California Code of Regulations
Title 10 - Investment
Chapter 5 - Insurance Commissioner
Subchapter 4.8 - Review of Rates
Article 4 - Determination of Reasonable Rates
Section 2644.10 - Excluded Expenses
Current through Register 2024 Notice Reg. No. 38, September 20, 2024
The following expense items shall not be allowed for ratemaking purposes:
(a) Political contributions and lobbying.
(b) Executive compensation that exceeds the reasonable amount for such compensation.
For purposes of this computation, the following shall apply:
max comp = 1077(101.4600 + 0.4060 log X)
max comp = 1077(101.4140 + 0.3490 log X)
max comp = 1077(101.2310 + 0.3820 log X)
max comp= 1077(101.2470 + 0.3580 log X)
max comp = 1077(101.2460 + 0.3420 log X)
where X is the greater of (i) the insurer's total countrywide direct earned premium for the most recent completed calendar year for lines of business subject to Proposition 103 divided by 1,000,000 or (ii) 70.
(c) Bad faith judgments and associated defense and cost containment expenses.
(d) All costs attendant to the unsuccessful defense of discrimination claims.
(e) Fines and penalties.
(f) Institutional advertising expenses. "Institutional advertising" means advertising not aimed at obtaining business for a specific insurer and not providing consumers with information pertinent to the decision whether to buy the insurer's product.
(g) All payments to affiliates, to the extent that such payments exceed the fair market rate or value of the goods or services in the open market.
Except as allocated pursuant to section 2643.6, calculation of the amounts expended on the foregoing expense items shall be based on the insurer's national expenditures, allocated among states in proportion to earned premium.
The disallowance shall be effected by reducing the efficiency standard by the ratio of the insurer's national excluded expenses to its national direct earned premium.
1. New section
filed 8-13-91 as an emergency; operative 8-13-91 (Register 92, No. 3). A Certificate
of Compliance must be transmitted to OAL 12-11-91 or emergency language will be
repealed by operation of law on the following day.
2. Repealed by
operation of Government Code section
11346.1(g)
(Register 92, No. 15).
3. New section refiled 2-14-92 as an emergency;
operative 2-14-92 (Register 92, No. 15). A Certificate of Compliance must be
transmittted to OAL 6-15-92 or emergency language will be repealed by operation of
law on the following day.
4. Repealed by operation of Government Code
section
11346.1(g)
and new section filed 3-15-95; operative 3-15-95. Submitted to OAL for printing only
pursuant to Government Code section
11343(a)(1)
(Register 95, No. 11).
5. Amendment of subsections (b), (c) and (g) and
new subsections (b)(1)-(b)(3)(E) filed 1-3-2007; operative 4-3-2007. Submitted to
OAL for printing only pursuant to Government Code section
11340.9(g)
(Register 2007, No. 1).
Note: Authority cited: Sections 1861.01 and 1861.05, Insurance Code; and 20th Century v. Garamendi, 8 Cal.4th 216 (1994). Reference: Sections 1861.01 and 1861.05, Insurance Code; and Calfarm Insurance Company v. Deukmejian (1989) 48 Cal.3d 805.
