A startup NY insurer files a homeowners rate that is 25% below market in an effort to gain share rapidly. DFS analyzes the filing and finds projected loss ratios above 110%. Under NY Ins. Law § 2303, what is the most likely basis for DFS to disapprove the rate?

Why this is the answer

NY Ins. Law § 2303's three-prong rate standard polices the floor (inadequate) as well as the ceiling (excessive). A rate priced below the actuarially supported level imperils the insurer's ability to pay future claims — when reserves run dry, policyholders bear the loss through insolvency. DFS, charged with protecting both consumers and the broader market, can disapprove inadequate rates just as readily as excessive ones. Anti-predatory pricing is a less obvious but real piece of rate regulation.