PLCaliforniamedium
An auto insurer has not filed an overall rate change with the California Department of Insurance in the past 26 months. Under Prop 103 implementing rules, what action is the Department most likely to take?
Require the insurer to file a rate application so the Commissioner can review whether the existing rate remains adequate, not excessive, and not unfairly discriminatory
BIssue a market-conduct examination focused on claims-handling and underwriting practices that is wholly unrelated to the adequacy of the insurer's currently filed and approved rates
CAutomatically suspend the insurer's certificate of authority to transact private passenger auto insurance until an entirely new rate application is filed, reviewed, and approved
DGrant the insurer indefinite filing-free status, exempt from further actuarial review, so long as no verified consumer complaints about its rates have been received
Why this is the answer
The Prop 103 prior-approval framework presumes ongoing actuarial supervision. Cal. Ins. Code §§ 1861.01-1861.05 and CDI's implementing regulations establish what is informally called the 'two-year rule' — if a personal auto insurer has not filed a rate application within approximately 24 months, the Department may demand a filing to test whether the existing rates remain compliant with the § 1861.05 standard (not excessive, inadequate, or unfairly discriminatory). Market-conduct exams (a) and certificate suspension (b) address different problems; option (d) reverses the actual policy.
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