RATE REGULATION FOR TITLE INSURANCE
Section 625.11, Wis. Stat., states that insurance rates shall not be excessive, inadequate or unfairly discriminatory. As stated in s. 625.13, Wis. Stat., insurers must file rates and supplementary rate information within 30 days after they become effective. The previous two statutes apply to the rate filings of title insurers.
There is an exception to the above filing requirements in the administrative code which was adopted in 1993. The insurance rule s. Ins 6.78 (4), Wis. Adm. Code, exempts the filing requirement for rate changes which deviate downward from a previously filed rate of a title insurer.
Ins 6.78 Exemption from filing of rates.
(4) EXEMPT FILING. If a title insurance rate as set forth in sub. (2) (b) is a downward deviation of an existing filed rate, the rate shall not be filed with the commissioner provided that all of the following apply:
(a) The insurer keeps for at least five years after the inception date of the policy the following information:
1. The filed rate and premium and the deviated rate and premium;
2. The effective date of the policy and the location and description of the risk;
3. The reason for the deviation; and
4. A record of the deviated rate development.
(b) Prior to entering into such insurance agreements in Wisconsin, the insurer has notified the commissioner of its intentions to do so, identifying the contemplated rate deviation program.
However, the exemption is only allowed when certain information is retained by the insurer. In addition, the insurer must notify the commissioner, in writing:
- The title insurer's intent to deviate downward from a filed rate, and
- Identify the rate deviation program.
The description of the rate deviation program should explain when downward deviations could be used and the parameters of the program.
The next section describes the specific record keeping requirements for title insurers who allow downward deviations from their filed rates.
RECORD KEEPING REQUIREMENTS RELATED TO DOWNWARD DEVIATIONS
If a title insurer wishes to offer rates that deviate downward from a filed rate, s. Ins 6.78 (4) (a), Wis. Adm. Code, requires the insurer to retain information for a five-year period:
- A list of all rating factors used to adjust premium rates and the premium impact of those factors
- The actual premium rate charged and a record of the deviation
- The effective date of the policy and the location and description of the risk
Under s. Ins 6.78, Wis. Adm. Code, downward deviations require a documented reason and a documented development or explanation. The reason and development for a deviation will need to follow the program filed by the title insurer with the commissioner. The reason and rate development information retained about a deviation will need to address the factors that led to the deviation. Review s. Ins 6.78, Wis. Adm. Code, for the specific requirements.
The insurer who makes or authorizes a downward deviation will need to assure itself that the deviation is not inadequate and not unfairly discriminatory. Under s. 625.11 (4), Wis. Stat., one rate could be unfairly discriminatory in relation to another in the same class if it clearly fails to reflect equitably the differences in expected losses and expenses.
To facilitate compliance with the record keeping requirement, the insurer may arrange with its title insurance agent to retain the records and rate development information required by s. Ins 6.78 (4) (a), Wis. Adm. Code. Any such arrangement should be documented in writing. The title insurer has the responsibility for compliance with the statutes and administrative codes, including the retention of records and providing those records promptly to the Office of the Commissioner of Insurance, if requested.
Questions concerning this bulletin can be e-mailed to:
Insurance Examiner Advanced