AGO 89-3.

Case Date:October 16, 1989
Colorado Attorney General Opinions 1989. AGO 89-3. October 16, 1989Department of Law Attorney General Opinion FORMAL OPINION of DUANE WOODARD Attorney General Opinion No. 89-3 AG Alpha No. RG IN AGARF Steven V. Berson Executive Director Colorado Department of Regulatory Agencies 1525 Sherman Street, Room 110 Denver, CO 80203 Automobile Insurance Premium Rates and Underwriting GuidelinesDear Mr. Berson: This opinion letter is in response to your August 15, 1989 letter in which you ask six questions concerning the Insurance Division's powers to regulate automobile insurance premiums and insurance company underwriting guidelines. QUESTIONS PRESENTED AND CONCLUSIONS Your letter raises the following six questions: Can the Division of Insurance require insurance companies across the board to cut automobile insurance rates by 20 percent? No. Can the Division of Insurance require that all insurance companies not raise automobile insurance premium rates for 2 years? No. Can the Division of Insurance require that all insurance companies receive prior approval from the Division of Insurance before they raise automobile insurance rates? Yes. Can the Division of Insurance mandate an end to penalties such as increased premium rates or termination of coverage for persons who are involved in accidents which are not their fault? No. Unless the insurance company cannot meet the conditions set by statute. Can the Division of Insurance mandate that insurance premium rates be based on driving record and miles driven and that premium rates cannot be based on neighborhood location? No. Can the Division of Insurance prohibit insurance companies from charging higher rates (surcharges) for drivers with good records who have not had automobile insurance for a period of time but who wish to be insured again? No, unless the insurer is unable to demonstrate that the fact that the insured has gone uninsured for period of time will have a probable effect upon losses incurred by the insurance company. ANALYSIS Colorado's insurance rating statute Sections 10-4-401 to 419, C.R.S. (1987) addresses property and casualty insurance premiums. The statute divides all property and casualty insurance lines into two categories -- type I and type II. Type I coverage consists of worker's compensation, medical malpractice coverage written by joint underwriting associations and assigned risk motor vehicle insurance. See Section 10-4-401(3)(a), C.R.S. (1987). Type I coverage is a "prior approval" coverage. This means that the insurer, before changing his rates, must file the new proposed rates with the Division of Insurance (hereinafter "the Division") and get its approval before implementing them. All other types of property/casualty coverage are classified as type II insurance. Automobile insurance with the exception of assigned risk motor vehicle coverage is a type II coverage. Type II insurance coverage is a "file and use" coverage which means that the insurer must only file its proposed rates with the Division before putting them into effect. See Section 10-4-401(3) and (4), C.R.S. (1987). There is no requirement with regard to type II coverage that the insurer obtain the Division's approval before implementing new rates. Sections 10-4-405 and 406, C.R.S. (1987) establish a procedure pursuant to which the Division can review all type I rates before they are implemented by the insurer. Type II coverages are not subject to Sections 10-4-405 and 406. See Section 10-4-401(3)(b), C.R.S. (1987). However, under Section 10-4-418, C.R.S. (1987) the Commissioner of Insurance (hereinafter "the Commissioner") either on his own motion or in response to a complaint, can commence an agency proceeding for the purpose of determining whether an insurer's automobile insurance rates are in violation of the insurance statutes. Under Section 10-4-403, C.R.S. (1987) both type I and type II rates are subject to the requirement that they be neither excessive nor...

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