1. (a) An insurer that does not currently have credible data to support any of the categories for any of the rating factors listed in section 2632.5(c) and (d) may use the following for each such factor in their class plans filed within three years of the effective date of these regulations. An insurer may elect to use more than one of the listed data sources, provided each data source is identified as being primary, secondary, or third etc. The primary data source must be used for all rating factors included in that data source. The secondary data source can be used only if the primary data source does not have information on a specific rating factor or as needed to supplement credibility. The secondary data source must be used for all rating factors included in that data source before using a third data source. Similarly, the third data source can only be used if the secondary data source does not have information on a specific rating factor or as needed to supplement credibility, etc.:

   1. (1) their own data, interpolating or otherwise actuarially adjusting the data to fit the categories; or
   2. (2) data from another company; or
   3. (3) data from an advisory organization; or
   4. (4) the indicated relativity from another insurer with a similar book of business; or
   5. (5) data that may be published by the Department; or
   6. (6) approved relativities from another insurer's approved class plan.

2. (b) For class plans filed more than three years after the effective date of this regulation, an insurer may use only one of the following for every rating factor:

   1. (1) the insurer's own data; or
   2. (2) the insurer's own data and the data from a single alternative source of primary data; or,
   3. (3) data from a single alternative source of primary data, such as an advisory organization; or,
   4. (4) the indicated relativity from the approved plan of another insurer with a similar book of business; or
   5. (5) data that may be published by the Department; or,
   6. (6) data that may be published by the Department and the insurer's own data.
3. (c) When an insurer uses data from another source (as allowed in 2632.9(a) & (b)) they may use only the raw data before any adjustment factors have been applied (e.g., loss adjustment expenses, trending, loss development, etc.).

4. (d) If an insurer elects to use the optional factors average relative frequency band and severity band as listed in Section 2632.5(d)(14) and (15), the bands described in Section 2632.9(e) may be used. Use of the data described in section 2632.9(e) shall not be considered a data source for the purposes of section 2632.9(b) and restrict an insurer from selecting one of the options listed there. An insurer may also elect to use their own data for developing the frequency and severity bands. In the event that an insurer lacks credible data at the census tract level, they shall use zip code data. If the insurer's own zip code data is not fully credible, it shall use the claims frequency and severity for the zip code that is published in the manual described in Section 2632.9(e) either:

   1. (1) directly as it is published, or

   2. (2) to credibility adjust their own data. In the case where the manual indicates that the rate published in the manual has been credibility adjusted, an insurer may:

      1. (A) use the credibility adjusted rate in the manual as the complement of credibility, or

      2. (B) combine the unadjusted data published in the manual with its own unadjusted data. If this combined data is still not credible, then an insurer may elect to use as the compliment of credibility either:

         1. 1. the rate published in the manual for the CAARP territory that the zip code is a member of, or
         2. 2. the rate based on their own data or data from the manual from another grouping of contiguous whole zip codes, selected by the insurer, that is fully credible and contains said zip code.
5. (e) The frequency and severity rates and possible band assignments for each zip code in California are shown in the manual entitled “The 2008 California Private Passenger Auto Frequency and Severity Bands Manual, revised May 15, 2008”, and are in their entirety hereby incorporated by reference. This regulation manual is not printed in the California Code of Regulations, but may be examined on our public website.

6. (f) Zip codes not included in the manual described under (e) shall be assigned to bands as follows:

   1. (1) new zip codes that were split off from an old zip code, shall use the band of the former zip code for that area;
   2. (2) new zip codes that combined all or parts of other zip codes shall be assigned to one of the old zip codes that was used to make the new zip code;
   3. (3) all other zip codes not in (e) shall be assigned by the insurer based on the band of any zip code that borders it.
   4. (4) for assignments made under (2) or (3), insurers must choose the same zip code to be used for all band assignments.

Note: Authority cited: Section 1861.02, Insurance Code; and Calfarm Insurance Company v. Deukmejian (1989) 48 Cal.3d 805. Reference: Sections 1861.02 and 1861.05, Insurance Code.

History

1. Certificate of Compliance as to 3-17-94 order including repealer and new section heading transmitted to OAL 7-12-94 and filed 8-23-94; operative 9-22-94 (Register 94, No. 34). For prior history, see Register 94, No. 11.

2. New section filed 7-5-96; operative 8-4-96 (Register 96, No. 27).

3. Amendment of subsection (e) filed 10-26-2009; operative 10-26-2009 pursuant to Government Code section 11343.4 (Register 2009, No. 44).

4. Change without regulatory effect amending subsection (d) filed 2-1-2024 pursuant to section 100, title 1, California Code of Regulations (Register 2024, No. 5).