§ 31A-19a-201. Rate standards.

(1) Rates may not be excessive, inadequate, or unfairly discriminatory.

(2)

(a) Rates are not excessive if a reasonable degree of price competition exists at the consumer level with respect to the class of business to which they apply. In determining whether a reasonable degree of price competition exists, the commissioner shall consider:

(i) relevant tests of workable competition pertaining to:

(A) market structure;

(B) market performance; and

(C) market conduct; and

(ii) the practical opportunities available to consumers in the market to:

(A) acquire pricing and other consumer information; and

(B) compare and obtain insurance from competing insurers.

(b) The tests described in Subsection (2)(a) include:

(i) the size and number of insurers actively engaged in the market and class of business;

(ii) the market shares of insurers actively engaged in the market and changes in market shares;

(iii) the existence of rate differentials in that class of business;

(iv) ease of entry and latent competition of insurers capable of easy entry;

(v) availability of consumer information concerning the product and sales outlets or other sales mechanisms; and

(vi) efforts of insurers to provide consumer information.

(c) If reasonable price competition does not exist, rates are excessive if:

(i) rates are likely to produce a long-term profit that is unreasonably high in relation to the riskiness of the class of business; or

(ii) expenses are unreasonably high in relation to the services rendered.

(3) Rates are inadequate if:

(a) they are clearly insufficient, when combined with the investment income attributable to them, to sustain the projected losses and expenses in the class of business to which they apply; and

(b) the use of such rates has or, if continued, will have:

(i) the effect of substantially lessening competition; or

(ii) the tendency to create a monopoly in any market.

(4)

(a) A rate is unfairly discriminatory if price differentials fail to equitably reflect the differences in expected losses and expenses after allowing for practical limitations.

(b) A rate is not unfairly discriminatory if it is averaged broadly among persons insured under a:

(i) group, franchise, or blanket policy; or

(ii) mass marketed plan.

Renumbered and Amended by Chapter 130, 1999 General Session