Session Laws Chapter 307

CHAPTER 307

(SB 37)

Insurance rates and rating procedures and approval revised.

ENTITLED, An Act to provide for the filing and usage of certain property casualty rates and to exempt certain size risks from rate and form approval.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:

Section 1. For the purposes of this Act, the term, exempt commercial policyholder, means any person who applies for or procures any kind of property casualty insurance, except title or workers' compensation insurance, through the use of a risk manager employed or retained by such person, and meets at least two of the following qualifications:

(2) Has a net worth of at least ten million dollars as reported in the policyholder's most recently issued financial statement, reviewed or audited by an independent certified public accountant;

(3) Has annual net revenues or net sales of at least ten million dollars as reported in the policyholder's most recently issued financial statement, reviewed or audited by an independent certified public accountant;

(4) Employs at least one hundred full-time employees, either individually or, if the policyholder is a member of an affiliated group, collectively with all members of the affiliated group;

(5) Has, if the policyholder is a nonprofit organization, an annual operating budget of at least two million five hundred thousand dollars for the most recently completed calendar or fiscal year, whichever applies;

(6) Has, if the policyholder is a public entity, an operating budget of at least ten million dollars for the most recently completed calendar or fiscal year, whichever applies; or

(7) Has, if the policyholder is a municipality, a population of at least twenty thousand.

Section 2. For the purposes of this Act, the term, risk manager, means an employee of the exempt commercial policyholder, or a third-party consultant retained by the policyholder who provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and the purchase of insurance, and who possesses at least one of the following credentials:

(2) A designation as a chartered property and casualty underwriter issued by the American Institute for Chartered Property and Casualty Underwriters and Insurance Institute of America;

(d) Risk and insurance coverage analysis.

Section 3. That chapter 58-24 be amended by adding thereto a NEW SECTION to read as follows:

An insurer issuing a policy to an exempt commercial policyholder is exempt, except as provided for in this Act, from the rate filing requirements of chapter 58-24 and the form filing requirements of § 58-11-12. At the time of soliciting an exempt commercial policyholder to purchase insurance, the insurance producer, or the insurer in the case of a direct procurement from

the insurer, shall disclose to the policyholder and the policyholder's risk manager, on a form created by the insurer, that a premium or rate may be quoted or a policy form may be used that is not subject to the rate and form filing requirements of the Division of Insurance.

Section 4. That chapter 58-24 be amended by adding thereto a NEW SECTION to read as follows:

If a third-party consultant is retained by the exempt commercial policyholder to act as the

policyholder's risk manager when a quote for insurance is delivered to the policyholder, the consultant shall disclose, in writing, the existence of any commission, fee, or contingency arrangement the third-party consultant has with the insurer.

Section 5. That chapter 58-24 be amended by adding thereto a NEW SECTION to read as follows:

The director may promulgate rules, pursuant to chapter 1-26, to carry out the provisions of this Act to ensure that insurers make policyholders aware of their exempt status and that insurers keep separate records of exempt policies. The rules may include certification, record keeping, and notices.

Section 6. That chapter 58-24 be amended by adding thereto a NEW SECTION to read as follows:

The insurer shall maintain copies of the disclosures required by this Act. The copies are subject to examination. The insurer shall provide the copies to the division upon request as provided by this title.

Section 7. That chapter 58-24 be amended by adding thereto a NEW SECTION to read as follows:

Any insurer who sells any kind of insurance to an exempt commercial policyholder shall maintain records relating to the insurance sales as required by this Act. At a minimum, the records shall include: any data, statistics, rates, rating plans, rating systems, and underwriting rules used in underwriting and issuing such policies; claims-made policy forms; annual experience data on each risk insured, including written premiums, written premiums at a manual rate, paid losses, outstanding losses, loss adjustment expenses, underwriting expenses, underwriting profits, and profits from contingencies; and complaint information required under South Dakota law.

The insurer shall maintain the records for five years. The insurer shall make such records available for examination by the director at any reasonable hour.

Section 8. That § 58-24-10 be amended to read as follows:

58-24-10. Every insurer shall file with the director of the Division of Insurance every manual, minimum, 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. Every such filing shall state the proposed effective date thereof, and shall indicate the character and extent of the coverage contemplated. The filing date is the effective date thereof unless the insurer proposes an effective date subsequent to the filing date.