PROPOSED RULEMAKING
[31 PA. CODE CH. 113]
Mass Merchandising of Property and Casualty Insurance
[27 Pa.B. 1848] The Insurance Department (Department) proposes to delete Chapter 113, Subchapter D (relating to mass merchandising of property and casualty insurance) to read as set forth in Annex A, under the authority of sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412); sections 601 and 621 of The Insurance Department Act of 1921 (40 P. S. §§ 231 and 251); section 354 of The Insurance Company Law of 1921 (40 P. S. § 477b); The Fire, Marine and Inland Marine Rate Regulatory Act (40 P. S. §§ 1221--1238); and The Casualty and Surety Rate Regulatory Act (40 P. S. §§ 1181--1199).
Purpose
The purpose of this rulemaking is to delete Subchapter D to eliminate redundant regulations. Adopted in 1971, the regulations were prescribed to prevent abuses in the mass merchandising of property and casualty insurance. The regulations imposed requirements on insurance companies licensed to do business in this Commonwealth, and on their agents, where mass merchandising is used as a method of selling. The regulations require the Department's approval of rates and policies prior to the sale of the insurance policies, and requires the licensure of agents who sell the policies. The regulations also prohibit specific sales practices. In addition, the regulations require the insurer to give notice to the insured prior to cancellation for nonpayment of premiums, to provide assistance in obtaining other insurance to individuals who are denied insurance under the mass merchandising plan and require the maintenance of statistics. The regulations are no longer necessary because their requirements merely repeat or duplicate present statutory requirements, are unduly burdensome or are no longer used.
Specifically, these regulations duplicate existing authorities governing the filing of insurance rates and policy forms. The Department has statutory authority to review property and casualty policy rates prior to use under The Fire, Marine and Inland Marine Rate Regulatory Act and The Casualty and Surety Rate Regulatory Act. The Department also has the existing authority to review property and casualty policy forms prior to use under section 354 of The Insurance Company Law of 1921. These regulations also repeat the requirement of agent licensure provided under sections 601 and 621 of the Insurance Department Act.
Further, the attempt to prevent specific abuses in the mass merchandising of property and casualty insurance is no longer necessary since the statutory authority to regulate unfair practices in the business of insurance exists under the Unfair Insurance Practices Act (40 P. S. §§ 1171.1--1171.15) (UIPA). The requirement of providing written notice to the insured prior to cancellation for nonpayment of premiums exists under the act of June 5, 1968 (P. L. 140, No. 78) (40 P. S. §§ 1008.1--1008.11) known as Act 78, and relating to the cancellation and nonrenewal of private passenger automobile insurance, the act of July 3, 1986 (P. L 396, No. 86) (40 P. S. §§ 3401--3409) known as Act 86, and relating to commercial property and casualty risks, and in particular, section 5(a)(9) of the UIPA (40 P. S. § 1171.5(a)(9)) relating to owner occupied residential properties and personal property of individuals. Finally, the sections requiring the rendering of assistance to individuals in obtaining insurance is unduly burdensome and the report of statistics is no longer used by the Department.
Comments regarding the deletion of these regulations were solicited from the various trade associations representing the insurance industry. Comments were received from the Insurance Federation of Pennsylvania, Inc. This organization's comments were in agreement with the Department that the regulations are redundant to the authorizing statutes.
Fiscal Impact
The deletion of these sections will have no fiscal impact. Because of the redundancy of the regulatory provisions to authorizing statutes, the provisions of the regulations remain in effect under the statutes.
Paperwork
The deletion of these sections will have no effect on paperwork requirements.
Affected Parties
The deletion of these sections will affect insurers who are licensed to sell insurance in this Commonwealth.
Effectiveness/Sunset Date
The rulemaking will become effective upon final publication in the Pennsylvania Bulletin. Because the rulemaking proposes to delete redundant regulations, no sunset date has been assigned.
Contact Person
Questions and comments concerning this proposed rulemaking may be addressed to Randolph L. Rohrbaugh, Director, Property and Casualty Bureau, 1311 Strawberry Square, Harrisburg, PA 17120 (717) 787-4192, within 30 days of its publication in the Pennsylvania Bulletin.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on March 28, 1997, the Department submitted a copy of this proposed rulemaking to the Independent Regulatory Review Commission (IRRC) and the Chairpersons of the House Insurance Committee and the Senate Banking and Insurance Committee. In addition to submitting the proposed rulemaking, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department in compliance with Executive Order 1996-1. A copy of the material is available to the public upon request.
If IRRC has objections to any portion of the proposed rulemaking, it will notify the Department within 30 days of the close of the public comment period. The notification shall specify the regulatory review criteria that have not been met by that portion. The Regulatory Review Act specifies detailed procedures for the agency, the Governor and the General Assembly to review these objections before final publication of the proposal.
LINDA S. KAISER,
Insurance CommissionerFiscal Note: 11-144. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 31. INSURANCE
PART VII. PROPERTY, FIRE AND CASUALTY INSURANCE
CHAPTER 113. MISCELLANEOUS PROVISIONS
Subchapter E. [MASS MERCHANDISING OF PROPERTY AND CASUALTY INSURANCE] (Reserved) § 113.51. [Definitions] (Reserved).
[The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise:
Mass merchandising plan--A method of selling property and casualty insurance wherein the insurance is offered to employes of particular employers or to members of particular associations, or organizations or to persons grouped in other ways; the insurer maintains its right to underwrite each individual risk; and the employer, association or organization has agreed to, or otherwise affiliated itself with, the sale of the insurance to those employes or members.
Property and casualty insurance--Forms of fire, casualty and inland marine insurance.]
§ 113.52. [Applicability] (Reserved).
[This subchapter shall apply only to insurance policies issued or renewed in this Commonwealth after its effective date, and may not apply to methods of merchandising other than ''mass merchandising plans,'' as defined in § 113.51 (relating to definitions).]
§ 113.53. [Purpose] (Reserved).
[The purpose of this subchapter is to prescribe rules to prevent abuses in connection with the sale of property and casualty insurance in this Commonwealth under mass merchandising plans, while preserving for consumers the potential benefits of this form of merchandising.]
§ 113.54. [Approval prior to sale or use] (Reserved).
[Prior to the sale or use of a mass merchandising plan in this Commonwealth, the form and rates of the plan shall first be filed with and approved by the Insurance Commissioner under the provisions of section 354 of The Insurance Company Law of 1921 (40 P. S. § 477b) and the applicable rate regulatory act referred to in § 113.55 (relating to premium rates).]
§ 113.55. [Premium rates] (Reserved).
[Premium rates under a mass merchandising plan shall comply with the filing requirements and standards set forth in the insurance laws and regulations of the Commonwealth, particularly as set forth in The Casualty and Surety Rate Regulatory Act (40 P. S. § 1181--1199) and the Fire, Marine and Inland Marine Rate Regulatory Act (40 P. S. § 1221--1238). Rates will not be deemed to be unfairly discriminatory because different premiums result for policyholders with like loss exposures but different expense factors, or like expense factors but different loss exposures, provided the rates reflect the differences with reasonable accuracy. Rates may not be deemed to be unfairly discriminatory if they are averaged broadly among persons insured under a mass merchandising plan.]
§ 113.56. [Premium payments.] (Reserved).
[Premiums for policies issued under mass merchandising plans may be paid by any of the following methods:
(1) By the sponsoring employer, association or organization, wholly from its own funds.
(2) Wholly from funds supplied by the insured employes or group participants through payroll deductions or other appropriate means.
(3) Partly from funds supplied by the sponsoring employer, association, organization or other group and partly by the insured employes or group participants.]
§ 113.57. [Insurance agents or brokers] (Reserved).
[(a) No person, sponsoring employer, association, organization or other group shall act as an insurance agent or insurance broker in connection with a mass merchandising plan for a kind of insurance, unless the person is licensed as an agent or broker for that kind of insurance, under sections 601 or 621 of The Insurance Department Act of 1921 (40 P. S. §§ 231 or and 251).
(b) For the purposes of this subchapter, none of the following activities engaged in by a sponsoring employer, association, organization or other group shall require the licensing of the entity as an insurance agent or broker:
(1) Uncompensated endorsement or recommendation of the mass merchandising program to its employes or members.
(2) Distribution, by mail or otherwise, to its employes or members of information pertaining to the mass merchandising program.
(3) Collection of premiums through payroll deductions or other appropriate means, and remittance of such to an insurer.
(4) Receipt of compensation from an insurer for administrative services in connection with the mass merchandising program, provided the compensation bears a reasonable relationship to the services actually performed. The amount of the compensation may not be based solely upon the amount of premiums paid or the number of employes or members participating in the program.
(5) Other activities as may, from time to time, be approved by the Insurance Commissioner.]
§ 113.58. [Prohibited practices] (Reserved).
[(a) Compulsory participation. No insurer may sell insurance under a mass merchandising plan if it is a condition of employment or of membership in an association, organization or other group that an employe or member purchase insurance under the plan, or if an employe, member or person will be subject to any penalty by reason of nonparticipation in the insurance program. A contribution by an employer or other group entity may not be deemed a penalty against a nonparticipant.
(b) Tie-in sales. No insurer may sell insurance under a mass merchandising plan which makes the purchase of insurance available under the plan contingent upon the purchase of another insurance, product or service, or the purchase of another insurance, product or service contingent upon the purchase of insurance available under the plan. This subsection may not be considered to prohibit the reasonable requirement of safety devices, such as heat detectors, lightning rods, theft prevention equipment and the like.]
§ 113.59. [Underwriting standards] (Reserved).
[No insurer may use underwriting standards for individual risk selection in a mass merchandising plan which are, on the whole, more restrictive than the standards used by the insurer for individual risk selection in the sale of the same kind of insurance in this Commonwealth other than under mass merchandising plans. If the insurer does not sell the kind of insurance in this Commonwealth other than under mass merchandising plans, its underwriting standards for individual risk selection in the plans shall, on the whole, be no more restrictive than the standards used by its principal affiliate, if any, for individual risk selection in the scale of the kind of insurance in this Commonwealth other than under mass merchandising plans. The insurer shall be willing to educate members through seminars, bulletins, safety programs and the like.]
§ 113.60. [Failure to remit premiums] (Reserved).
[The failure of an employer, association, organization or other group to remit premiums when due for any reason may not be regarded as nonpayment of premium by an insured under a plan providing for remittance of premium by the employer, association, organization or other group, until the insured shall have been given not less than 15 days written notice. The 15-day notice shall be calculated from the date of the receipt of the same by the insured.]
§ 113.61. [Other insurance plans] (Reserved).
[An insurer, agent or broker selling insurance under a mass merchandising plan shall, with respect to an employe or member who applies for but is denied insurance under the plan, assist the person in obtaining insurance through another appropriate existing voluntary or mandatory insurance plan, such as the Pennsylvania Assigned Risk Plan or the Pennsylvania Fair Plan.]
§ 113.62. [Statistics to be maintained] (Reserved).
[An insurer selling insurance under mass merchandising plans shall maintain separate statistics as to exposures, premiums, losses and expense experience pertinent thereto. The statistics shall be compiled in accordance with the company's statistical plans and reported annually in summary form to the Insurance Department by July 15 of each year, starting in 1974.]
[Pa.B. Doc. No. 97-559. Filed for public inspection April 11, 1997, 9:00 a.m.]
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