A N     A C T

RELATING TO WORKERS' COMPENSATION

Introduced By: Reps. Rose and Coelho

Date Introduced : February 3, 1998

It is enacted by the General Assembly as follows:

SECTION 1. Sections 27-7.1-3, 27-7.1-4, 27-7.1-5, 27-7.1-6, 27-7.1-7, 27-7.1-8, 27-7.1-9, 27-7.1-10, 27-7.1-11, 27-7.1-14, and 27-7.1-23 of the General Laws in Chapter 27-7.1 entitled "Workers' Compensation Insurance" are hereby repealed in their entirety:

{DEL 27-7.1-3. Approval of rates. -- DEL} {DELThe director shall apply the procedures and standards of this section in investigating, reviewing, and approving or disapproving rates: DEL}

{DEL (1) The director may require the filing of specific rates for workers' compensation insurance, including classifications of risks, experience, or any other rating information from insurance companies authorized to transact insurance in this state; DEL}

{DEL (2) The director may make or cause to be made investigations as he or she may deem necessary to satisfy himself or herself that the rates to be promulgated are just and reasonable; DEL}

{DEL (3) The director may at any time, after a public hearing, withdraw his or her approval of a previously approved rate filing; and DEL}

{DEL (4) The director shall approve all rates prospectively only and the rates shall have no retroactive effect. Rates shall be effective ninety (90) days following written notice and approved by the director. DEL}

{DEL 27-7.1-4. Contents of filing. -- DEL} {DEL(a) A rate filing shall include, for each company included in the filing: DEL}

{DEL (1) For each of the three (3) calendar years immediately preceding the date of the filing: DEL}

{DEL (i) The actual gross earned premiums allocable to the coverage of risks in this state; DEL}

{DEL (ii) For unearned premium, earned premium, loss and loss expense reserve funds, and capital and surplus subject to investment, allocable to the coverage of risks in this state: DEL}

{DEL (A) The amount of investments of each type of fund; DEL}

{DEL (B) The types of investments of all of these funds; and DEL}

{DEL (C) The annual income amounts, before taxes, generated by the aggregate of these investments; DEL}

{DEL (iii) The gross rate of return on admitted assets; DEL}

{DEL (iv) The amount of dividends or the equivalent allowed or returned to policyholders, members, or subscribers; DEL}

{DEL (v) The aggregate annual expenses allocable to the coverage of risks in this state, including acquisition and field supervision expenses, taxes, licenses, and fees, other than federal income tax, and general expenses, each stated separately. Safety engineering expense and loss control services' expense shall be stated separately under general expense; DEL}

{DEL (vi) The aggregate annual losses and loss adjustment expense allocable to the coverage of risks in this state; DEL}

{DEL (vii) The total loss reserves for this coverage being held at the beginning and end of each calendar year and the annual paid losses, including methods and interest rates used in determining present value for the reserve to which they apply; DEL}

{DEL (viii) The changes and improvements instituted in loss control and employee safety engineering; DEL}

{DEL (ix) The amount of money expended to pay back interest to claimants as defined in section 28-35-12 and the amount of money expended to pay any and all penalties required by the Workers' Compensation Act, chapters 29 to 38 of title 28; DEL}

{DEL (x) The cost control program and techniques employed to have a substantial impact on fraudulent claim costs, unnecessary health care cost, and any other unreasonable costs and expenses; DEL}

{DEL (xi) Any investigations conducted by the company and/or the state involving fraudulent claims by employers, employees, insureds and insurers; and DEL}

{DEL (xii) Full disclosure of the extent and cost of claims management procedures, specifically including, but not limited to, legal costs, fees, and rates of compensation, number and location of adjusters assigned to Rhode Island workers' compensation cases, and number of claims assigned to each adjuster, including Rhode Island workers' compensation claims, non-Rhode Island workers' compensation claims, and non-workers' compensation claims; DEL}

{DEL (2) For each risk classification: DEL}

{DEL (i) The rate presently applicable to the classification; DEL}

{DEL (ii) The rate proposed for the classification; DEL}

{DEL (iii) Loss experience in this state for each of the three (3) most recent years available, including, in each classification, payroll, number of serious workers' compensation cases, number of nonserious cases, the losses, including medical expenses incurred with respect to each type of case, loss adjustment expense, and the total of all losses and expenses incurred; and DEL}

{DEL (iv) The information required by subsection (a)(2) being presented in tabular form; DEL}

{DEL (3) If data reported is determined by percentage factors, rather than actual expense, an explanation of the basis of the factors used; DEL}

{DEL (4) Statements or exhibits that reasonably substantiate assumptions, methodology, or calculations used in support of the proposed rates or to generate the information or data in the filing and identification of any of those rates that are known or believed to be contrary to the established policy of the director; and DEL}

{DEL (5) Any other information required to be included by the director. DEL}

{DEL (6) No insurance company or rating bureau shall issue or cause to be modified any rate, rating plan, or rule increasing the cost of workers' compensation insurance in this state until information satisfactory to regulations adopted by the insurance administrator providing regional and state data have been filed and approved for use in this state. The regulations shall be submitted to a public hearing not less than ninety (90) days after July 11, 1990. DEL}

{DEL 27-7.1-5. Aggregate data. -- DEL} {DEL(a) Aggregate expense data, annual loss and loss adjustment expense data, and loss experience data required to be reported under section 27-7.1-4 shall be based on expense and experience data pertaining to this state, except as otherwise provided in this section. The profit factor used in establishing the rates requested, the rate of return on the investment allocable to the coverage of risks in this state represented by that profit factor, and the facts, assumptions, and calculations employed to derive that profit factor and rate of return shall also be reported in the aggregate. DEL}

{DEL (b) To the extent that the Rhode Island expense and experience data is not fully credible, the director may allow reporting of and consider data from outside this state. DEL}

{DEL (c) Aggregate loss experience data shall: DEL}

{DEL (1) Include and be categorized as required in section 27-7.1-4(a)(2)(iii); and DEL}

{DEL (2) Be presented in tabular form. The tables shall indicate, with respect to each classification, the relative weight given to experience in this state and to national experience in determining the applicable rate. DEL}

{DEL 27-7.1-6. Additional information. -- DEL} {DELThe director may require, at any time, any additional information the director deems necessary and may reasonably extend the time periods established in section 27-7.1-10 to allow time to provide that information. DEL}

{DEL 27-7.1-7. Standard for approval. -- DEL} {DEL(a) The provisions of this section apply to approval or disapproval of rate filings. DEL}

{DEL (b) To approve a rate filing, the director shall find that, from the filing and sworn testimony, the rating organization or insurer has established, in addition to all other requirements, that: DEL}

{DEL (1) The proposed rates are just and reasonable and not excessive, inadequate, or unfairly discriminatory; DEL}

{DEL (2) The profit factor used in establishing the rate requested will produce only a just and reasonable return on investment allocable to the coverage of risks in this state; and DEL}

{DEL (3) The reported loss reserves, including the discount rates applied to those reserves, are reasonable. DEL}

{DEL (c) In determining if the proposed rates are just and reasonable, the director shall consider: DEL}

{DEL (1) The profit factor used in establishing the rate requested and its relationship to the return on the investment allocable to the coverage of risks in this state; DEL}

{DEL (2) The reported investment income earned or realized from funds generated from business in this state; DEL}

{DEL (3) The investment gains on reserves, capital, and surplus; DEL}

{DEL (4) The reported loss reserves, including the methods and the interest rates used in determining the present value for reported reserves; DEL}

{DEL (5) Reported annual losses and loss adjustment expenses; DEL}

{DEL (6) The measures taken to contain costs, including loss control, loss adjustment, and employee safety engineering programs; DEL}

{DEL (7) The relationship of the aggregate amount of operating expenses reported by all companies to the annual operating expenses reported in the filing and the annual insurance expenses exhibits filed by each company with the department of business regulation; and DEL}

{DEL (8) The operating and management efficiency of the companies. DEL}

{DEL (d) The justness and reasonableness of rates shall be determined for the period in which the rates shall be in effect. DEL}

{DEL (e) The rating organization or insurer shall have the burden of proving that the proposed rates meet the requirements of this section. DEL}

{DEL (f) A rate filing may not be approved unless the director finds that the information supplied in the filing and sworn testimony is accurate and sufficient to meet the requirements of this section. DEL}

{DEL 27-7.1-8. Public record. -- DEL} {DELAny rate filings subject to this chapter and filed by an insurer or rating organization on behalf of its members or subscribers with the insurance commissioner shall be deemed public information at the time of such filing; provided, however, the insurance commissioner shall furnish the rate filings and all pertinent information as to the rate filings, upon written request, to any insured, to any authorized representative of an insured, to any insurance company trade association, or to any trade association of insurance producers. DEL}

{DEL 27-7.1-9. Information for parties and intervenors. -- DEL} {DELA party or intervenor may make a written application to the director for an order that a rating organization or insurer, which has presented a filing, produce any information relevant to whether the filing rates meet the requirements of this section, except for information relating to a particular claim. If the rating organization or insurer fails to furnish the information within the time prescribed by the director, the party or intervenor making the request may make a written application to the director for an order disapproving the filing. If, after a hearing, the director determines that the failure to furnish the information was without good cause, the director shall issue an order for the disapproval of the filing. DEL}

{DEL 27-7.1-10. Public hearing. -- DEL}{DEL The director shall hold a public hearing, as provided in chapter 9 of this title, on each filing. The public hearing shall be conducted not sooner than thirty (30) days and not later than one hundred twenty (120) days of the receipt of the rate filing by the department of business regulation, unless the director extends these limits under section 27-7.1-6. The director shall approve or disapprove that filing and state his or her findings in a written order issued within one hundred eighty (180) days from the receipt of the filing by the department, unless the director extends this limit under section 27-7.1-6. If the director denies a filing, any further filing shall be deemed to be a new filing, subject to this public hearing requirement. DEL}

{DEL 27-7.1-11. Subsequent filing. -- DEL}{DEL A rating organization or insurer may not file a rate filing within one hundred eighty (180) days of receiving approval of a prior rate filing. DEL}

{DEL27-7.1-14. Optional deductibles. DEL}{DEL(a) Each workers' compensation insurance policy issued by every insurer shall offer, at the option of the insured employers, optional deductibles for medical and indemnity benefits in the amount of two hundred fifty ($250), five hundred ($500), one thousand ($1,000), two thousand five hundred ($2,500), or five thousand ($5,000) dollars per claim and such other reasonable amounts as may be approved by the insurance commissioner. The insured employer in choosing to exercise the option, shall choose only one of the amounts as the deductible. The provisions of this section shall be fully disclosed in writing to the prospective purchaser. DEL}

{DEL (b) The director of the department of business regulation shall promulgate reasonable rules and regulations to promote the orderly implementation of any plan or plans that is deemed necessary. DEL}

{DEL (c) An insurance company shall be deemed primarily responsible for the payment of all the claims above or below the deductible in the event of a dispute or insolvency of the employer. DEL}

{DEL 27-7.1-23. Surcharges and discounts. -- DEL}{DEL Servicing carriers may be authorized to surcharge and discount premiums in the residual market with the approval of the director. Any petition to impose a surcharge must list the amounts and percentage increases of each proposed surcharge, and demonstrate through offsetting discounts or rate reductions that the surcharge application will be revenue neutral in direct premium charges, unless it is brought in a rate filing made pursuant to section 27-7.1-4. DEL}

SECTION 2. Sections 27-7.1-2, 27-7.1-12 and 27-7.1-22 of the General Laws in Chapter 27-7.1 entitled "Workers' Compensation Insurance" are hereby amended to read as follows:

27-7.1-2. Approval of policies. -- (a) Every insurance company issuing workers' compensation insurance policies covering the payment of compensation and benefits provided for in this chapter shall file with the director:

(1) A copy of the form of the policies. A policy may not be issued until the director has approved the form; and

(2) Its classification of risks and their premium rates and any subsequent proposed classifications and premium rates, which may not take effect until the expiration of {DEL ninety (90) DEL} {ADD sixty (60) ADD}days from the date the director has approved them.

(b) Premium rates less than those approved may be used and filed with the director. If the director has reason to believe that the filing produces rates which are inadequate or unfairly discriminatory, the director may disapprove them.

(c) Any policy forms, subject to this chapter and filed by an insurer or rating organization on behalf of its members or subscribers with the {DEL insurance commissioner DEL} {ADD director ADD}, shall be deemed public information at the time of the filing; {DEL provided, however, DEL} {ADD and ADD} the {DEL insurance commissioner DEL} {ADD director ADD} shall furnish the policy forms and all pertinent information as to the policy forms, upon written request, to any insured, to any authorized representative of an insured, to any insurance company trade association, or to any trade association of insurance producers.

27-7.1-12. Procedural rules. -- {ADD (a) ADD} Subject to the applicable requirements of the Administrative Procedures Act, chapter 35 of title 42, the director may adopt rules {ADD and regulations ADD} establishing procedures for {ADD : ADD} {DEL the DEL} {ADD (1) The ADD} administration of this chapter, including, but not limited to, procedures governing submission of petitions for intervenor status, prefiling of testimony and exhibits, information requests, subpoena prehearing conferences, and the conduct of hearings {DEL . DEL} {ADD ; ADD}

{ADD (2) Use by insurers to record and report to the director their rates; ADD}

{ADD (3) Use by insurers in the recording and reporting of loss and expense experience, in order that the experience of all insurers may be made available at least annually in such form and detail as may be necessary to aid in determining whether rating systems comply with the standards set forth in section 27-7.1-4. The director may designate advisory organizations or other agencies to assist in gathering such experience and making compilations thereof, and such compilations shall be public records; and ADD}

{ADD (4) The interchange of data necessary for the application of rating plans. ADD}

{ADD (b) In order to further the administration of this chapter, the director and every insurer and advisory organization may exchange information and experience data with insurance supervisory officials, insurers and advisory organizations in other states and may consult with them with respect to the application of rating systems. ADD}

{ADD (c) Cooperation among advisory organizations or among advisory organizations and insurers in ratemaking or in other matters within the scope of this act is authorized but the filings resulting from such cooperation are subject to all the provisions of this act. The director may review such cooperative activities and practices and, if after hearing any such activity or practice is found to violate the provisions of this act, a written order may be issued specifying that such activity or practice violates the provisions of this act and requiring the discontinuance of such activity. ADD}

27-7.1-22. "Fresh start" provision. -- (a) In order to restore a healthy voluntary workers' compensation insurance market in the state of Rhode Island, and to avert the departure of insurers presently providing workers' compensation insurance in the state, the department shall provide for recovery of ninety percent (90%) of any deficits for the policy period beginning the first day of the month beginning after passage of this legislation through December 31, 1992, and seventy-five percent (75%) of any deficits for the policy year January 1, 1993 through December 31, 1993, pursuant to subsections (b) through (h).

(b) The term "deficits" shall mean the amount by which incurred losses and expenses associated with the entire Rhode Island workers' compensation insurance market exceeds premiums collected from risks in that market and investment income allocable to those premiums. Any deficits for the covered portion of policy year 1993 shall be initially calculated as of June 30, 1994, and annually reviewed as of June 30 of each of the subsequent four (4) years.

(c) Deficit calculations shall be made by an independent actuarial firm. Selection of this firm shall be agreed to by the department, the state {ADD compensation insurance ADD} fund, and an organization representing licensed workers' compensation insurers. Compliance with NCCI pool servicing carrier standards shall be reviewed by the department {DEL of business regulations DEL} and shall be considered by the actuary in determining the extent of any deficit.

(d) Assessments for 1992 deficits shall apply to all policies issued on or after January 1, 1995, and assessments for 1993 deficits shall apply to all policies issued on or after January 1, 1996. Deficits shall be assessed against current policy year insureds and collected as a surcharge on current policy year premiums.

(e) (1) Any deficits determined as of June 30, 1994, shall be amortized over a five (5) year period, with twenty percent (20%) of the deficits due when policies for policy year 1995 are issued.

(2) Any 1992 deficits determined as of June 30, 1995, shall be amortized over a four (4) year period, with twenty-five percent (25%) of the deficits due when policies for policy year 1996 are issued. Subsequent 1992 deficit determination shall be made by each June 30 amortized over the remaining period, with a final deficit determination to be made by June 1, 1998.

(3) Any 1993 deficits determined as of June 30, 1995, shall be amortized over a five (5) year period, with twenty percent (20%) of the deficits due when policies for policy year 1996 are issued. Any 1993 deficits determined as of June 30, 1995, shall be amortized over a four (4) year period, with twenty-five percent (25%) of the deficits due when policies for policy year 1997 are issued. Subsequent 1993 deficit determinations shall be made by each June 30 and amortized over the remaining period, with a final deficit determination to be made by June 1, 1999.

(f) In no instance shall the deficit surcharge for either policy year 1992 or 1993 exceed ten percent (10%) of the policyholder's current policy year written premium, nor shall the combined surcharge for 1992 and 1993 exceed ten percent (10%) of the policyholder's current policy year written premium. Any outstanding balance as a result of this limitation shall be assessable at ten percent (10%) of current policy year written premium per year until all those obligations are fulfilled.

(g) The department shall annually notify the state compensation insurance fund and each insurance carrier writing workers' compensation insurance in Rhode Island of the amount of any deficit surcharge, as established by the independent actuarial firm, to be charged against policy holders.

(h) The state compensation insurance fund and each insurance carrier writing workers' compensation insurance shall collect deficit surcharges under this section at the time the policy is issued. After collection, those surcharges shall be transferred to an interest bearing custodial account administered by the director of the department of labor, for the exclusive benefit of the workers' compensation insurance carriers. Monies collected and invested in the account and interest earned thereon shall be distributed only to worker's compensation carriers in accordance with a schedule promulgated by the department {ADD , ADD} {DEL of business regulation, DEL} based on the report of the independent actuarial firm. The monies shall be and remain the property of the workers' compensation carriers and shall not constitute public funds.

SECTION 3. Chapter 27-7.1 of the General Laws entitled "Workers' Compensation Insurance" is hereby amended by adding thereto the following sections:

{ADD 27-7.1-1.1 Definitions. --ADD}{ADDThe following definitions shall apply for purposes of this chapter: ADD}

{ADD (1) "Accepted actuarial standards" means the standards adopted by the casualty actuarial society in its statement of principles regarding property and casualty insurance ratemaking, and the standards of practice adopted by the actuarial standards board. ADD}

{ADD (2) "Advisory organization" means any entity, including its affiliates or subsidiaries which assists insurers in ratemaking-related activities, and is licensed in accordance with the provisions of section 27-9-22. ADD}

{ADD (3) "Classification system" means the plan, system, or arrangement for recognizing differences in exposure to hazards among industries, occupations of operations of insurance policyholders. ADD}

{ADD (4) "Department" means the department of business regulation. ADD}

{ADD (5) "Developed losses" means losses (including loss adjustment expenses) adjusted 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 (including loss adjustment expense) payments. ADD}

{ADD (6) "Director" means the director of the department of business regulation. ADD}

{ADD (7) "Expenses" means a workers' compensation insurer's determination of the expenses, other than loss expenses and loss adjustment expenses, associated with writing workers' compensation insurance. ADD}

{ADD (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 in the same classification to produce a prospective premium credit, debt or unity modification. ADD}

{ADD (9) "Insurer" means any person writing coverage under the workers' compensation laws of this state. ADD}

{ADD (10) "Loss trending" means any procedure for projecting developed losses to the average date of loss for the period during which the policies are to be effective, including loss ratio trending. ADD}

{ADD (11) "Prospective loss costs" means historical aggregate losses and loss adjustment expenses, including all assessments that are loss-based, projected through development to their ultimate value and through trending to a future point in time, ascertained by accepted actuarial standards. Prospective loss costs do not include provisions for profit or expenses other than loss adjustment expenses. ADD}

{ADD (12) "Pure premium rate" means that portion of the rate which represents the loss cost per unit of exposure including loss adjustment expense. ADD}

{ADD (13) "Rate or rates" means rate of premium, policy and membership fee, or any other charge made by an insurer for or in connection with a contract or policy of workers' compensation and employer's liability insurance, prior to application of individual risk variations based on loss or expense considerations, and does not include minimum premiums. ADD}

{ADD (14) "Special assessments" means insurers' insolvency fund assessments, workers' compensation administration fund assessments, capital assessments for the state compensation insurance fund, and other similar assessments. Special assessments shall not be considered as either expenses or losses, but shall be treated as separate costs by insurers' and shall be assessed on their policyholders in accordance with rules set forth by an advisory organization and approved by the director. ADD}

{ADD (15) "Statistical plan" means the plan, system, or arrangement used in collecting data. ADD}

{ADD (16) "Supplementary rating information" includes any manual or plan of rates, classification, rating schedule, minimum premium, policy fee, rating rule, underwriting rule, statistical plan and any other similar information needed to determine the applicable premium for an individual insured and not otherwise inconsistent with the purposes of this act, as prescribed by the director. ADD}

{ADD (17) "Supporting information" means (i) the experience and judgment of the filer and the experience or data of other insurers or advisory organizations relied upon by the filer; (ii) the interpretation of any other data relied upon by the filer; and (iii) descriptions of methods used in making the rates, and any other information required by the director to be filed. ADD}

{ADD 27-7.1-4.1. Standards for approval of rates. -- ADD}{ADDThe director shall apply the following standards in making rates: ADD}

{ADD (1) Rates shall not be excessive, inadequate or unfairly discriminatory. ADD}

{ADD (2) Due consideration shall be given to: (i) past and prospective loss experience within and outside the state; (ii) a reasonable margin for profits and contingencies; (iii) dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members or subscribers; (iv) past and prospective expenses both countrywide and those specifically applicable to this state; (v) provisions for special assessments; and (vi) all other relevant factors within and outside this state. In determining the reasonableness of the profit, consideration shall be given to investment income. ADD}

{ADD (3) Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for individual risks in accordance with rating plans which 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. ADD}

{ADD 27-7.1-5.1. Rate filings. --ADD} {ADD(a) Every insurer shall file with the director, every manual, minimum premium, class rate, rating schedule or rating plan and every other rating rule, and every modification of any of the foregoing which it proposes to use. An insurer may file its rates either by filing its final rates or by filing a multiplier to be applied to prospective loss costs that have been filed by an advisory organization on behalf of an insurer as permitted by section 27-9-8.1. Every such filing shall state the proposed effective date thereof. ADD}

{ADD Every insurer shall file or incorporate by reference material which has been approved by the director, at the same time as the filing of the rate, all supplementary rating and supporting information to be used in support of or in conjunction with a rate. The information furnished for support of a filing may include or consist of a reference to: ADD}

{ADD (i) The experience or judgment of the insurer or information filed by the advisory organization on behalf of the insurer as permitted by section 27-9-8.1, (ii) the interpretation of the insurer or advisory organization of any statistical data it relies upon, (iii) the experience of other insurers or advisory organizations, or (iv) any other relevant factors. A filing and any supporting information shall be open to public inspection upon receipt of the filing. ADD}

{ADD When a filing is not accompanied by the information upon which the insurer supports such filing, the director may require such insurer to furnish the information upon which it supports such filing and in that event, the waiting period shall commence as of the date such information is furnished. Until the requested information is provided, the filing shall not be deemed complete. If the requested information is not filed within a reasonable time period, the filing may be returned to the insurer as not filed and not available for use. ADD}

{ADD After reviewing an insurer's filing, the director may require that the insurer's rates be based upon the insurer's own loss, special assessment and expense information. If the insurer's loss or allocated loss adjustment expense information is not actuarially credible, as determined by the director, the insurer may use or supplement its experience with information filed with the director by an advisory organization. ADD}

{ADD Insurers utilizing the services of an advisory organization must provide with their rate filing, at the request of the director, a description of the rationale for such use, including its own information and method of utilization of the advisory organization's information. ADD}

{ADD (b) The director shall review filings as soon as reasonably possible after they have been made in order to determine whether they meet the requirements of this act. ADD}

{ADD (c) Subject to the exception specified in section 27-7.1-6.2, each filing shall be on file for a waiting period of fifteen (15) days before it becomes effective, which period may be extended by the director for an additional period not to exceed fifteen (15) days if written notice is given within such waiting period to the insurer or advisory organization which made the filing that additional time is needed for the consideration of the filing. Upon written application by the insurer, the director may authorize a filing which has been reviewed to become effective before the expiration of the waiting period or any extension thereof. A filing shall be deemed to meet the requirements of the act unless disapproved by the director within the waiting period or any extension thereof. ADD}

{ADD (d) No insurer shall make or issue a contract or policy except in accordance with the filings which have been approved and are in effect for said insurer as provided in this act or in accordance with subsection (c) of this section. ADD}

{ADD (e) Nothing contained in this section shall prevent the director from holding a hearing on a rate filing pursuant to the provisions of chapter 42-35 and regulations adopted by the department. ADD}

{ADD 27-7.1-6.1. Disapproval of rates. -- ADD}{ADD(a) If within the waiting period or any extension thereof as provided in section 27-7.1-5.1(c) the director finds that a filing does not meet the requirements of this act, a written order of disapproval shall be sent to the insurer or advisory organization specifying therein the reasons the filing fails to meet the requirements of this act and stating that such filing shall not become effective. If a filing is disapproved by the director, the insurer or advisory organization may request a hearing on the disapproval within thirty (30) days of the date of the order of disapproval and the director shall schedule such hearing within thirty (30) days of the receipt of the request. The insurer bears the burden of proving compliance with the standards established by this act. ADD}

{ADD (b) If at any time after a rate has been approved, the director finds that the rate no longer meets the requirements of this act, the director may order the discontinuance of use of such rate. The order of discontinuance may be issued after a hearing with at least thirty (30) days prior notice to all insurers affected by the order. The order must be in writing and state the grounds for the order. The order also shall specify when, within a reasonable time thereafter, the filing will be deemed no longer effective. The order shall not affect any contract or policy made or issued prior to the expiration of the period set forth in the order. The director's order may include a provision for a premium adjustment for contracts or policies made or issued after the effective date of the order. ADD}

{ADD 27-7.1-6.2. Consent to rate. --ADD} {ADDNotwithstanding any other provision of this act, upon the written consent of the insured, filed with the director, a rate in excess of the rate determined in accordance with the other provisions of this act may be used on any specific risk. ADD}

{ADD 27-7.1-7.1 Information to be furnished insureds. -- ADD}{ADD(a) Every advisory organization and every insurer shall, within a reasonable time after receiving a written request, furnish to any insured affected by a rate made by the insurer, or the authorized representative of the insured, all pertinent information as to such rate. ADD}

{ADD 27-7.1-8.1. Services of advisory organizations. -- ADD}{ADD(a) No advisory organization shall provide any service relating to the rates subject to this act, and no insurer shall utilize the services of such organization for such purposes unless the organization has obtained a license pursuant to section 27-9-22. ADD}

{ADD (b) No advisory organization shall refuse to supply any services for which it is licensed in this state to any insurer authorized to do business in this state and offering to pay the fair and usual compensation for the services. ADD}

{ADD 27-7.1-9.1. Membership in rating organization. -- ADD} {ADD(a) The director shall appoint one or more advisory organizations licensed in accordance with the provisions of section 27-9-22 to assist the director in gathering, compiling, and reporting relevant statistical information. Every workers' compensation insurer shall record and report its workers' compensation experience to the advisory organization as set forth in the uniform statistical plans submitted by the advisory organization to the director. ADD}

{ADD (b) Except for corporations organized under chapter 27-7.2 of the Rhode Island general laws each workers' compensation insurer shall be a member of an advisory organization. Each workers' compensation insurer may adhere to the policy terms filed by the advisory organization. ADD}

{ADD (c) Every workers' compensation insurer shall adhere to the uniform classification system and uniform experience rating plan as submitted to the director and which is presently in effect. The experience rating plan shall be the exclusive means of providing prospective premium adjustments based upon measurement of the loss-producing characteristics of an individual insured. ADD}

{ADD (d) Subject to the approval of the director, the advisory organization shall develop and file rules reasonably related to the recording and reporting of data pursuant to the uniform statistical plan, uniform experience rating plan, and the uniform classification system. ADD}

{ADD (e) The advisory organization shall not adopt any rule that would prohibit or regulate the payment of dividends, savings or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers. A plan for the payment of dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders is not considered a rating plan or system. ADD}

{ADD 27-7.1-10.1. Procedural rules -- Rate administration -- Consultation with other states. -- ADD}{ADD(a) Subject to the applicable requirements of the administrative procedures act, chapter 35 of title 42, the director may adopt rules and regulations for: ADD}

{ADD (1) The administration of this chapter, including, but not limited to, procedures governing submission of petitions for intervenor status, prefiling of testimony and exhibits, information requests, subpoenas, prehearing conferences, and the conduct of hearings. ADD}

{ADD (2) Use by insurers to record and report to the director their rates. ADD}

{ADD (3) Use by insurers in the recording and reporting of loss and expense experience, in order that the experience of all insurers may be made available at least annually in such form and detail as may be necessary to aid in determining whether rating systems comply with the standards set forth in section 27-7.1-4. The director may designate a advisory organization or other entity to assist in gathering such experience and making compilations thereof, and such compilations shall be public records. ADD}

{ADD (4) The interchange of data necessary for the application of rating plans. ADD}

{ADD (b) In order to further the administration of this chapter, the director and every insurer and advisory organization may exchange information and experience data with insurance supervisor officials, insurers and advisory organizations in other states and may consult with them with respect to the application of rating systems. ADD}

{ADD (c) Cooperation among advisory organizations or among advisory organizations and insurers in ratemaking or in other matters within the scope of this act is authorized but the filings resulting from such cooperation are subject to all the provisions of this act. The director may review such cooperative activities and practices and, if after hearing any such activity or practice is found to violate the provisions of this act, a written order may be issued specifying that such activity or practice violates the provisions of this act and requiring the discontinuance of such activity. ADD}

{ADD 27-7.1-11.1. Challenge and review of application of rating system. --ADD}{ADD (a) An advisory organization and every insurer subject to this article which makes its own rate, shall provide within this state reasonable means whereby any person aggrieved by the application of its rating system may upon that person's written request be heard in person or by the person's authorized representative to review the manner in which such rating system has been applied in connection with the insurance afforded the aggrieved person. ADD}

{ADD (b) Any party affected by the action of an advisory organization or the insurer may, within thirty (30) days after written notice of that action, make application, in writing, for an appeal to the director, setting forth the basis for the appeal and the grounds to be relied upon by the applicant. If the advisory organization or insurer fails to grant or reject such request within thirty (30) days after it is made, the applicant may proceed in the same manner as if the application has been rejected. ADD}

{ADD (c) The director shall review the application and, if the director finds that the application is made in good faith and that it sets forth on its face grounds which reasonably justify holding a hearing, the director shall conduct a hearing held not less than ten (10) days after written notice to the applicant and to an advisory organization or insurer. The director, after a hearing, shall affirm or reverse the action of an advisory organization or insurer. ADD}

{ADD (d) If, after a hearing held under this section, it is determined that the rates charged by an insurer are in excess of the otherwise appropriate rate, such overcharge shall be refunded to the insured. ADD}

{ADD 27-7.1-12.1. Acts reducing competition prohibited. -- (a) In this section, the word "insurer" includes two or more affiliated insurers (1) under common management; or (2) under common controlling ownership or under common effective legal control and in fact engaged in joint or cooperative underwriting, investment management, marketing, servicing or administration of their business and affairs as insurers. ADD}

{ADD (b) Neither the advisory organization nor any insurer may: ADD}

{ADD (1) Monopolize or attempt to monopolize, or combine or conspire with any other person or persons, or monopolize the business of any kind, subdivision or class thereof; ADD}

{ADD (2) Agreed with any other insurer or the advisory organization to charge or adhere to any rate or rating plan other than the uniform experience rating plan or rating rule except as needed to comply with the requirements of section 27-7.1-10; ADD}

{ADD (3) Make an agreement with any other insurer, the advisory organization, or other person to unreasonably restrain trade or substantially lessen competition in the business of insurance of any kind, subdivision, or class, or; ADD}

{ADD (4) Make any agreement with any other insurer or the advisory organization to refuse to deal with any person in connection with the sale of insurance. ADD}

{ADD (c) The fact that two or more insurers, whether or not members or subscribers to the advisory organization, use consistently or intermittently the same rules rating plans, rating schedules, rating rules, policy forms, rate classification, underwriting rules, surveys, inspections or similar materials in not sufficient in itself to support a finding that an agreement exists. ADD}

{ADD (d) The advisory organization and any member or subscriber thereof may not interfere with the right of any insurer to make its rates independently of the advisory organization. ADD}

{ADD (e) Except as required by section 27-7.1-10, the advisory organization may not have or adopt any rule or exact any agreement or formulate or engage in any program which would require any member, subscriber or other insurer to: ADD}

{ADD (1) Utilize some or all of its service. ADD}

{ADD (2) Adhere to its rates, rating plan, rating systems, or underwriting rules; or ADD}

{ADD (3) Prevent any insurer from acting independently. ADD}

{ADD 27-7.1-13.1. False or misleading information. -- ADD}{ADDNo person, firm, corporation, association or organization shall willfully withhold information which will affect the rates or premiums chargeable under this act or knowingly give false or misleading information to the director, any statistical agency or advisory organization designed by the director or any insurer. ADD}

{ADD 27-7.1-24. Transition. -- ADD}{ADDInsurers and an advisory organization are not required to immediately refile rates previously approved. For three (3) years after the effective date of this act, any member or subscriber of an advisory organization is authorized to continue to use all rates and deviations filed or approved for its use until the insurer makes its own filing to change its rates, either by making an independent filing and adopting an advisory organization's approved prospective loss costs, or modifications thereof. ADD}

{ADD 27-7.1-25. Severability. --ADD} {ADDIf any provision of this chapter or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the chapter, which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are declared to be severable. ADD}

SECTION 4. Section 27-9-8 of the General Laws in Chapter 27-9 entitled "Casualty Insurance Rating" is hereby amended to read as follows:

{DEL 27-9-8. Filings by rating organizations. DEL}{ADD 27-9-8. Filings by advisory organizations. -- ADD} (a) An insurer may satisfy its obligation to make filings by becoming a member of, or a subscriber to, a licensed {DEL rating DEL} {ADD advisory ADD} organization which makes filings, and by authorizing the {DEL commissioner DEL} {ADD director ADD} to accept those filings on its behalf; provided, that nothing contained in this chapter shall be construed as requiring any insurer to become a member of or a subscriber to any {DEL rating DEL} {ADD advisory ADD} organization {ADD . ADD} {DEL ; DEL} {DEL and provided further, an insurer insuring against workers' compensation and employers' liability, and only with reference to that insurance, which writes more than one percent (1%) of the total workers' compensation and employers' liability premium volume in Rhode Island, may not so satisfy its obligation to file rates as provided by this section. For the purposes of this chapter, "rates" mean the charges for insurance per unit of exposure, prior to any application of individual risk variations based on loss of expense considerations, or a consideration of both, and does not include minimum premiums. DEL}

{DEL (b) For the purposes of this chapter, in computing the percentage of the total workers' compensation and employers' liability premium volume in Rhode Island, the volume shall include the total aggregate premium volume of a parent corporation including the premium volume of its subsidiary corporations. DEL}

{ADD Every advisory organization shall file with the director for approval all prospective loss costs, provisions for special assessments and all supplementary rating information and every change or amendment or modification of any of the foregoing proposed for use in this state. Such filings shall be subject to the provisions of chapter 27-7.1 entitled 'Workers' Compensation Insurance" of the general laws relating to workers' compensation insurance. ADD}

SECTION 5. Chapter 27-9 of the General Laws entitled "Casualty Insurance Rating" is hereby amended by adding thereto the following sections:

{ADD 27-9-8.1. Advisory organization -- Permitted activity. -- ADD} {ADD Any advisory organization, in addition to other activities not prohibited, is authorized, on behalf of its members and subscribers, to: ADD}

{ADD (1) Develop statistical plans including territorial and class definitions; ADD}

{ADD (2) Collect statistical data from members, subscribers or any other source; ADD}

{ADD (3) Prepare and distribute prospective loss costs which may include provisions for special assessments; ADD}

{ADD (4) Prepare and distribute factors, calculations or formulas pertaining to classification, territory, increased limits and other variables; ADD}

{ADD (5) Prepare and distribute manuals of rating rules and rating schedules that do not include final rates, expense provisions, profit provisions or minimum premiums; ADD}

{ADD (6) Distribute information that is required or directed to be filed with the director; ADD}

{ADD (7) Conduct research and collect statistics in order to discover, identify, and classify information relating to causes or prevention of losses; ADD}

{ADD (8) Conduct research and collect information to determine the impact of statutory changes upon prospective loss costs and special assessments; ADD}

{ADD (9) Prepare policy forms and endorsements and consult with members, subscribers and others relative to their use and application; ADD}

{ADD (10) Conduct research and on-site inspections for the purpose of providing risk information relating to individual structures; ADD}

{ADD (11) Conduct on-site inspections to determine rating classifications for individual insureds; ADD}

{ADD (12) Establish a committee which may include insurance company representatives to review the determination of the rating classification for individual insureds and suggest modifications to the classification system; ADD}

{ADD (13) Collect, compile and distribute past and current prices of individual insurers and publish such information; ADD}

{ADD (14) Collect and compile exposure and loss experience for the purpose of individual risk experience ratings; ADD}

{ADD (15) Furnish any other services, as approved by the director, related to those services enumerated in this section. ADD}

{ADD 27-9-8.2. Applicability. -- ADD} {ADD Except as expressly provided in this act and chapter 27-7.1, the provisions of chapter 27-9 shall not apply to workers' compensation insurance. ADD}

SECTION 6. This act shall take effect upon passage.