229 Ga. 777 | Ga. | 1972
Standard National Insurance Company is a Georgia corporation wholly owned by Phoenix Insurance Company of Hartford, which is wholly owned by Travelers Corporation of Hartford, Connecticut. Travelers Indemnity Company is another wholly owned subsidiary of Travelers Corporation. These four companies are frequently referred to as the "Travelers Group.”
Standard National sells "group” automobile insurance, notably to Lockheed Corporation employees at Marietta, Georgia, but to other groups as well. This mass merchandizing utilizes group solicitation, payroll deduction, electronic processing, and an agency commission of 6% rather than the usual 20%, all of which lowers the "overhead” cost of the insurance. It permits Standard National to sell its policies to members of the "group” at a proportionately reduced premium as compared with policies sold on an individual basis. The savings are substantial.
The record shows that Standard National’s group policy holders pay 16.6% less for automobile liability coverage and 22.7% less for automobile physical damage coverage
Essentially this litigation arose when certain "independent insurance agents” complained to the Georgia Insurance Commissioner that Standard National’s reduced premiums to "employee groups” violated the Georgia Insurance Code. The Insurance Commissioner ruled in favor of the independent agents. The four members of the Travelers Group filed a complaint in Fulton Superior Court. This appeal is from a judgment adverse to the independent insurance agents and the Georgia Insurance Commissioner.
The appellants complain that the "lower premiums charged by Standard National to Lockheed employees for substantially the same type of automobile insurance sold by Travelers Indemnity Company to the public generally in Georgia at higher rates constituted a violation of [Code Ann.] §56-713 (4) and §56-507 of the Georgia Insurance Code because of the close corporate relationship of companies, which are under common ownership, control and management.”
Appellants contend that, "in such circumstances, different treatment of identical insurance risks founded solely on the distinction that Standard National wrote individual policies only to persons employed by a single employer, on a payroll deduction plan, whereas Travelers Indemnity Company did not so restrict its marketing, constituted the granting of a preference placed upon employment in a particular group contrary to the 'fictitious group’ statute (Code Ann. § 56-713 (4)) and unfair discrimination between policyholders of what is essentially one company.”
The appellants argue that any saving afforded by mass merchandising should benefit all of the policyholders of a company and not just the group policyholders.
As stated by appellants, the issue is "very narrow and precise,” that is, "whether or not Code Ann. §§ 56-713 (4) and 56-507 prohibit the mass marketing program of Standard National.”
Code Ann. § 56-507 provides: "Standards applicable to rates. — The following standards shall apply to the making and use of rates pertaining to all classes of insurance to which the provisions of this Chapter are applicable: (a) Rates shall not be excessive or inadequate, as herein defined, nor shall they be unfairly discriminatory. No rate shall be held to be excessive unless (1) such rate is unreasonably high for the insurance provided and (2) a reasonable degree of competition does not exist in the area with respect to the classification to which such rate is applicable. No rate shall be held inadequate unless (1) it is unreasonably low for the insurance provided, and (2) continued use of it would endanger solvency of the insurer, or unless (3) the use of such rate by the insurer using . same has, or will, if continued, tend to destroy competition or create a monopoly, (b) Consideration shall be given, to the extent applicable, to past and prospective loss experience within and outside this State, to conflagration and catastrophe hazards, to a reasonable margin for underwriting profit and contingencies, to past and prospective expenses both Country-wide and those specially applicable to this State, and to all other factors, including judgment factors, deemed relevant within and out
1. In our opinion Code Ann. § 56-713 (4) relating to "Fictitious groups,” insofar as affects the issue here, prohibits
Code Ann. § 56-713 (4) prohibits arbitrary group rates which are offered only as a contrivance to attract subscribers. Code Ann. § 56-507 authorizes classifications of risks based upon a reduced expense factor.
Upon close analysis, the evil against which § 56-713 (4) (a) is directed is the granting of advantage in insurance rates to persons, or groups of persons, based upon factors other than legitimate rate-making considerations.
2. The other enumerations of error need not be decided.
Judgment affirmed.