PRINTER'S NO. 1785
No. 1524 Session of 1989
INTRODUCED BY O'DONNELL, DeWEESE, ITKIN, KUKOVICH, WESTON,
MOEHLMANN, HAGARTY, JOHNSON, FOX, BOYES, GIGLIOTTI, KOSINSKI,
LINTON, MRKONIC, BELARDI, McNALLY, LaGROTTA, HAYDEN, MAIALE,
MAINE, TRICH, RUDY, WILLIAMS, RYBAK, COY, MORRIS, ROBINSON,
STUBAN, NAHILL, BELFANTI, HALUSKA, TRELLO, McVERRY, BLAUM,
COWELL, McCALL, JOSEPHS, PISTELLA, BATTISTO, TANGRETTI,
TIGUE, LEVDANSKY, FREEMAN, HOWLETT, MELIO, DeLUCA,
YANDRISEVITS, BISHOP, CAWLEY, MICHLOVIC, STABACK, BROUJOS,
THOMAS, LETTERMAN, CORRIGAN, REBER, RAYMOND, LLOYD, VEON,
SERAFINI, J. TAYLOR, HASAY, EVANS, RITTER, OLASZ, DONATUCCI
AND PRESSMANN, MAY 23, 1989
REFERRED TO COMMITTEE ON INSURANCE, MAY 23, 1989
AN ACT
1 Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An
2 act relating to insurance; amending, revising, and
3 consolidating the law providing for the incorporation of
4 insurance companies, and the regulation, supervision, and
5 protection of home and foreign insurance companies, Lloyds
6 associations, reciprocal and inter-insurance exchanges, and
7 fire insurance rating bureaus, and the regulation and
8 supervision of insurance carried by such companies,
9 associations, and exchanges, including insurance carried by
10 the State Workmen's Insurance Fund; providing penalties; and
11 repealing existing laws," requiring insurance companies to
12 disclose certain data; providing for the review of rate
13 filings and for compliance with requests for data and
14 information; providing for a liability underwriting services
15 plan and for a notice of intent to withdraw; and providing
16 for penalties.
17 The General Assembly of the Commonwealth of Pennsylvania
18 hereby enacts as follows:
19 Section 1. The act of May 17, 1921 (P.L.682, No.284), known
20 as The Insurance Company Law of 1921, is amended by adding
1 articles to read:
2 ARTICLE X-A.
3 DATA DISCLOSURE.
4 Section 1001-A. Reporting of Insurance Data.--By no later
5 than September 1, 1989, and each September 1 thereafter, each
6 insurer licensed to write property or casualty insurance in this
7 Commonwealth shall annually report its loss and expense
8 experience as provided in this act. However, an insurance
9 company whose market share, for a given line of insurance in the
10 most recent annual statement, is less than one per centum by
11 direct written premium volume, shall not be required to submit
12 the data listed in subsection (b)(1) through (12) for all types
13 of insurance included in that annual statement line, unless the
14 company is a member of a group of companies under the same
15 ownership or management, another member of which has a market
16 share of at least one per centum. Once exempted from reporting
17 by this section, a company shall not be required to submit data
18 unless and until it or another member of its group achieves a
19 market share of at least two per centum. Once required to report
20 by this section, a company shall not be exempted from submitting
21 data unless and until it and all other members of its group
22 achieve market shares of less than one per centum. The Insurance
23 Department may designate one or more rate-service organizations
24 to gather and compile such experience and data, provided that
25 the data are reported separately for each company. The
26 department shall require each insurer licensed to write property
27 or casualty insurance in this Commonwealth to provide the
28 required data in a data processing format prescribed by the
29 department.
30 Section 1002-A. Commercial Insurance.--(a) The report
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1 required for commercial insurance by section 1001-A shall
2 include, but not be limited to, the following specific types of
3 insurance (which shall be shown separately) written by each
4 insurer:
5 (1) Political subdivision liability insurance, reported
6 separately in the following categories:
7 (i) municipalities;
8 (ii) school districts or schools; and
9 (iii) authorities and other political subdivisions.
10 (2) Public official liability insurance.
11 (3) Dram shop liability insurance.
12 (4) Commercial day-care center liability insurance for
13 facilities licensed and regulated by the Department of Public
14 Welfare.
15 (5) Products liability insurance.
16 (6) Medical malpractice insurance.
17 (7) Attorneys malpractice insurance.
18 (8) Architects and engineers malpractice insurance.
19 (9) Officers and directors liability insurance.
20 (10) Commercial motor vehicle insurance reported separately
21 for voluntary and involuntary writings, for each of the
22 following coverages:
23 (i) bodily injury liability insurance;
24 (ii) property damage liability insurance;
25 (iii) first party benefits insurance;
26 (iv) uninsured and underinsured motorist coverage; and
27 (v) physical damage insurance (comprehensive insurance and
28 collision insurance combined).
29 The automobile insurance plan shall provide the data for the
30 involuntary market; however, all insurance companies writing
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1 commercial motor vehicle insurance shall report the data for the
2 voluntary market.
3 (b) The required report shall include the following data by
4 type of insurance, both specific to this Commonwealth and also
5 to the United States, except where otherwise noted. The data
6 shall be compiled for the previous calendar year, accident year,
7 or policy year, as determined by the Insurance Department,
8 ending on the thirty-first day of December, and evaluated as of
9 the thirty-first day of March of the following year:
10 (1) Direct written premiums at collected rate levels.
11 (2) Direct earned premiums at collected rate levels.
12 (3) Net investment income, excluding both realized and
13 unrealized capital gains and losses, using estimates where
14 necessary, broken down by line in accordance with the NAIC
15 insurance expense exhibit method.
16 (4) Net investment income, including realized capital gains
17 and losses (which shall be shown separately) but excluding
18 unrealized capital gains and losses, using estimates where
19 necessary, broken down by line in accordance with the NAIC
20 insurance expense exhibit method.
21 (5) Net investment income, including realized capital gains
22 and losses (which shall be shown separately) and including
23 unrealized capital gains and losses (which shall be shown
24 separately), using estimates where necessary, broken down by
25 line in accordance with the NAIC insurance expense exhibit
26 method.
27 (6) Incurred loss development for all available years
28 beginning with 1984, and determined as the sum of the following
29 developments, which shall be shown separately:
30 (i) dollar amount of paid claims; plus
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1 (ii) reserves for reported claims; plus
2 (iii) reserves for incurred but not reported claims; plus
3 (iv) paid allocated loss adjustment expenses; plus
4 (v) reserves for allocated loss adjustment expenses.
5 (7) Incurred claim count development for all available years
6 beginning with 1984, and determined as the sum of the following
7 developments, which shall be shown separately:
8 (i) number of claims closed with payment; plus
9 (ii) number of claims closed without payment; plus
10 (iii) number of claims pending.
11 (8) Incurred expenses, including commissions, other
12 acquisition costs, general expenses, unallocated loss adjustment
13 expenses, taxes, licenses and fees, all of which shall be shown
14 separately.
15 (9) Net underwriting gain or loss.
16 (10) Net operating gain or loss, including net realized
17 investment income but excluding unrealized investment income.
18 (11) The total number of incurred claims and corresponding
19 losses and loss distributions broken down into components of
20 economic loss, pain and suffering, and punitive damages.
21 (12) For all ceded reinsurance agreements with unrelated
22 insurers entered into with the current reporting year, except
23 those negotiated on an individual risk basis, the names and
24 addresses of reinsurance intermediaries and fronting companies
25 that provide reinsurance services and coverage. Information
26 shall include, but not be limited to, limits and types of
27 coverage provided, restrictions and loss retention. For
28 individual risk reinsurance agreements allocated to
29 Pennsylvania, the company shall identify the three leading
30 intermediaries placing the reinsurance and the number of
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1 individual risks that are reinsured on that basis per line of
2 business. The data shall be held confidential; however, a
3 summary statement of the cost and availability of reinsurance
4 shall be made part of the report requirement of section 1006-A.
5 (13) Any other information requested by the Insurance
6 Department.
7 (c) The Insurance Department shall promulgate rules and
8 regulations setting forth procedures governing the reporting
9 requirements of this article that shall include, but not be
10 limited to:
11 (1) provisions to guarantee confidentiality of the data with
12 regard to information relevant to individual claims; and
13 (2) standard and uniform definitions for information
14 required to be submitted to the department pursuant to this
15 article, that shall be consistent with generally accepted
16 actuarial principles.
17 Section 1003-A. Private Passenger Motor Vehicle Insurance.--
18 (a) The report required for private passenger motor vehicle
19 insurance by section 1001-A shall include, but not be limited
20 to, private passenger motor vehicle insurance reported
21 separately for voluntary and involuntary writings, for each of
22 the following coverages:
23 (1) bodily injury liability insurance;
24 (2) property damage liability insurance;
25 (3) first party benefits insurance;
26 (4) uninsured and underinsured motorist insurance;
27 (5) comprehensive insurance; and
28 (6) collision insurance.
29 The automobile insurance plan shall provide the data for the
30 involuntary market; however, all insurance companies writing
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1 private passenger motor vehicle insurance shall report the data
2 for the voluntary market.
3 (b) The required report shall include the following private
4 passenger motor vehicle data, both specific to this Commonwealth
5 and also to the United States, except where otherwise noted. The
6 data for the coverages in clauses (1) through (4) of subsection
7 (a) shall be compiled for the previous accident year ending on
8 the thirty-first day of December and evaluated as of the thirty-
9 first day of March of the following year, whereas the data for
10 the comprehensive and collision coverages shall be compiled for
11 the previous calendar year. Furthermore, all data required by
12 clauses (1), (2), (3), (4), (8) and (9) of this subsection shall
13 be broken down by Pennsylvania rating territories.
14 (1) Direct written premiums at collected and current rate
15 levels; however, the current rate level information is not
16 required on a countrywide basis.
17 (2) Direct earned premiums at collected and current rate
18 levels; however, the current rate level information is not
19 required on a countrywide basis.
20 (3) Written exposures.
21 (4) Earned exposures.
22 (5) Net investment income, excluding both realized and
23 unrealized capital gains and losses, using estimates where
24 necessary, broken down by line in accordance with the NAIC
25 insurance expense exhibit method.
26 (6) Net investment income, including realized capital gains
27 and losses (which shall be shown separately) but excluding
28 unrealized capital gains and losses, using estimates where
29 necessary, broken down by line in accordance with the NAIC
30 insurance expense exhibit method.
19890H1524B1785 - 7 -
1 (7) Net investment income, including realized capital gains
2 and losses (which shall be shown separately) and including
3 unrealized capital gains and losses (which shall be shown
4 separately), using estimates where necessary, broken down by
5 line in accordance with the NAIC insurance expense exhibit
6 method.
7 (8) Incurred loss development for all available years
8 beginning with 1983, and determined as the sum of the following
9 developments, which shall be shown separately:
10 (i) dollar amount of paid claims; plus
11 (ii) reserves for reported claims; plus
12 (iii) reserves for incurred but not reported claims; plus
13 (iv) paid allocated loss adjustment expenses; plus
14 (v) reserves for allocated loss adjustment expenses.
15 (9) Incurred claim count development for all available years
16 beginning with 1983, and determined as the sum of the following
17 developments, which shall be shown separately:
18 (i) number of claims closed with payment; plus
19 (ii) number of claims closed without payment; plus
20 (iii) number of claims pending.
21 (10) Incurred expenses, including commissions, other
22 acquisition costs, general expenses, unallocated loss adjustment
23 expenses, taxes, licenses and fees, all of which shall be shown
24 separately.
25 (11) Net underwriting gain or loss.
26 (12) Net operating gain or loss, including net realized
27 investment income but excluding unrealized investment income.
28 (13) The total number of incurred claims and corresponding
29 losses and loss distributions, broken down into components of
30 economic loss, pain and suffering, and punitive damages.
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1 (14) For all ceded reinsurance agreements with unrelated
2 insurers entered into with the current reporting year, except
3 those negotiated on an individual risk basis, the names and
4 addresses of reinsurance intermediaries and fronting companies
5 that provide reinsurance services and coverage. Information
6 shall include, but not be limited to, limits and types of
7 coverage provided, restrictions and loss retention. For
8 individual risk reinsurance agreements allocated to
9 Pennsylvania, the company shall identify the three leading
10 intermediaries placing the reinsurance and the number of
11 individual risks that are reinsured on that basis per line of
12 business. The data shall be held confidential; however, a
13 summary statement of the cost and availability of reinsurance
14 shall be made part of the report requirement of section 1005-A.
15 (15) Any other information requested by the Insurance
16 Department.
17 Section 1004-A. Rules and Regulations.--The Insurance
18 Department shall promulgate rules and regulations setting forth
19 procedures governing the reporting requirements of this article
20 that shall include, but not be limited to:
21 (1) provisions to guarantee confidentiality of the data with
22 regard to information relevant to individual claims; and
23 (2) standard and uniform definitions for information
24 required to be submitted to the department pursuant to this
25 article, that shall be consistent with generally accepted
26 actuarial principles.
27 Section 1005-A. Actuarial Impact Statement Regarding
28 Judicial Decisions.--Any insurance company or rating
29 organization, acting on behalf of more than one insurance
30 company, may file an actuarial study detailing the impact of any
19890H1524B1785 - 9 -
1 appellate judicial decision it believes will have a significant
2 impact on the price or availability of insurance.
3 Section 1006-A. Department Utilization.--The Insurance
4 Department shall utilize the reports submitted by insurers
5 pursuant to this article, or any portions of these reports, in
6 determining whether the rates or rating plans, or any subsequent
7 modifications thereof, for property or casualty insurance in
8 this Commonwealth, are excessive, inadequate or unfairly
9 discriminatory, or for any other purpose. The department shall
10 annually summarize the data compiled pursuant to this act, and
11 file a report and findings with the standing committees of the
12 General Assembly having jurisdiction over insurance affairs. The
13 department shall be authorized to audit, at its discretion, any
14 of the data submitted under this article.
15 Section 1007-A. Requirement for Doing Business.--Each
16 insurance company shall file all of the information required
17 under this article with the Insurance Department as a
18 prerequisite to obtaining permission to write coverage, to
19 continue to do business, or to file for rate adjustments.
20 Section 1008-A. Penalty.--Each insurer who fails to comply
21 with the terms of section 1001-A, 1002-A or 1003-A shall pay an
22 administrative penalty of ten thousand dollars ($10,000) and
23 thereafter a further administrative penalty of two hundred
24 dollars ($200) daily until all sections are complied with.
25 ARTICLE X-B.
26 REVIEW OF RATE FILINGS.
27 Section 1001-B. Filings.--(a) The Insurance Department is
28 authorized to audit, at its discretion, all data submitted in
29 support of rules, rates or rating plans.
30 (b) Public notice shall be given of any public hearing or
19890H1524B1785 - 10 -
1 other opportunities for any interested party or person to
2 present information on filings of rules, rates or rating plans.
3 (c) All filings of rules, rates and rating plans presented
4 to the department shall be part of the public record.
5 (d) The commissioner shall promulgate rules and regulations
6 establishing procedures for the review of rules, rates and
7 rating plans for property and casualty insurance, which shall
8 include, but not be limited to:
9 (1) Uniform definitions of actuarial terms used in filings
10 of rules, rates and rating plans.
11 (2) Standard formats and standard methodologies for the
12 submission or modification of rules, rates and rating plans. An
13 insurance company may provide additional information beyond the
14 standard data base established by the department.
15 ARTICLE X-C.
16 REQUESTS FOR DATA AND INFORMATION; COMPLIANCE.
17 Section 1001-C. Requests for Data and Information.--Any
18 person or entity licensed or otherwise authorized to engage in
19 the business of insurance in this Commonwealth shall comply with
20 calls for data and any other information that may be made by the
21 Insurance Department. Compliance with such calls, relating to
22 the conduct of the business of insurance, shall include the
23 following actions:
24 (1) The provision of all data or information requested
25 within thirty (30) calendar days of the date that the request is
26 first received unless a different time to respond is provided by
27 the department or granted as a result of a formal request by the
28 entity to which the request is made. Where data or information
29 is not readily available in the form or format in which it is
30 requested, such data and information shall be generated,
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1 organized and presented in the form or format requested by the
2 department, provided that upon written request the person or
3 licensee shall have an additional thirty (30) days to generate,
4 organize and present all data and information requested. The
5 commissioner may grant additional thirty (30) day extensions to
6 the time to respond to a request for data or information upon
7 request.
8 (2) The provision of copies of actual records or documents
9 requested, including, but not limited to, letters, guidelines,
10 lists, memoranda, directives, notices and any form of
11 communication which relates to data or information requested.
12 Section 1002-C. Penalties.--Any person or entity which fails
13 to comply with this article shall pay up to a maximum
14 administrative penalty of ten thousand dollars ($10,000) and be
15 subject to a further administrative penalty of two hundred
16 dollars ($200) daily until full compliance occurs.
17 ARTICLE X-D.
18 NOTICE OF INTENT TO WITHDRAW.
19 Section 1001-D. Notice Required.--(a) Whenever an insurer
20 licensed to write property and casualty insurance as described
21 in section 1001-A decides to withdraw from any line, subline or
22 classification of business, the insurance company shall file
23 with the Insurance Department a notice detailing the intent to
24 withdraw. The notice shall include, but not be limited to, the
25 reasons for withdrawal, the number of policyholders affected,
26 the effective date of the withdrawal, if the withdrawal is
27 Statewide or national, and a listing of potential sources for
28 replacement coverage for insureds. This notice of withdrawal by
29 insurers shall be filed at least sixty days prior to the
30 effective date of the withdrawal.
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1 (b) The Insurance Department shall use this information to
2 assist in determining market conditions.
3 (c) The department shall not permit any insurer licensed to
4 write property and casualty insurance to withdraw from any line
5 or classification of business without complying with the
6 provisions of this article.
7 ARTICLE X-E.
8 PENNSYLVANIA LIABILITY UNDERWRITING SERVICES PLAN.
9 Section 1001-E. Definitions.--The following words and
10 phrases when used in this article shall have the meanings given
11 to them in this section, unless the context clearly indicates
12 otherwise:
13 (1) "Board," means the board of directors of the plan.
14 (2) "Commercial liability insurance," means insurance
15 coverage against the legal liability of the insured against
16 loss, damage or expense incident to a claim arising out of the
17 death or injury of any person or property damage as the result
18 of or incident to the lawful conduct of a business enterprise or
19 public purpose. The term includes such insurance coverage of
20 governmental entities, including political subdivisions as
21 specified in section 1002-A(1)(i), (ii) and (iii).
22 (3) "Commissioner," means the Insurance Commissioner of the
23 Commonwealth.
24 (4) "Department," means the Insurance Department of the
25 Commonwealth.
26 (5) "Plan," means the Pennsylvania Liability Underwriting
27 Services Plan.
28 (6) "Surplus lines agent," means an individual, partnership
29 or corporation that is duly licensed as such by the commissioner
30 to effect placement of insurance coverage with an unlicensed
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1 insurer, and who may receive a commission therefor.
2 Section 1002-E. Creation of Plan.--The Pennsylvania
3 Liability Underwriting Services Plan is created as a legal
4 entity with all the rights which are reasonable and necessary to
5 fulfill its purpose, including, but not limited to, the
6 following:
7 (1) To own property.
8 (2) To enter into contracts.
9 (3) To sue and be sued, provided that no judgment against
10 the plan shall create any liability in the individual members.
11 Section 1003-E. Purpose.--The plan shall assist in the
12 placement of commercial liability insurance for eligible
13 Pennsylvania commercial risks and public entities that have
14 tried and failed to find such coverage.
15 Section 1004-E. Membership.--Every commercial liability
16 insurer admitted to do business in this Commonwealth shall, as a
17 condition of its authority to write such kinds of insurance
18 within this Commonwealth, be a member of the plan and have the
19 rights and obligations as hereinafter described. The
20 commissioner may require that the surplus lines insurance
21 companies participate in the plan.
22 Section 1005-E. Participation.--Each member of the plan
23 shall participate in funding the administrative costs of the
24 plan, to the extent that application fees do not defray those
25 costs, and in the review of applications for insurance. Each
26 member's share of participation obligations shall be equitable
27 and set forth in the method of operation. However, members of
28 the plan shall not be required to review application of eligible
29 commercial risks or public entities where the member has not
30 underwritten such coverage for two consecutive years preceding
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1 the effective date of this section.
2 Section 1006-E. Board of Directors.--The plan shall be
3 governed by nine directors and the Insurance Commissioner, who
4 shall serve as a non-voting ex officio chairman. The nine
5 directors shall be appointed to the board as voting members, by
6 the commissioner, each to serve a term of two years. Five
7 members shall be representatives of insurance companies, two
8 members shall be licensed insurance agents or brokers and two
9 members shall be consumers of commercial insurance. Members
10 shall serve as representatives of their employers, who may have
11 the right to substitute individuals with the prior approval of
12 the commissioner.
13 Section 1007-E. Voting Rights.--Whenever so designated by
14 the board pursuant to its method of operation, each commercial
15 liability insurer shall be allotted votes in proportion to its
16 share of the Statewide total written premium during the prior
17 year relating to general liability coverage, plus the liability
18 portion, as determined by the commissioner, of commercial multi-
19 peril coverage.
20 Section 1008-E. Organization.--(a) Within sixty (60) days
21 following the issuance of an order by the commissioner to
22 establish a plan the board shall submit to the commissioner, for
23 his review, a proposed method of operation of the plan,
24 consistent with the provisions of this act, which shall provide
25 for the formation of the plan and the economical and efficient
26 administration of the plan, including, but not limited to,
27 management of the plan, preliminary assessment of all members
28 for initial expenses necessary to commence operations,
29 establishment of necessary facilities within this Commonwealth,
30 assessment of members to defray continuing expenses, limits of
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1 liability, eligibility requirements, procedures for securing
2 timely referrals and quotes on insurance applications and
3 governance of the plan.
4 (b) The method of operation shall be subject to approval by
5 the commissioner and shall take effect ten (10) days after
6 having been approved by him. If the commissioner disapproves the
7 proposed method of operation, the commissioner shall specify his
8 objections and how the plan of operation may be made acceptable.
9 Following the receipt of objections from the commissioner, the
10 plan shall, within fifteen (15) days, submit for review an
11 appropriately revised method of operation, and, if the plan
12 fails to do so or if the revised plan so filed is unacceptable,
13 the commissioner shall promulgate a plan of operation.
14 (c) The plan may, by its own initiative, subject to prior
15 approval by the commissioner, amend the method of operation.
16 Section 1009-E. Application Fees.--Subject to approval by
17 the commissioner, the plan shall require applications to be
18 accompanied by reasonable application fees, which may vary for
19 different classes of applicants. Initially, application fees
20 should not exceed one hundred dollars ($100) nor be less than
21 ten dollars ($10) for any class of insured and shall be reviewed
22 annually by the commissioner. The application fee is non-
23 refundable if the applicant is determined to be eligible for
24 coverage, regardless of whether coverage is found for the
25 applicant through the plan.
26 Section 1010-E. Eligibility.--All applications for
27 commercial liability coverage may be eligible for consideration
28 by the plan if they are accompanied by the application fee
29 appropriate to that class of risk, three refusals of coverage
30 from admitted Pennsylvania commercial lines writers and one
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1 refusal of coverage from a licensed surplus lines agent, and a
2 completed questionnaire as shall be supplied to the applicant by
3 the plan and approved by the commissioner, except for
4 applications relating to:
5 (1) Insurance on motor vehicles.
6 (2) Insurance for pollution or environmental impairment.
7 (3) Insurance for workers' compensation and employers'
8 liability.
9 (4) Insurance for medical malpractice professional
10 liability.
11 (5) Insurance on activities conducted substantially outside
12 this Commonwealth unless the insurance is required by
13 Pennsylvania or Federal statute.
14 (6) Other risks as may be excluded by the plan and approved
15 by the commissioner.
16 Section 1011-E. Immunity.--There shall be no liability or
17 cause of action against any member of the plan or its agents or
18 employes, the plan or its agents or employes, members of the
19 board of directors or the department or its representatives for
20 any action taken by or statement made by them in the performance
21 of their powers and duties under this article.
22 Section 1012-E. Funds.--All fees, assessments and other
23 moneys received by the plan shall be deposited into a restricted
24 revenue account within the General Fund and are hereby
25 appropriated to the board for the purposes set forth in this
26 article.
27 Section 2. This act shall take effect in 60 days.
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