Insurers have two options regarding treatment of the regulatory surcharge:
An insurer may recoup the regulatory surcharge by passing the surcharge directly through to its policyholders. Before the amount may be passed through as a policyholder surcharge, a new rate filing or rating manual must be filed with the Office of the Insurance Commissioner (OIC) (if rates/rating manuals must be filed for the line of business). If an insurer chooses to recoup the surcharge, it must be at a uniform rate that is “reasonably calculated” and the surcharge must be separately stated on either a billing statement or a policy statement sent to an insured.
An insurer may continue to build the regulatory surcharge into its rates as one of the insurer’s expected costs. However, using this option, the regulatory surcharge should not be included in the calculation of premiums on the State Page exhibit or for premium tax purposes; it should be expensed and reported as a fee.
May an insurer directly recoup the regulatory surcharge for prior years?
No. Previous rates included the regulatory fee in the rate structure and were collected from past premium payments. A company may begin to directly recoup the regulatory surcharge from its policyholders for the 2007 regulatory surcharge that was due June 15, 2007.
The OIC will monitor insurer compliance with the new law by:
- Reviewing filed premium tax statements,
- Reviewing rate filings and
- Conducting market conduct oversight activities.