1. The intent of
this order is to clarify and define what is expected of
companies using Public Protection Classification systems
to write homeowners insurance and property insurance in
Alaska.
2. Most insurers
writing property insurance (e.g., commercial property, homeowners,
commercial multi peril, etc.) coverages in Alaska use criteria
reflecting the level of public fire protection when underwriting
and rating these coverages. The system most frequently used
is the Public Protection Classifications derived from Insurance
Services Office, Inc.'s (ISO) Fire Suppression Rating Schedule.
This system measures the level of fire protection available
in an area and correlates experience based on these classifications.
3. ISO is a
licensed rating organization in the State of Alaska (per
AS 21.39.060) authorized to make filings on behalf of its
members and subscriber insurers.
4. The Division of
Insurance has received allegations that some insurers who
have authorized ISO to file property insurance rules, including
the Public Protection Classifications, on their behalf in
Alaska, are not using that system, and have not filed any
deviations from ISO nor independently derived Public Protection
Classifications.
5. In response to
these allegations, the Division of Insurance conducted research
to determine
a. the ISO requirements
for use of the Public Protection Classifications of company
filings to determine how many insurers utilize ISO's Public
Protection Classifications, and
b. how many insurers
file for deviations, modifications and exceptions to the
classifications.
6. According to ISO,
insurers participating in ISO for state service rules for
any property line of insurance are eligible to use ISO's
Public Protection Classifications for all property lines
of business that the company may write. However, only a
company that is eligible and has either granted ISO the
authority to file rules, which include protection classifications,
on their behalf for a specific line of property insurance,
or has filed by reference within their independent rule
filing to use the ISO Public Protection Classifications,
has their use of ISO's Public Protection Classifications
approved by the division pursuant to AS 21.39.040.
7. Although most
insurers utilize the standard ISO classifications, some
insurers have not granted ISO the authority to file rules,
including protection classifications, on their behalf for
specific lines of property insurance or filed by reference
the ISO Public Protection Classifications, and some have
filed for exceptions, modifications, and deviations from
the ISO Public Protection Classifications. An insurer that
has neither adopted ISO's Public Protection Classifications
nor filed its own may be in violation of AS 21.39.040.
THE DIRECTOR HEREBY
ORDERS:
A. The Division of
Insurance considers that each insurer who has authorized
ISO to file personal and/or commercial property rules on
its behalf is utilizing the ISO Public Protection Classifications
and the established effective dates for the classifications
unless a deviation or an independent filing is made under
AS 21.39.040.
B. In accordance
with AS 21.39.040, an insurer writing a property coverage
that considers public fire protection in its rate structure
must:
i) grant ISO
the authority to file rules, including Public Protection
Classifications, on its behalf for a specific line of
property insurance,
ii) be a participating
ISO insurer and file by reference within their independent
rule filing to use ISO's Public Protection Classifications
for a specific line of property insurance, or
iii) file detailed
support with the Division of Insurance to utilize another
Protection Classification System.
C. If an insurer
has granted ISO the authority to file on its behalf in accordance
with provision B.(i) above, or filed by reference within
their independent filing in accordance with provision B.(ii)
above, then the insurer must:
i) utilize ISO's
Public Protection Classifications and the established
effective date, or
ii) file and
receive approval for any change to the effective date
established by ISO; and
iii) file detailed
support and receive approval from the Division of Insurance
to provide exceptions, modifications or deviations from
ISO's Public Protection Classifications. This detailed
support should include an explanation of why the insurer
believes ISO's Public Protection Classifications are
inappropriate for use in the particular situation.
D. An insurer writing
property insurance that is not eligible to use ISO's Public
Protection Classifications must file and receive approval
for the use of any other Public Protection Classification
rating system it elects to use.
E. If an insurer
is currently using the ISO Public Protection Classifications
with any exceptions, modifications, or deviations, or any
other Public Protection Classification system, the insurer
must provide the Division of Insurance with a copy of the
approved filing exceptions, modifications, deviations, or
other classification system no later than June 1, 1997.
F. Pursuant to AS
21.39.170(a), insurers or rating organizations affected
by this order will have a right to request a hearing within
30 days after notice of the order.
