FIRST REGULAR SESSION

HOUSE BILL NO. 251

89TH GENERAL ASSEMBLY

INTRODUCED BY REPRESENTATIVE AUER.

Read 1st time January 9, 1997 and 1000 copies ordered printed.

ANNE C. WALKER, Chief Clerk

L0886.01I

AN ACT

To repeal sections 379.883 and 379.888, RSMo 1994, relating to commercial casualty insurance, and to enact in lieu thereof two new sections relating to the same subject.

Be it enacted by the General Assembly of the state of Missouri, as follows:

Section A. Sections 379.883 and 379.888, RSMo 1994, are repealed and two new sections enacted in lieu thereof, to be known as sections 379.883 and 379.888, to read as follows:

379.883. 1. No notice of cancellation of a commercial casualty insurance policy shall be effective unless prior written notice of the cancellation is mailed or delivered by the insurer to the named insured at least sixty days prior to the effective date of the cancellation, except where the cancellation is based on one or more of the following reasons:

(1) Nonpayment of premium;

(2) Fraud or material misrepresentation affecting the policy or in the presentation of a claim thereunder or a violation of any of the terms or conditions of a policy;

(3) Changes in conditions after the effective date of the policy which have materially increased the hazards originally insured;

(4) Insolvency of the insurer; or

(5) The insurer involuntarily loses reinsurance for the policy.

2. No notice of nonrenewal of a commercial casualty insurance policy shall be effective unless mailed or delivered by the insurer to the named insured at least sixty days prior to the effective date of the nonrenewal.

3. Notice of cancellation or nonrenewal of a commercial casualty insurance policy shall state the insurer's actual reason for proposing the action, the statement of reason to be sufficiently clear and specific so that the recipient can identify the basis of the insurer's decision without further inquiry. An assignment or transfer of a commercial casualty insurance policy among affiliated insurers within an insurance holding company system is not a cancellation or nonrenewal for purposes of sections 379.882 to 379.895.

379.888. 1. As used in sections 379.888 to 379.893:

(1) "'A' rated risk" means any insurance coverage for which rates are individually determined based upon judgment because neither a rate service organization nor the insurer has yet established a manual rate based upon experience, except that if a rate service organization or the insurer acquires sufficient experience to establish, or if the insurer itself has, a manual rate for such coverage, then such coverage shall no longer be considered an "A" rated risk for each insurer;

(2) "Base rate" means the rate designed to reflect the average aggregate experience of a particular market, prior to adjustment for individual risk characteristics resulting from application of any rating plan;

(3) "Classification" means a grouping of insurance risks according to a classification system used by an insurer;

(4) "Classification system" means a schedule of classifications and a rule or set of rules used by an insurer for determining the classification applicable to an insured;

(5) "Commercial casualty insurance" means casualty insurance for business or nonprofit interests which is not for personal, family, or household purposes;

(6) "Director" means the director of the department of insurance;

(7) "Rate" means a monetary amount applied to the units of exposure basis assigned to a classification and used by an insurer to determine the premium for an insured;

(8) "Rating plan" means a rule or set of rules used by an insurer to calculate premium for an insured, and the parameter values used in such calculation, after application of classification premium rates to units of exposure;

(9) "Rating system" means a collection of rating plans to be used by an insurer, rules for determining which rating plans are applicable to an insured, a classification system, and other rules used by an insurer for determining contractual consideration for insured.

2. Every filing of commercial casualty insurance premium rates, rating plans or rating systems by an insurer or rating organization must be submitted to the director for review prior to becoming effective if it produces an increase or decrease exceeding twenty-five percent annually from changes in any:

(1) Base rates;

(2) Rating basis;

(3) Rating plans;

(4) Manual rules;

(5) Territorial definitions; or

(6) Combination of such rating system components of subdivisions (1) to (5) of this subsection.

3. Nothing in this section applies to premium increases or decreases from:

(1) Change in hazard of the insured's operation;

(2) Change in magnitude of the exposure basis for the insured, including, without limitation, changes in payroll or sales; or

(3) "A" rated risks.

4. Notice of a change in any rating system component is not required to be sent to each insured.
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