in section 3. Such rules and plans may also provide for the recording and reporting of expense experience items which are specially applicable to the District of Columbia and are not susceptible of determination by a prorating of countrywide expense experience. In promulgating such rules and plans the Board shall give due consideration to the rating systems on file with it and, in order that such rules and plans may be as uniform as is practicable among the several States, to the rules and to the form of the plans used for such rating systems in other States. No insurer shall be required to record or report its loss experience on a classification basis that is inconsistent with the rating system filed by it. The Board may designate one or more rating organizations or other agencies to assist it in gathering such experience and making compilations thereof, and such compilations shall be made available subject to reasonable rules promulgated by the Board, to insurers and rating organizations. (b) Reasonable rules and plans may be promulgated by the Board for the interchange of data necessary for the application of rating plans. (c) In order to further uniform administration of rate regulatory laws, the Board and every insurer and rating organization may exchange information and experience data with insurance supervisory officials, insurers and rating organizations in other States and may consult with them with respect to ratemaking and the application of rating systems. (d) The Board may make reasonable rules and regulations necessary to effect the purposes of this Act. SEC. 14. No person or organization shall willfully withhold information from, or knowingly give false or misleading information to, the Board, any statistical agency designed by the Board, any rating organization, or any insurer, which will affect the rates or premiums chargeable under this Act. A violation of this section shall subject the one guilty of such violation to the penalties provided in section 16 of this Act. SEC. 15. Agreements may be made among insurers with respect to the equitable apportionment among them of insurance which may be afforded applicants who are in good faith entitled to but who are unable to procure such insurance through ordinary methods and such insurers may agree among themselves on the use of reasonable rate modifications for such insurance, such agreements and rate modifications to be subject to the approval of the Board. SEC. 16. (a) The Board may, if it finds that any person or organization has violated any provision of this Act, impose a penalty or not more than $50 for each such violation, but if it finds such violation to be willful it may impose a penalty of not more than $500 for each such violation. Such penalties may be in addition to any other penalty provided by law. (b) The Board may suspend the license of any rating organization or insurer which fails to comply with an order of the Board within the time limited by such order, or any extension thereof which the Board may grant. The Board shall not suspend the license of any rating organization or insurer for failure to comply with an order until the time prescribed for an appeal therefrom has expired or if an appeal has been taken, until such order has been affirmed. The Board may determine when a suspension of license shall become effective and it shall remain in effect for the period fixed by it, unless the Board modifies or rescinds such suspension, or until the order upon which such suspension is based is modified, rescinded, or reversed. (c) No penalty shall be imposed and no license shall be suspended or revoked except upon a written order of the Board, stating its findings, made after a hearing held upon not less than ten days' written notice to such person or organization specifying the alleged violation. SEC. 17. (a) Any insurer or rating organization to which the Board has directed an order made without a hearing may, within thirty days after notice to it of such order, make written request to the Board for a hearing thereon. The Board shall hear such party or parties within twenty days after receipt of such request and shall give not less than ten days' written notice of the time and place of the hearing. Within fifteen days after such hearing the Board shall affirm, reverse, or modify its previous action, specifying its reasons therefor. Pending such hearing and decision thereon the Board may suspend or postpone the effective date of its previous action. (b) Nothing contained in this Act shall require the observance at any hearing of formal rules of pleading or evidence. (c) Any order or decision of the Board shall be subject to review by the District of Columbia Court of Appeals at the instance of any party in interest. (d) The court shall determine whether the filing of the appeal shall operate as a stay of any such order or decision of the Board. The Court may, in disposing of the issue before it, modify, affirm, or reverse the order or decision of the Board in whole or in part. SEC. 18. The Act entitled "An Act to provide for regulation of certain insurance rates in the District of Columbia, and for other purposes," approved June 1, 1944 (58 Stat. 267; sec. 35-1401 et seq., D.C. Code, 1951 edition), and the Act entitled "An Act to provide for regulation of certain insurance rates in the District of Columbia, and for other purposes," approved May 20, 1948 (62 Stat. 242; sec. 35– 1501 et seq., D.C. Code, 1951 edition), are hereby repealed. SEC. 19. If any section, subsection, subdivision, paragraph, sentence, or clause of this Act is held invalid or unconstitutional, such decision shall not affect the remaining portions of this Act. SEC. 20. This Act shall take effect one hundred and eighty days after date of its enactment. Senator MCINTYRE. I would like to have included in the record at this time a letter from Mr. Nicholas deB. Katzenbach, Deputy Attorney General, U.S. Department of Justice, opposing the bill and advising they prefer legislation along the lines of S. 1184. (The letter referred to follows:) Hon. ALAN BIBLE, U.S. DEPARTMENT OF JUSTICE, Chairman, Committee on the District of Columbia, DEAR SENATOR: This is in response to your request for the views of the Department of Justice on S. 2077, a bill to regulate, in the District of Columbia, rates for all forms of casualty insurance, including fidelity, surety, and guarantee bonds, and for certain forms of fire, marine, and inland marine insurance, and for other purposes. The stated purpose of this measure is to regulate insurance rates in such a manner that they shall not be excessive, inadequate, or unfairly discriminatory, and to authorize cooperative action among insurers in ratemaking and other matters without discouraging reasonable competition among insurers. This bill would repeal the Fire Insurance Act of 1944 (58 Stat. 267; sec. 35-1401 et seq., District of Columbia Code, 1951 edition) and the Casualty Insurance Act of 1948 (62 Stat. 242; sec. 35-1501 et seq., District of Columbia Code, 1951 edition), both of which are administered by the Superintendent of Insurance for the District. In eliminating the above statutes, this bill would abolish the present mandatory bureau membership requirement with respect to fire insurance and would authorize independent ratemaking and partial subscribership to rating bureaus. It would specifically deny to rating bureaus status under the act to apply for a hearing before the Commissioner on any insurer's filing and would eliminate the requirement that deviations must be renewed annually. The existing Casualty Insurance Act contains what is known in the industry as a file-and-use provision. That is, rates may become effective immediately upon filing with the Commissioner. In repealing this statute, the proposal generally would substitute the "prior approval" principle which has been a part of the fire insurance law. Under this principle, rates do not become effective until approved by the Commissioner. This Department supported the file-and-use principle in its report on S. 1184, dated July 15, 1963, and earlier in testimony on S. 556, 87th Congress. In our view, it affords greater flexibility to companies to respond to changing conditions and stimulates competition. The Casualty Insurance Act, in effect since 1948, has demonstrated that the file-and-use system can work without abuse. During the 15 years in which the Casualty Insurance Act has been in effect, a large body of administrative guidelines has been issued. It would seem desirable to amend rather than to repeal this act so as to minimize the loss of these existing administrative interpretations. S. 1184 does this in that it incorporates portions of the fire insurance law into an amended version of the present casualty insurance law. Accordingly, this Department prefers legislation along the lines of S. 1184. The Bureau of the Budget has advised that there is no objection to the submission of this report from the standpoint of the administration's program. Sincerely, NICHOLAS DEB. KATZENBACH, Senator MCINTYRE. I would also like to have included at this point in the record a letter from the Honorable Walter N. Tobriner, President, District of Columbia Board of Commissioners, opposing the bill. (The letter referred to follows:) Hon. ALAN BIBLE, Chairman, Committee on the District of Columbia, JANUARY 31, 1964. MY DEAR SENATOR BIBLE: The Commissioners of the District of Columbia have for report S. 2077, 88th Congress, a bill to regulate in the District of Columbia rates for all forms of casualty insurance, including fidelity, surety, and guarantee bonds and for certain forms of fire, marine, and inland marine insurance, and for other purposes. The purposes of the bill, as set forth in the first section thereof, are "to promote the public welfare by regulating insurance rates in the District of Columbia to the end that they shall not be excessive, inadequate, or unfairly discriminatory, and to authorize and regulate cooperative action among insurers in ratemaking and in other matters within the scope of this act." To accomplish these purposes the bill replaces with a single law two existing laws governing the regulation of insurance rates in the District of Columbia. These existing laws are the act approved June 1, 1944 (58 Stat. 267; secs. 35-1401 through 1409, D.C. Code, 1961 ed.), commonly referred to as the "Fire Rating Act," and the act approved May 20, 1948 (62 Stat. 242; secs. 35-1501 through 1510, D.C. Code, 1961 ed.), commonly referred to as the "Casualty Rating Act." The single new comprehensive law replacing the Fire Rating Act and the Casualty Rating Act would contain provisions having the following major features: 1. Making of rates.-Section 3 contains the basic requirement that rates shall not be "excessive, inadequate, or unfairly discriminatory." It requires that rates be made only by insurers or rating organizations and enumerates certain standards applicable to these organizations in determining the reasonableness of proposed rates. The section declares that "uniformity among insurers in any matters within the scope of this section is neither required nor prohibited." 2. Rate filings.-Section 4 provides that each insurer, except as to inland marine risks, shall file with the Board of Commissioners of the District of Columbia its rates, rating schedules, plans, systems, etc., and every modification thereof, which it intends to use within the District of Columbia. Such filings and modifications (except those stated in subsection (e)) may not become effective before the expiration of a specified waiting period unless the requirement for such waiting period is waived. They must be accompanied by supporting information and shall be open to public inspection on and after the date they become effective. An insurer may make its own rate filings with the Board or it may authorize a licensed rating organization of which it is a member or subscriber to make rate filings on its behalf. Membership in such a rating organization is voluntary on the part of insurers, and the authorization given by them to the rating organizations to make filings may be revoked at any time in order that the insurer may make independent rate filings. 3. Insured's right of review; Board of Commissioners' disapproval of filings. Section 5 establishes the right of any insured in the District of Columbia to a review, either by the insurer or the Board, of the manner in which a rate filing is applied to him, and authorizes the Board to order an insurer or rating organization to discontinue the use of rate filings found after hearing to be excessive, inadequate, or discriminatory. 4. Rating organizations.-Section 6 provides for licensing of rating organizations. Insurers may become either members of, or subscribers to, the services of a rating organization, and such membership or subscription service may not be unreasonably denied to any insurer. Rating organiza tions and insurers are authorized to cooperate in ratemaking, subject to review by the Board. Section 7 provides that a rating organization may require any insurer to adhere to the filings made on its behalf unless a deviation is granted by the Board. Section 8 provides for appeals to the Board by any member of a rating organization from any decision of the organization approving or rejecting changes in filing. Section 9 provides for appeals to the Board by any party affected by the application of a rating system. 5. Advisory organizations.-Section 10 defines an advisory organization as any organization of insurers, other than a rating organization, which engages in any activity regulated by the bill. Advisory organizations must register with the Board and are prohibited from performing any function of a rating organization or in any way preventing an insurer from acting independently in its ratemaking. Section 11 provides for regulation of joint underwriting by the Commissioners, including the issuing or orders after hearings. 6. Examinations, rate administration, misleading information, assigned risks, penalties, hearings, and judicial review.-Section 12 authorizes examination of rating organizations and advisory organizations by the Board, while section 13 authorizes the Board to make reasonable rules and regulations necessary to effect the purposes of the bill. Section 14 prohibits the withholding of information or the giving of false information. The remaining sections authorize the Board to review the actions of insurers with respect to assigned risks, and provide for penalties and proceedings for the suspension or revocation of the licenses of insurers and rating organizations for violations of the bill, as well as for judicial review of such proceedings. The provisions of the bill are made severable and an effective date 180 days after enactment is provided. On May 9, 1963, the Commissioners forwarded to the chairman, Senate District Committee, a report on S. 1184, a bill to amend and consolidate the laws providing for regulation of certain insurance rates in the District of Columbia, and for other purposes. The purpose of S. 1184, as recognized in the Commissioners' report, is basically identical with that of this bill, S. 2077-namely, to revise the laws of the District of Columbia governing rate regulation in the fire and casualty insurance industries-in order to further encourage and promote competition in the determination of the rates in the District for fire and casualty protection. Unlike S. 2077, however, S. 1184 would accomplish these purposes, not by repealing both the Fire and Casualty Rating Acts, but by repealing only the restrictive Fire Rating Act of 1944 and amending the liberal Casualty Rating Act of 1948 to add fire rates to its regulatory scope. The Commissioners prefer the S. 1184 approach to revision of the District's rating laws over the approach set forth in S. 2077, which repeals both existing laws. They feel that, by repealing the Fire Rating Act of 1944 and enlarging the scope of the Casualty Rating Act of 1948, as S. 1184 does, all of the objectionable, restrictive features of the District's rating laws will be removed while the advantage of more than 15 years of clarification of the Casualty Rating Act through administrative interpretation and enforcement will be retained. Among the provisions of law which presently appear only in the Fire Rating Act of 1944, and which would be abolished by S. 1184, are compulsory membership by insurers in a single rating organization, rate filings only through the rating organization and prior approval by the Superintendent of Insurance before rates become effective. In lieu of these provisions, S. 1184, if amended as recommended by the Commissioners in their report of May 9, 1963, would provide for regulation of both fire and casualty rates under the liberal terms of the Casualty Rating Act, which were described in the above-mentioned Commissioners' report as follows: "(1) Rates for insurance must not be excessive, inadequate, or unfairly discriminatory. Factors to consider in determining whether rates meet this standard are enumerated. "(2) Licensed rating organizations are permitted, but membership by insurance companies in such organizations is wholly optional. "(3) Insurance companies may file rates with the Superintendent of Insurance either directly or through a licensed rating organization. "(4) Rates may be changed by the company or rating organization which filed them. "(5) A company may deviate from rates filed for it by a rating organization and such deviation may become effective immediately upon filing or at such future time as the filer may specify. The Superintendent may, within 30 days, terminate the deviation retroactively. "(6) The Superintendent is authorized to investigate rate filings and order appropriate adjustment thereof." S. 1184 and S. 2077 differ with respect to the right of an insurer to file independent rates after becoming a member or subscriber to a rating organization. S. 1184 provides that such an insurer may file independent rates at any time, regardless of membership in a rating organization. S. 2077 provides that a member or subscriber to a rating organization who desires to deviate from rates filed by the organization must first obtain the approval of the Board, which approval must be given if the proposed rates are in harmony with the purposes of the act. In conclusion, the Commissioners believe that the principal liberalizing provisions of S. 2077 governing reasonableness of rates, voluntary rating organization membership, independent filings by insurers, and inspection and regulation of rating and advisory organizations, are guaranteed with equal effectiveness by the provisions of S. 1184. The Commissioners feel that S. 1184 has the additional advantage of incorporating into its regulatory scope the Casualty Rating Act of 1948, an act which has, through more than 15 years of administrative interpretation and enforcement, proved itself to be a reasonable, workable legal framework for sound rate regulation. Accordingly, the Commissioners do not favor the enactment of S. 2077, but recommend that the Congress enact instead S. 1184, if amended as recommended by the Commissioners in their report of May 9, 1963, on such bill. The Commissioners have been advised by the Bureau of the Budget that, from the standpoint of the administration's program, there is no objection to the submission of this report to the Congress. Yours very sincerely, WALTER N. TOBRINER, President Board of Commissioners, District of Columbia. Senator MCINTYRE. I ask that a comparison of the provisions of S. 1184 and S. 2077 prepared by the committee staff be inserted in the record at this point. Also a letter addressed to Senator Alan Bible from Mr. Samuel C. Cantor, acting superintendent of insurance, State of New York Insurance Department. (The document and letter referred to follows:) COMPARISON OF S. 1184 AND S. 2077 The provisions of S. 2077 are generally comparable with those contained in S. 1184 as such bill amends existing law with the exception of the provisions relating to rate filings. S. 1184 provides for rates and deviations to become effective when filed unless the filer shall propose a future effective date. In contrast S. 2077 provides for deviation filings to become effective when specifically approved by the Board (Board of Commissioners, District of Columbia) and rates to become effective after a specified waiting period unless the Board disapproves the filing. The specified waiting period consists of a 15-day period after the filing has been made with the Board plus an additional 15-day period when the Board in its discretion determines such additional time is needed for the consideration of the filing. The Board may accelerate the effective date of the filing by authorizing a filing to become effective before the expiration of the 15- or 30-day waiting period. Set forth below is a comparison of S. 1184 and S. 2077 relating to the pertinent filing provisions contained in these two bills. The cited sections under S. 1184 are contained in 62 Stat. 242, with amendatory language of the bill incorporated therein. The cited sections under S. 2077 are contained in such bill itself: |