HD13 - The Level of Competition, Availability, and Affordability in the Commercial Liability Insurance Entity

  • Published: 1988
  • Author: State Corporation Commission
  • Enabling Authority: House Bill 1235 (Regular Session, 1987)

Executive Summary:
Legislative Directive

Section 38.2-1905.1 of the Code of Virginia directs the State Corporation Commission to report to the .General Assembly at least annually on the level of competition, availability and affordability concerning the lines and subclassifications of insurance defined in §§ 38.2-117 (Personal Injury Liability) and § 38.2-118 (Property Damage Liability) insuring a commercial entity. See Appendix A.

The Commission's report is required to designate all insurance lines and subclassifications defined in §§ 38.2-117 and 38.2-118, including those lines and subclassifications containing coverage defined in those sections, insuring a commercial entity for which the Commission has reasonable cause to believe that competition may not be an effective regulator of rates. Before discussing potentially non-competitive areas, we will address lines and subclassifications that are generally competitive.

GENERALLY COMPETITIVE AREAS

Based on our findings, it appears that competition is an effective regulator of rates for many subclassifications and types of coverages, primarily in the premises/operations and commercial umbrella liability lines of insurance. While we have not listed every possible subclassification and type of coverage, some of the generally competitive areas include:

GENERALLY COMPETITIVE LINES AND SUBCLASSIFICATIONS

I. PREMISES/OPERATIONS LIABILITY

A. TRADE CONTRACTORS NOT ENGAGED IN COMMERCIAL CONSTRUCTION

B. HABITATIONAL PROPERTIES

C. RETAIL AND WHOLESALE OPERATIONS

D. OTHER SERVICE AND MERCANTILE

ll. COMMERCIAL UMBRELLA LIABILITY

POTENTIALLY NON-COMPETITIVE AREAS

Based on analysis of the surveys, the demand factors, and the general market conditions, the Commission has reasonable cause to believe that competition may not be an effective regulator of rates for the following entire lines of insurance:

POTENTIALLY NON-COMPETITIVE ENTIRE LINES

I. PRODUCTS AND COMPLETED OPERATIONS LIABILITY (INCLUDING DISCONTINUED OPERATIONS)

II. ENVIRONMENTAL IMPAIRMENT LIABILITY

III. LIQUOR LIABILITY

IV. DIRECTORS AND OFFICERS LIABILITY

The Commission has reasonable cause to believe that competition may not be an effective regulator of rates for the following subclassifications and types of coverages in otherwise competitive lines of insurance:

POTENTIALLY NON-COMPETITIVE SUBCLASSIFICATION AND TYPES OF COVERAGES WITHIN COMPETITIVE LINES

I. PREMISES/OPERATIONS LIABILITY

A. CONTRACTORS LIABILITY

1. Commercial Contracting
2. Hazardous Waste
3. Pest Control/Exterminators

B. GOVERNMENTAL OR MUNICIPAL LIABILITY

1. Government Entities (including Public Officials Liability)
2. Law Enforcement Agencies
3. School Divisions
4. Public Housing

C. RECREATIONAL LIABILITY

1. Special Events
2. All Other Recreational Activities

D. DAY CARE/CHILD CARE LIABILITY

ll. PROFESSIONAL LIABILITY

A. MEDICAL PROFESSIONAL LIABILITY

B. LAWYERS PROFESSIONAL LIABILITY

C. INSURANCE AGENTS ERRORS AND OMISSIONS

D. ARCHITECTS ERRORS AND OMISSIONS

E. ENGINEERS ERRORS AND OMISSIONS

F. REAL ESTATE AGENTS ERRORS AND OMISSIONS

Accordingly, pursuant to Virginia Code § 38.2-1905.2.C., insurers writing these potentially non-competitive lines, subclassifications and types of coverages designated above will be required, on or before March 16, 1988, to file supplemental reports for further investigation and hearings by the State Corporation Commission.