New Mexico Administrative Code
Title 13 - INSURANCE
Chapter 8 - INSURANCE POLICIES AND RATES
Part 5 - RATE MODIFICATION PLANS
Section 13.8.5.8 - STANDARDS FOR RATE MODIFICATION PLANS

A. Rate modification plans may only be used to acknowledge variance in risk or expense characteristics.

B. Rate modification plans may be based only on rating characteristics not already reflected in the manual rates or experience rating plan. Rate modification plans must clearly indicate the objective criteria to be used.

C. Individual underwriting files must contain specific criteria and document particular circumstances of the risk in support of each debit or credit. Such documentation must be maintained in the file to enable the superintendent to verify compliance with this rule. Documentation may include, but is not limited to inspection reports, photographs, agent observations and findings, insured formal safety plans, premises evaluations and narrative reports covering other aspects of the risk. Expenses such as reduced commissions may be considered but must be documented in the underwriting file.

D. Any rate modification plan designed to be applied simultaneously to property, liability, or vehicle coverage shall contain reasonable factors that give appropriate recognition to the distinct exposures involved in such coverage.

E. Once a rate modification plan has been filed and approved, its use by the insurer is mandatory. The rate modification plan must be applied uniformly in a non-discriminatory manner for all eligible classes of risk even if the application of the rate modification plan results in a "1.0" modification or no change in a previous modification applied.

F. The application of any rate modification plan shall not result in debits or credits that exceed 25 percent for the commercial vehicle, commercial general liability and commercial property lines of business. The application of any rate modification plan shall not result in debits or credits that exceed 15 percent for the workers' compensation line of business. Modifications generated by loss experience or company expense experience are not subject to this limitation. Professional liability, contract surety bonds, and directors and officers liability are not subject to this limitation.

G. Once a rate modification plan has been applied to a risk and a credit or debit established, no changes in the credit or debit can be made without appropriate justification and documentation.

H. Any rate modification plan must provide that an applicant will be notified in writing by the insurer at the issuance of a new policy of the factors and resulting amounts which resulted in the rating modification, whether a debit or credit, so that, among other things, the applicant will be fairly apprised of any corrective action that might be appropriate with respect to the insurance risk. The insured must also be notified in writing by the insurer at the issuance of a renewal policy of either the removal of credits or the addition of debits in the rating modification and the reasons therefor.