company provides for replenishment of surpluses
22 from premiums, when the replenishment is attributable to
23 investment losses.
24 (C) Rates shall be deemed inadequate if they are
25 clearly insufficient, together with the investment income
26 attributable to them, to sustain projected losses and
27 expenses in the class of business to which they apply.
28 (D) One rate shall be deemed unfairly
29 discriminatory in relation to another in the same class
30 if it fails to clearly and equitably reflect the
31 difference in expected losses and expenses.
32 (E) A rate shall be deemed inadequate as to the
33 premium charged to a risk or group of risks if discounts
34 or credits are allowed that exceed a reasonable
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1 reflection of expense savings and reasonably expected
2 loss experience from the risk or group of risks.
3 (F) A rate shall be deemed unfairly discriminatory
4 as to a risk or group of risks if the application of
5 premium discounts or credits among those risks does not
6 bear a reasonable relationship to the expected loss and
7 expense experience among the various risks.
8 (4) In reviewing a rate filing the Department may
9 require the insurer to provide at the insurer's expense all
10 information necessary to evaluate the condition of the
11 company and the reasonableness of the failure according to
12 the criteria enumerated in this Section.
13 (5) The Department may at any time review a rate, rating
14 schedule, rating manual, or rate change, the pertinent
15 records of the insurer, and market conditions. If the
16 Department finds on a preliminary basis that a rate may be
17 excessive, inadequate, or unfairly discriminatory, the
18 Department shall initiate proceedings to disapprove the rate
19 and shall so notify the insurer. If a proposed rate
20 represents an increase greater than the increase in the
21 medical care component of the Consumer Price Index for the
22 region or city of the United States having the greatest
23 increase in the previous calendar year, the Department shall
24 initiate proceeding to approve or disapprove the rate and
25 shall notify the insurer. Upon being notified, the insurer
26 or rating organization shall, within 60 days, file with the
27 Department all information that, in the belief of the insurer
28 or organization, proves the reasonableness, adequacy, and
29 fairness of the rate or rate change. In these instances and
30 in any administrative proceeding relating to the legality of
31 the rate, the insurer or rating organization shall carry the
32 burden of proof by a preponderance of the evidence to show
33 that the rate is not excessive, inadequate, or unfairly
34 discriminatory. After the Department notifies an insurer
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1 that a rate may be excessive, inadequate, or unfairly
2 discriminatory, unless the Department withdraws the
3 notification, the insurer shall not alter the rate except to
4 conform with the Department's notice until the earlier of 120
5 days after the date the notification was provided or 180 days
6 after the date of the implementation of the rate. The
7 Department may disapprove without the 60-day notification any
8 rate increase filed by an insurer within the prohibited time
9 period or during the time that the legality of the increased
10 rate is being contested.
11 (6) If the Department finds that a rate or rate change
12 is excessive, inadequate, or unfairly discriminatory, the
13 Department shall issue an order of disapproval specifying
14 that a new rate or rate schedule be filed by the insurer
15 which responds to the findings of the Department. The
16 Department shall further order that premiums be adjusted
17 reflecting the findings of the Department.
18 (215 ILCS 5/482.1a new)
19 Sec. 482.1a. Report of loss and expense data.
20 (a) The Department shall promulgate rules that require an
21 insurer licensed to write accident and health insurance in
22 the State to record and report its loss and expense
23 experience and other data as may be necessary to determine
24 whether rates are fair and appropriate. The Department may
25 designate one or more rate service organizations or advisory
26 organizations to gather and compile such experience and data.
27 The Department shall require an insurer licensed to write
28 accident and health insurance in this State to submit a
29 report, on a form furnished by the Department, showing its
30 direct writings in this State and the United States.
31 (b) The report shall include all of the following data,
32 both specific to this State and also to the United States, by
33 the type of insurance for the previous year ending on the
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1 31st day of December:
2 (1) Direct premiums written.
3 (2) Direct premiums earned.
4 (3) Net investment income, including net realized
5 capitol gains and losses, using appropriate estimates where
6 necessary.
7 (4) Incurred claims, developed as the sum of the
8 following (the report shall include data for each of the
9 following categories used to develop the sum of incurred
10 claims):
11 (A) dollar amount of claims closed with payment;
12 plus
13 (B) reserves for reported claims at the end of the
14 current year; minus
15 (C) reserves for reported claims at the end of the
16 previous year; plus
17 (D) reserves for incurred but not reported claims
18 at the end of the current year; minus
19 (E) reserves for incurred but not reported claims
20 at the end of the previous year; plus
21 (F) loss adjustment expenses for claims closed;
22 plus
23 (G) reserves for Loss Adjustment Expense at the end
24 of the current year; minus
25 (H) reserves for Loss Adjustment Expense at the end
26 of the previous year.
27 (5) Actual incurred expenses allocated separately to
28 loss adjustment, commissions, other acquisition costs,
29 advertising, general office expenses, taxes, licenses and
30 fees, and all other expenses.
31 (6) Net underwriting gain or loss.
32 (7) Net operation gain or loss, including net investment
33 income.
34 (8) The number and dollar amount of claims closed with
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1 payment, by year incurred and the amount reserved for them.
2 (9) The number of claims closed without payment and the
3 dollar amount reserved for those claims.
4 (10) Federal income tax recoverable.
5 (11) Any other information requested by the Department.
6 (c) For the first year only in which the insurer is
7 required to file this report, the data required by paragraphs
8 (1) through (7) of subsection (b) shall include the previous
9 calendar year and each of the preceding 4 calendar years.
10 (d) It is the duty of the Department to annually compile
11 and review all reports submitted by insurers pursuant to this
12 Section to determine the appropriateness of premium rates for
13 accident and health insurance in this State. The
14 Department's findings and the filings shall be published,
15 provided to the General Assembly, and made available to any
16 interested insured or citizen. If the Department finds at
17 any time that any rate is no longer fair or appropriate, it
18 shall issue an order withdrawing its approval. The order
19 shall specify reasons for withdrawal of approval and shall be
20 furnished to each affected insurer and rating organization,
21 and shall be effective in not less than 30 days from its
22 issuance unless an affected insurer meets the burden of
23 showing that such rate is in fact fair and appropriate.
24 (f) An insurance company shall file all of the
25 information required under this Section with the Department
26 as a prerequisite to obtaining permission to write coverage,
27 to continue to do business or to file for rate increases.
28 (g) An insurer that fails to comply with the terms of
29 this Section shall pay a civil penalty of a fine of $10,000
30 and thereafter a fine of $200 daily until the Section is
31 complied with.
32 (215 ILCS 5/483.2) (from Ch. 73, par. 1065.18-20)
33 Sec. 483.2. Examination of admitted companies; rate
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1 overcharge refunds.
2 (1) The Director may, at any reasonable time, make or
3 cause to be made an examination of every admitted company
4 transacting any class of insurance to which the provisions of
5 this Article are applicable to ascertain whether such company
6 and every rate and rating system used by it for every such
7 class of insurance complies with the requirements and
8 standards of this Article applicable thereto. Such
9 examination shall not be a part of a periodic general
10 examination participated in by representatives of more than
11 one state.
12 (2) If, after examination of a company, the Director
13 finds that the company has used rates which exceed those
14 rates which have been filed with the Department of Insurance
15 under this Article and any applicable regulations, he may
16 require the company to refund those rate overcharges to the
17 policyholders.
18 A company found to have failed or refused be in violation
19 of this Section for failure to refund any overcharges as
20 determined pursuant to Section 475.1a shall pay a penalty to
21 the Department of Insurance of $100 per day for each such
22 violation. A refusal to refund overcharges to any one
23 policyholder is a violation under this Article Section and
24 additional refusals shall be considered additional violations
25 under this Article Section.
26 Continued refusal by a company to refund policyholder
27 overcharges after an Order of the Director to so refund under
28 this Article Section may subject a company to suspension of
29 its Certificate of Authority until such time as it has shown
30 compliance with the Order of the Director and has refunded
31 the overcharges.
32 (Source: P.A. 77-1328.)
33 (215 ILCS 5/484.2) (from Ch. 73, par. 1065.18-24)
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1 Sec. 484.2. Noncompliance of Rate, Rating Plan or
2 System;: notice by Director.
3 If after examination of a company, rating organization,
4 advisory organization, or group, association or other
5 organization of companies which engages in joint underwriting
6 or joint reinsurance, or upon the basis of other information,
7 or upon sufficient complaint as provided in Section 484.1 the
8 Director has good cause to believe that such company,
9 organization, group or association, or any rate, rating plan
10 or rating system made or used by any such company or rating
11 organization, does not comply with the requirements and
12 standards of this Article applicable to it, he shall, unless
13 he has good cause to believe such non-compliance is wilful,
14 give notice in writing to such company, organization, group
15 or association stating therein to the extent practicable, in
16 what manner such non-compliance is alleged to exist and
17 specifying therein a reasonable time, not less than 10 days
18 thereafter, in which such non-compliance may be corrected.
19 (Source: P.A. 77-1328.)
20 (215 ILCS 5/475.1 rep.)
21 (215 ILCS 5/478.1 rep.)
22 (215 ILCS 5/484.1 rep.)
23 Section 10. The Illinois Insurance Code is amended by
24 repealing Sections 475.1, 478.1, and 484.1.
25 Section 99. Effective date. This Act takes effect
26 January 1, 1998.".