PURPOSE: This rule effectuates and aids in the interpretation of sections 375.1007, 375.445 and 375.936(6), RSMo regarding detection of frequency to indicate a business practice under the Unfair Claims Settlement Practices Act or conducting business fraudulently, not in good faith or in a manner constituting misrepresentations or false advertising.

1. (1) Unfair Claims Settlement Rates.

   1. (A) As used in section (1), the terms and phrases mean as follows:

      1. 1. “Time error rate,” any one (1) of the

following:

1. A. Acknowledgment time error rate,

the percentage of claims in which the insurer has performed an act described in section 375.1007(2), RSMo or violated 20 CSR 100- 1.030;

1. B. Investigation time error rate, the

percentage of claims in which the insurer has performed an act described in section 375.1007(3), RSMo or violated 20 CSR 200- 1.040; and

1. C. Determination time error rate, the

percentage of claims in which the insurer has performed an act described in section 375.1007(7), RSMo or violated 20 CSR 200- 1.050(1)(A).

1. 2. “Unfair settlement rate,” the percent-

age of claims in which the insurer has performed an act described in section 375.1007(1), (5), (6), (8), (15), RSMo or violated 20 CSR 200-1.020 and 20 CSR 200- 1.050(1)(B) or 20 CSR 200-1.050(2).

1. (B) The time error rates and unfair settlement rate will be important in determining whether the insurer has engaged in an unfair settlement practice as that phrase is used in section 375.1007, RSMo; however, other relevant factors will be considered in making the determinations. No attempt is made in this regulation to list other relevant factors because these factors depend on the facts of each case and no exhaustive or comprehensive list of other factors can be made.
2. (C) The time error rates and unfair settlement rate may be established by census or by an appropriate random sample. Whether a random sample was appropriate will be determined on a case-by-case basis.

1. (2) Unfair, Fraudulent, or Bad Faith Conduct in Claims Settlement.

   1. (A) As used in section (2), the terms and phrases mean as follows:

      1. 1. “Insurance law,” any statutory provi-

sion in Chapters 354 or 374 through 385, RSMo or any regulation promulgated thereunder;

1. 2. “Claims error rate,” the percentage of

claims in which the insurer violated any insurance law, except section 375.1007, RSMo or 20 CSR 100-1.010, 20 CSR 100- 1.020, 20 CSR 100-1.030, 20 CSR 100- 1.040, 20 CSR 100-1.050, 20 CSR 100- 1.100, section (1) of this rule and 20 CSR 300-2.100 or accepted or denied claims other than in accordance with the terms of an applicable policy, contract, certificate, endorsement or rider except where that acceptance or denial has already been included in the claims error rate as a violation of an insurance law;

1. 3. “Cancelled, Non-Renewed, Declined

1. (CND) error rate,” the percentage of cancelled and non-renewed policies and declined policy applications in which the insurer cancelled, non-renewed or declined in violation of any insurance law or the terms of the insurer’s policy, contract, certificate, endorsement or rider, or underwriting manuals or guidelines on file with the director;

   1. 4. “Post-claims underwriting index,” in

life or accident or health insurance, means 20 CSR 100-8

the ratio which the contestable policies or certificates which are rescinded by an insurer after a claim has been made or in which a claim has been resisted on the grounds of misrepresentation as divided by the total contestable policies or certificates on which claims have been made bears to the applications for insurance declined or rejected by the insurer as divided by the total applications for insurance;

1. 5. “Quotation error rate,” the percent-

age of personal lines property and casualty policies, contracts, certificates, endorsements or riders in which the premium quoted by the agent of the insurer is more than five dollars ($5) different than the premium actually charged by the insurer, excluding policies, contracts, certificates, endorsements or riders in which the information relied on by the agent is substantially different than the information relied on by the insurer; and

1. 6. “Rating error rate,” the percentage of

policies, contracts, certificates, endorsements or riders in which the premium actually charged the insured is more than five dollars ($5) different than the premium which should have been charged had the insurer calculated the premium in accordance with its policies, contracts, certificates, endorsements, riders and rating manuals or schedules on file with the director.

1. (B) The rates and index set forth in this regulation will be important in determining whether a violation of section 375.445, RSMo has occurred and the quotation error rate may also be considered in determining whether misrepresentations and false advertising of insurance policies within the meaning of section 375.936(6), RSMo has occurred. However, other relevant factors will be considered in making these determinations. No attempt is made in this regulation to list other relevant factors because other factors depend on the facts of each case and no exhaustive or comprehensive list of other relevant factors can be made.
2. (C) The rates or index may be established by census or by an appropriate random sample. Whether a random sample was appropriate will be determined on a case-by-case basis to ensure that the sample reflects a true random selection from the group as a whole and not so constricted by location, types, or time frame as to provide an inaccurate depiction of the overall group.

AUTHORITY: sections 374.045, 375.948 and 375.1018, RSMo 2000.* Original rule filed Nov. 1, 2007, effective July 30, 2008. FINANCIAL INSTITUTIONS AND PROFESSIONAL REGISTRATION

*Original authority: 374.045, RSMo 1967, amended 1993, 1995; 375.948, RSMo 1959, amended 1978, 1991; and 375.1018, RSMo 1991.