Joint Underwriting, Pools, Residual Market Mechanisms, and Workers' Compensation Assigned Risk Plans

1. Law
2. Tennessee Code
3. Insurance
4. Rates and Rating Organizations
5. General Provisions
6. Joint Underwriting, Pools, Residual Market Mechanisms, and Workers' Compensation Assigned Risk Plans

1. Authorization.  Notwithstanding § 56-5-113(a), insurers participating in joint underwriting, pools or residual market mechanisms may, in connection with the activity, act in cooperation with each other in the making of rates, supplementary rate information, policy forms, underwriting rules, surveys, inspections and investigations, the furnishing of loss and expense statistics or other information, and in the conduct of research. Joint underwriting, pools and residual market mechanisms shall not be deemed rate service or advisory organizations.
2. Regulation.
   1. Except to the extent modified by this section, insurers participating in joint underwriting, pool or residual market mechanisms are subject to this part.
   2. Every pool shall file with the commissioner:
      1. A copy of its constitution, articles of association or incorporation, bylaws, and any other rules or regulations governing its activities;
      2. A list of its members;
      3. The name and address of a resident of this state upon whom notices or orders of the commissioner or process may be served; and
      4. Any changes in the filings under subdivisions (b)(2)(A)-(C).
   3. Any residual market mechanism, plan or agreement to implement the mechanism, and any amendments to the mechanism, plan or agreement, shall be submitted in writing to the commissioner for approval, together with such information as the commissioner may reasonably require.
   4. If, after a hearing, the commissioner finds that any activity or practice of insurers participating in joint underwriting, pool or residual market mechanisms is unfair, unreasonable or otherwise inconsistent with this part, the commissioner shall issue a written order specifying in what respects the activity or practice is unfair, unreasonable or otherwise inconsistent with this part and require the discontinuance of the activity or practice.
3. 1. The commissioner shall implement a plan as soon as possible for the equitable apportionment among insurers of applicants for workers' compensation insurance who are in good faith entitled to such insurance, but who are unable to procure it through ordinary methods. The plan shall provide reasonable rules governing the equitable distribution of risks by direct assignment, reinsurance, or otherwise, and their assignment to insurers, and shall provide a method whereby applicants for insurance, insured, and insurers may have a hearing on grievances and the right of appeal to the commissioner.
   2. Notwithstanding § 56-5-113(a), every insurer, except those entities under § 50-6-405(a)(2) and (c) that qualify under § 50-6-401 or § 50-6-405, and those entities under title 50, chapter 6, part 6, undertaking to transact in this state the business of either workers' compensation or employer's liability insurance, or both, and every rating organization that files rates or prospective loss costs for such insurance shall participate in the plan. No insurer shall thereafter issue a policy of workers' compensation or employer's liability insurance or undertake to transact that business in this state unless the insurer participates in the plan.
   3. 1. No later than July 1 of each year, the commissioner shall determine whether the membership of the assigned risk pool, created pursuant to this subsection (c), for the prior calendar year exceeds fifteen percent (15%) of the membership of the eligible employer market, as based on premium, excluding self-insured employers and self-insured groups. For any period in which it is determined the membership of the assigned risk pool exceeds fifteen percent (15%) of the membership of the eligible employer market, the commissioner shall issue a report to the advisory council on workers' compensation setting forth the percentage of the eligible employer market insured through the assigned risk pool and the reasons contributing to increased membership of the pool. The report shall include recommendations as to whether:
         1. The competitive state workers' compensation insurance fund, established by title 50, chapter 6, part 6, should be activated;
         2. A plan of direct assignment on a randomized basis of all assigned risk plan policies to insurers offering workers' compensation insurance subject to subdivision (c)(4) should be implemented;
         3. Other actions should be taken; or
         4. No action should be taken.
      2. The advisory council shall have ninety (90) days to provide written comments to the commissioner regarding the report and recommendations. After receipt of the advisory council's comments and recommendations, the commissioner shall take action deemed appropriate; provided, that the commissioner shall hold a hearing before electing to activate the competitive state workers' compensation insurance fund or to institute a plan of direct assignment.
   4. If a direct assignment plan becomes operational, pursuant to this section, then the commissioner shall structure the randomized assignment so that small insurers do not bear a disproportionate share of risk in the market. A plan of direct assignment shall include provisions to provide that insurers who depopulated the assigned risk pool in the preceding five (5) years receive applicable take out credits to be used in determining the appropriate level of policies to be assigned to the insurers.
   5. If the commissioner elects to make the competitive state workers' compensation fund operational pursuant to subdivision (c)(3), then the fund shall not be required to meet the reserve requirements for a domestic insurance company for the first seven (7) years of operation as otherwise required by §§ 50-6-601 and 50-6-603. The commissioner shall promptly notify the governor, and the speakers of the senate and the house of representatives of the election.
   6. 1. 1. On and after January 1, 1997, the plan developed under this subsection (c) shall assign an insured in this plan to one (1) of three (3) subplans. Those subplans are:
            1. The small employer plan, for insureds not eligible for experience rating;
            2. The special risk plan, for insureds that are employers whose experience modifications are one and ten hundredths (1.10) or less; and
            3. The safety incentive plan, for all other risks.
         2. The commissioner is authorized to establish increasing levels of premium surcharges for employers with experience modification factors in excess of one and ten hundredths (1.10). The surcharges may not exceed fifty percent (50%) for employers with modification factors in excess of two and zero hundredths (2.00).
      2. The advisory prospective loss cost for subdivisions (c)(6)(A)(i)(a ) and (b ) may not exceed that approved by the commissioner for the voluntary market. The commissioner shall annually establish the multiplier to be applied to the advisory prospective loss cost for the assigned risk plan. In establishing the multiplier, the commissioner shall consider the estimated cost of providing required services pursuant to this subsection (c) and the level of the multipliers in the voluntary market.
   7. 1. The commissioner shall not approve a plan pursuant to this subsection (c) that does not provide for the making available of a list of the employers insured under this subsection (c) on request to interested persons for a reasonable fee or to the department. A reasonable fee shall only include the cost of production and mailing the list.
      2. As part of the application for insurance coverage, an employer shall elect whether to be excluded from the list provided for by this subsection (c). Every application for the assigned risk plan shall include the following language:

         THE INSURED ELECTS TO BE EXCLUDED FROM THE LIST OF EMPLOYERS IN THE ASSIGNED RISK PLAN:

         YES  NO

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