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Appendix C

Continuum of Rate Regulatory Frameworks

The Working Group has studied the various systems in use in the states and offers the following continuum of regulatory frameworks (for types of rating laws) for rates, forms and risk classifications. The various systems as applied to rates and risk classifications are briefly described in the following chart. The chart is assembled with the most restrictive framework first and descending to the least restrictive framework.

TYPES OF RATING LAWS

FRAMEWORK

DESCRIPTION

State Mandated Rates

Rates determined by the insurance regulator. Insurers must use the rate or may file a deviation to charge a rate below the published rate.

Prior Approval

Rates must be filed with and approved by the insurance regulator before they can be used.

Flex Rating

Prior approval of rates required only if they exceed a certain percentage above (and sometimes below) the previously filed rates, otherwise a file and use provision applies.

File and Use (Waiting Period)

Rates must be filed with the insurance regulator prior to their use. A waiting period applies before the rates can be used. Specific approval is not required but the department retains the right of subsequent disapproval.

File and Use (No Waiting Period)

Rates must be filed with the insurance regulator prior to their use. The rates may be used immediately. Specific approval is not required but the department retains the right of subsequent disapproval.

Use and File

Rates must be filed with the insurance regulator within a specified period after they have been placed in use.

Informational File

Rates must be filed with the insurance regulator for informational purposes. No formal review of them occurs and no supporting documentation is required.

No File

Rates are not required to be filed with or approved by the insurance regulator.  However, the company must maintain records of experience and other information used in developing the rates and make these available to the commissioner upon his request.

© 2009 National Association of Insurance Commissioners 14

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