Ohio Department of Insurance Company Services

Private Passenger Auto Rating Territories

The Unfair Trade Practices Act (Ohio Revised Code 3901.19 et seq.) prohibits insurers from charging different premium rates to persons residing within the limits of any municipal corporation based solely on the location of the residence of the insured within those limits.

Examiners review compliance with this at two levels. First, the territory definitions and rates that have been filed at the Department are reviewed to determine compliance. Second, the application of correct territory rating to individual policies is verified by identifying the actual municipality for the garaging addresses.

This has been a common problem and has been the subject of surveys and individual company examinations. Companies should review territorial definitions and firm up audit controls to be certain that premiums are being applied uniformly within all municipal corporations. As municipal boundaries change, it is the company’s responsibility to update territorial definitions and to establish controls that will assure continuing compliance with this statute.

Private Passenger Auto Cancellations and Nonrenewals

Most laws relevant to cancellations and nonrenewals can be found in Ohio Revised Code 3937.30 through 3937.35. There are some problems with companies not meeting the 30-day notice requirement for cancellations and nonrenewals and 10-day notice for nonpayment. Frequently, however, there are also problems with companies not informing insureds of their right to appeal. (Insureds can appeal to the Department if they believe the cancellation is based on erroneous information or is contrary to law or terms of the policy.) The reason for the cancellation must also be provided or a statement that such explanation will be furnished to the insured within five days after receipt of his or her written request therefore to the insurer.

Homeowners cancellations

Ohio Administrative Code 3901-1-18 requires a 30-day notice of cancellation. The notice must explain to the insured the procedures for making application to the Ohio Fair Plan.

Private Passenger Auto Partial Losses

The written estimate must clearly indicate the location of the licensed salvage dealer where “like kind and quality” parts are obtained. It is the Department’s position that by settling a loss based on an estimate, the estimate becomes “a written estimate prepared by or for an insurer.” Therefore, companies must be certain that this information is provided in all instances.

When non-original equipment manufacturer parts are to be used, Ohio Revised Code 1345.81 requires specific wording to be included on the estimate. Insurers must be certain that this requirement has been met by having the following exact wording included on the estimate:

“This estimate has been prepared based upon the use of one or more aftermarket crash parts supplied by a source other than the manufacturer of your motor vehicle. Warranties applicable to these aftermarket crash parts are provided by the parts manufacturer or distributor rather than by your own motor vehicle manufacturer.”

Private Passenger Auto Total Losses

Total losses must be valued consistently and fairly. It is not acceptable to obtain several sources such as NADA, CCC, and local quotes, then select the lowest value or an average value. A method of determining value based on local values must be established and followed consistently in settling each loss. This is an area in which companies frequently fail to comply with Ohio Administrative Code 3901-1-54(H)(7). Companies should contact the Department’s Market Conduct Division if additional assistance is needed in confirming compliance with this rule.

The rule also requires that sales tax be paid on replacement vehicles for total losses. Companies should be certain to document the sales tax calculation in claim notes. After the claimant and the company agree on a final valuation of the vehicle, the sales tax should be calculated based on the local sales tax rate. Be careful not to make a final offer that includes both valuation and sales tax without clearly identifying the valuation and the calculation of the sales tax.

Companies have the option of paying the sales tax later when the vehicle is replaced within thirty days and for no more than the replacement cost of the vehicle. However, this option is seldom used by companies. It is much more efficient to simply pay the sales tax as part of the total loss settlement rather taking on the expense of delayed processing of comparatively small settlement amounts.

File Retention

When a file is closed, Ohio Administrative Code 3901-1-54(D) requires that the claim file be accessible and retrievable for three years. Claim notes are a very important part of claim file documentation. Companies should be certain that claim adjusters, supervision, and management all make notes of claim activities. Claim notes can be a valuable method of demonstrating compliance.

Companies should be able to retrieve new business applications and cancellations as well. These can be in paper, image, or electronic forms.

Self Reporting

All companies should be proactive in assuring compliance with Ohio statutes and regulations. A good compliance program enables a company to monitor itself rather than having the problem uncovered in a market conduct examination. The Ohio Department of Insurance encourages companies to report any such identified problems voluntarily before the problem is identified by the Department through complaints, analysis, or examination.

The problem should be reported along with a corrective action plan. The plan should include changes in procedures, systems, manuals, training, and audits. In addition, the plan should also include information on how any consumers harmed by the

The Department will not take punitive action against companies that report problems and provide an adequate corrective action plan. It is strongly recommended that companies take advantage of this self-reporting procedure in order to minimize the need for any further regulatory action.