1. On June 30,
1989, the Director of the Division of Insurance approved
a three-year policy plan endorsement submitted by Industrial
Indemnity. This endorsement provides that a schedule rating
expense credit will be applied to a workers' compensation
policy if the insured renews coverage with Industrial
Indemnity for a three-year period. If the insured cancels
coverage during this three-year period, the schedule rating
expense credit is removed from all policies, retroactive
to the inception date of the three-year policy plan.
2. Schedule rating
is a prospective method of rating used to reflect characteristics
of the risk that affect expected losses and are not otherwise
accounted for in the rates. Retroactive removal of a schedule
credit is not an appropriate use of schedule rating.
3. The Director
has received similar filings from other insurers, all
of which have been disapproved. The disapproval was based
on AS 21.36.290, which states that a policy written for
a term longer than one year is considered to have been
written for successive policy periods or terms of one
year. The removal of a schedule credit after a policy
period or term due to actions on a subsequent policy is
a violation of AS 21.36.290.
THE DIRECTOR HEREBY
ORDERS:
A. Under the authority
of AS 21.42.120(c), the Director hereby withdraws approval
of Industrial Indemnity Endorsement 1XD05 R1 (04/72),
Three-Year Policy Plan Endorsement. Effective April 1,
1997, this endorsement is no longer approved.
B. Any policies
currently written with a credit in accordance with this
endorsement may remain in effect until they expire. However,
if an insured elects to cancel a policy containing this
endorsement, the expense credit may not be removed from
the canceled policy or from any previous policies.
