INSURANCE

DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF INSURANCE

Rate Intervenor Rules

Adopted New Rules: N.J.A.C. 11:3-17

Adopted Amendments: N.J.A.C. 11:3-18.6

Proposed: May 7, 2001 at 33 N.J.R. 1305(a).

Adopted: July 10, 2001 by Karen L. Suter, Commissioner Department of Banking and Insurance

Filed: July 10, 2001 as R. 2001 d. 270, with substantive and technical changes not requiring additional public notice and comment (see N.J.A.C. 1:30-6.3).

Authority: N.J.S.A. 17:1-8.1, 17:1-15c and 17:29A-46.7 and 46.8.

Effective Date: August 6 , 2001.

Expiration Date: January 4, 2006

Summary of Public Comments and Agency Responses

The Department received nine written comments on the proposal, four insurers (Allstate New Jersey Insurance Company, First Trenton Companies, New Jersey Manufacturers Insurance Group and State Farm Insurance Companies), four insurance trade organizations (Alliance of American Insurers, Insurance Council of New Jersey, the National Association of Independent Insurers and Professional Insurance Agents of New Jersey); and Pringle Quinn Anzano on behalf of the Personal Automobile Insurance Plan ("PAIP").

COMMENT: One commenter suggested that the purpose and scope section of N.J.A.C. 11:3-17 should be amended to clarify that it does not apply to PAIP, the involuntary market insurer. The commenter stated that N.J.A.C. 11:3-16(a) establishes rate-making requirements "for all private passenger automobile rate filing for the voluntary market." The commenter contends that this limitation in scope is reiterated in N.J.A.C. 11:3-16.1(b) which provides that, "this subchapter applies to all insurers making private passenger automobile insurance rate filings for the voluntary market in this State."

RESPONSE: The Department has construed the definition of rate filing found in N.J.S.A. 17:29A-46.8a to apply to the PAIP. The PAIP is not specifically excluded from these rules.

COMMENT: One commenter believed that the term "expertise" used in N.J.A.C. 11:3-17.3(a)1 should be defined.

RESPONSE: The Department does not believe that it is necessary to specifically define expertise, because the term, taken directly from the statute, has its usual and customary definition.

COMMENT: One commenter suggested that the Department add the term "substantial contribution" to the definitions found in N.J.A.C. 11:3-17.2. The commenter stated that by defining this term, all parties will understand the standards that must be met. The commenter suggested the use of the following definition from California. The provision states:

Substantial contribution means that the intervenor substantially contributed, as a whole, to a decision, order, regulation, or other action of the Commissioner by presenting relevant issues, evidence or arguments which were separate and distinct from those emphasized by the Department of Insurance staff or any other party, such that the intervenorís participation resulted in more relevant credible, and non-frivolous information being available for the Commissioner to make his or her decision, than would have been available to a Commissioner had the intervenor not participated.

RESPONSE: The Department agrees with the commenter that the term should be defined. Since the commenterís suggestion is a substantive change, the Department will be proposing amendments to these rules in the near future that will include a definition of substantial contribution.

COMMENT: One commenter suggested that the definition of "rate filing" in N.J.A.C. 11:3-17.2 should be amended. The commenter recommended that this definition exclude any filings made by the Territorial Rating Commission Working Group or any filing made by an insurer to implement the Territorial Rating revisions required by AICRA. The commenter believes that it would be inappropriate and unnecessary to permit rate intervention by others as part of the upcoming changes from the Territorial Rating Commission's efforts and that oversight of that process is unnecessary.

RESPONSE: These rules do not apply to territorial rate filings because territorial rate filings are revenue-neutral. Such filings are not characterized as seeking a rate increase, and therefore would not be subject to these rules.

COMMENT: Several commenters expressed concern about various aspects of the intervenor registration requirements at N.J.A.C. 11:3-17.3. N.J.A.C. 11:3-17.3(a) requires any person or entity that wishes to register as an intervenor to certify to its qualifications. One commenter noted that the Department's proposed rules track the qualifications found in N.J.S.A. 17:29A-46.8. The commenter stated that the statute only sets forth these qualifications as minimum standards and that the Commissioner should add to them. The commenter stated that N.J.S.A. 17:29A-46.8c provides that the Commissioner shall require documentation as necessary to qualify a person to intervene in a rate filing. The commenter contends that it appears that the Legislature intended to require more than just an annual registration fee of $100.00 and a registration form certifying that the individual meets the minimum requirements set forth in the proposed regulation. The commenter recommends that the Department expand the minimum requirements to include proof that they meet and continue to meet these requirements on an annual basis.

RESPONSE: The Department believes that these current standards are sufficient. If the Department determines that stricter or additional qualifications are needed, based on its experience with the rate intervenor process, it may amend these rules.

COMMENT: One commenter believes that N.J.A.C. 11:3-17.3(a) needs to provide greater detail as to minimum qualification than the generalities provided for in the statute. The commenter stated that terms such as "expertise in the insurance laws of the state," "an understanding of the actuarial principles employed in establishing rates," and "a demonstrated commitment to represent the interest of consumers and accept a duty of fidelity to do so" do not provide clear guidance as to the minimum qualifications for intervenors. The commenter recommended that the Department's proposed new rules include the following: (1) demonstrating expertise in New Jersey insurance laws should require minimum professional qualifications such as being a licensed attorney or having a professional designation in insurance such as a Chartered Property and Casualty Underwriter or some similar professional insurance designation; (2) the intervenor must actually be an actuary, employ an actuary or retain an actuary or actuarial firm; (3) the intervenor must have a bona fide interest in the rate filing in that the rate filing will directly impact the intervenor or the people whom the intevenor represents in terms of premium paid by the intervenor or the people whom the intervenor represents; (4) the commenter stated that inasmuch as the statute requires the intervenor to accept a duty of fidelity in representing the interest of consumers, the regulation should require the intervenor to obtain a fidelity bond of a specified amount; and (5) the regulation should impose a monetary penalty for frivolous registrations. The commenter stated more detailed standards to qualify as an intervenor will assure that intervenors have the necessary minimum expertise to participate in the rate filing discussion and will deter baseless interventions.

RESPONSE: The Department does not believe that the qualifications listed in N.J.A.C. 11:3-17.3(a) need to be amended at this time. The Department does not believe that stricter standards or additional qualifications are needed regarding the items raised by the commenter at this time. The Department does not want to unnecessarily restrict individuals or entities from participating in this process as long as they satisfy the basic requirements of this rule. The Department, based on its experience with the rate intervenor process, may amend these rules.

Since the rate intervenorís ability to recover reimbursement is based on it making a substantial contribution to the rate filing decision, the intervenor bears the cost of intervention in a rate filing without the guarantee of recovery. The Department believes that this will deter baseless intervention. The Department believes that these current standards are sufficient.

COMMENT: Two commenters expressed concern with N.J.A.C. 11:3-17.3(a)1. One commenter stated that the Department's requirements are very general and do not provide sufficient guidance for the Department to register those persons or entities qualified to serve as rate intervenors. The commenter suggested that the Department consider adding in N.J.A.C. 11:3-17.3(a)1 an insurance education or experience requirements of five years or more.

A second commenter suggested that the Department exercise due diligence and independently verify whether the individual or entity does indeed meet the qualifications as an intervenor. Additionally, the commenter stated that the Department should add a five year minimum education or experience requirement for each of the three disciplines, that is, actuary, attorney or insurance expert.

RESPONSE: The Department, in developing a process to allow individuals or entities to intervene in a rate filing, considers the current certification process to be the most effective and efficient manner to register intervenors. The Department does not believe that it is necessary at this time to require a five-year minimum education or experience requirement for each of the three disciplines. Since the Department is not licensing entities or individuals as intervenors, but is instead registering these individuals/entities, the Department believes that the proposal qualifications and standards are sufficient. The Department believes that the qualifications and standards that are set forth in these rules must be met or exceeded in order for an intervenor to make a substantial contribution to this process. These rules also include a process for revoking the registration of an intervenor who no longer meets these qualifications.

COMMENT: One commenter objected to N.J.A.C. 11:3-17.3(a)2 because the phrase "understanding of the actuarial principles" does not set out a clear, defined qualification. The commenter suggested that the Department consider a person who has demonstrated knowledge of actuarial principles through employment as an actuary or through minimum education requirements as an actuary. The commenter also believes that the intervenor and its experts be required to adhere to "Actuarial Standards of Practice" and the Statement of Principles regarding "Property and Casualty Insurance Rate-making" in their analysis and evaluation.

RESPONSE: The Department has amended N.J.A.C. 11:3-17.3(a)3 to provide that a "qualified actuary" is, for example, a Fellow of the Casualty Actuarial Society (FCAS) or a Member of the American Academy of Actuaries (MAAA). The Department is not amending this provision to require a Statement of Principles regarding Property and Casualty Insurance Rate-Making or adherence to Actuarial Standards of Practice in their analysis and evaluation, because the Department does not believe that these types of restrictions are necessary at this time. Additionally, the determination by the Commissioner of the awarding of advocacy and witness fees and expenses is in accordance with N.J.S.A. 17:29A-46.8g. The rate intervenor's ability to recover reimbursement is based on it making a substantial contribution to the adoption of any order or decision by the Commissioner in order to obtain an award of expenses and fees. The Department does not believe that it is necessary specifically to require that the intervenor affirm that it adhered to or relied on the Actuarial Standards of Practice and Statement of Principles regarding property and Casualty Rate-making.

COMMENT: One commenter expressed concern about the first requirement N.J.A.C. 11:3-17.3(a)1 that the intervenor has expertise in the insurance laws of the State. The commenter suggested that the Department establish specific criteria for meeting this requirement and require the intervenor to provide documentation of same. For example, an attorney admitted to practice in New Jersey with experience in the insurance field would have this expertise and could provide documentation of admission to practice in the state.

RESPONSE: The Department believes that it is sufficient that an entity or individual will certify to these qualifications. Additionally, if the Commissioner determines that an intervenor no longer meets the qualifications of these rules, the Commissioner shall revoke the intervenorís registration.

COMMENT: One commenter objected to N.J.A.C. 11:3-17.3(a)2 which requires that the intervenor have an understanding of the actuarial principles employed in establishing rates and rating systems. The commenter suggested that very few people, but for professional actuaries themselves, possess this understanding. Therefore, it is suggested that the Department should establish specific criteria for establishing this requirement and that the applicant should be required to demonstrate this understanding by producing documentation.

RESPONSE: The Departmentís rule establishes a process and procedure for an entity or individual to be registered as an intervenor. The Department is not licensing entities or individuals as intervenors, but is instead registering these individuals/entities, as intervenors. The Department believes that the certification requirements of these rules adequately and effectively comply with its statutory mandate. The Department does not want to unnecessarily restrict individuals or entities from participating in this process as long as they satisfy the basic requirements of this rule. Therefore, no additional documentation or specific criteria is necessary at this time.

COMMENT: One commenter objected to N.J.A.C. 11:3-17.3(a)3, which requires that the applicant have sufficient access to a qualified actuary and sufficient expertise to conduct a technical examination of a rate filing. The commenter suggested that the Department establish specific criteria for this requirement, that the applicant possess expertise in conducting a technical examination of a rate filing and that the applicant provide documentation indicating that these requirements are met.

RESPONSE: The Department has amended this provision to clarify that a qualified actuary is one who is, for example, a Fellow of the Casualty Actuarial Society or a Member of the American Academy of Actuaries. The Department notes the commenterís example as one illustration of an individual who would satisfy the qualification of "sufficient expertise." The Department does not want to unnecessarily restrict individuals or entities from participating in this process as long as they satisfy the basic requirements of this rule.

COMMENT: One commenter objected to N.J.A.C. 11:3-17.3(a)3. The commenter stated that the proposed rule does not specify whether a technical examination by a "qualified actuary" is required in the intervenorís Final Report (N.J.A.C. 11:3-17.6(d)). As written, the rule would allow an intervenor to delay a rate filing by failing to submit a valid "technical examination," or conversely, to commission an unnecessary or costly study under the assumption that the fees for such a study would be passed along to the insurer at the conclusion of the process.

RESPONSE: An unnecessary or costly study performed by an intervenor could not be passed along to the insurer for reimbursement at the conclusion of the process unless the intervenor has made a "substantial contribution" to the adoption of any order or decision by the Commissioner or court in connection with proceedings pursuant to N.J.S.A. 17:29A-46.8.

COMMENT: One commenter stated that in the Summary of the proposal and in N.J.A.C. 11:3-17.3, the proposal states that the third party may intervene in a filing when such individual is fulfilling a fidelity duty on behalf of consumers. The commenter stated that when an individual acts as a fidelity, that interest is ostensibly an important one and as such the intervenor should be required to obtain a $100,000 fidelity bond and proof of the bond to the Department. The commenter suggested that the standard should be that the intervenor have a "bona fide interest" and "substantial contribution" as currently defined. The commenter suggested that any "substantial contribution" must be directly related to identifying a serious flaw in the filing and meet the California definition or a similar definition for substantial contribution. A fidelity bond requirement should add the necessary balance required for an intervention. The commenter suggested that the bond be held by the Department in the event that an intervenor files a frivolous intervention, so that insurers may proceed against the bond.

RESPONSE: The Department does not believe that a fidelity bond is necessary. The rate intervenor registration form requires applicants to certify to their qualifications. The Department does not believe that an intervenor would frivolously intervene in a rate filing. In order for an intervenor to be awarded advocacy and witness fees and expenses, the intervenor must make a substantial contribution to the adoption of the Commissionerís Final Decision and Order. This substantial contribution standard cannot be met through a frivolous rate filing intervention.

COMMENT: One commenter expressed concern with N.J.A.C. 11:3-17.3(a)4 and the use of the phrase "sufficient resources." The commenter stated that this provision requires that the intervenor have "sufficient resources" to intervene in a rate filing process pursuant to this subchapter. The commenter stated that this provision has two elements: the costs of proceeding with intervention; and the ability to maintain appropriate liability should the intervenor be judged liable for some default. The commenter recommended that the Department require the person or entity interested in intervening to have assets capable of sustaining an intervention and also require the person or entity to be bonded in amounts that meet the projected liability costs of a filing ($500,000 or more in most cases). The commenter believes that it is important for the Department to establish a trust account to hold some minimum level of assets of the person or entity seeking to file as a rate intervenor. The commenter stated that this is necessary in case the person or entity is found to be in violation of some relevant provision. The commenter stated that this requirement would insure against any frivolous intervention by a party.

Additionally, the commenter stated that the proposal should include a standard for a person or entity to intervene in a rate filing that requires that there be a threshold interest in becoming a party to the rate filing. The commenter stated that this standard is similar to other forums and would insure the interest of the person or entity.

RESPONSE: The Department does not believe that it is necessary to require intervenors to be bonded in amounts that meet the projected liability costs of a filing. In order to participate effectively in the rate filing process, the intervenor will have to have resources to pay for its information request, advocacy and witness fees and expenses, which may or may not be reimbursed. Additionally, the Department believes a certification that one represents the interest of consumers is sufficient. The Department does not want to unnecessarily restrict individuals or entities from participating in this process as long as they satisfy the basic requirements of this rule. The Department also notes that N.J.A.C. 1:3-17.4 provides for the revocation of the registration of an intervenor if the intervenor no longer meets the qualifications of an intervenor set forth in these rules.

COMMENT: Two commenters objected to N.J.A.C. 11:3-17.3(b)2, which requires a registration fee of $100.00. One commenter stated that this fee is inconsistent with the fees imposed elsewhere in Department rules. The commenter stated that for example, the fee for a new or renewal producerís license or public adjusterís license is $300.00. The commenter believes that this fee should be consistent with those amounts and recommended a fee in the range of $300.00 to $500.00. A second commenter recommended that the fee be raised to $500.00, so that only those persons who have a legitimate contribution to be made to the process will participate.

RESPONSE: The Department does not believe that the commenterís analogy to the fees for licensing producers and public adjusters is appropriate. The Department is not licensing intervenors; it is registering these entities or individuals. The Department believes that the proposed fees are appropriate and adequately reflect the costs that it will incur in processing applications for registration and providing notification to the public and intervenors.

COMMENT: One commenter stated that rules should include protections to reimburse the State/and or rate filer in the event the intervention proves to be without merit. To accomplish this task, intervenors should be required to post a bond in the minimum amount of $10,000, with the actual bond amount established by the Department based on its estimate of the cost of intervention.

RESPONSE: The Department does not believe that this is necessary. In order for the Commissioner to award reasonable advocacy and witness fees and expenses to an intervenor, the intervenor must make a "substantial contribution" to the adoption of any order or decision by the Commissioner in connection with the proceedings pursuant to N.J.S.A. 17:29A-46.8. If the substantial contribution standard is not met, the rate intervenor recovers nothing.

COMMENT: Several commenters expressed similar concerns regarding N.J.A.C. 11:3-17.3(b) and 17.3(c). N.J.A.C. 11:3-17.3(b) sets forth the registration form and fee requirements of the applicants. N.J.A.C. 11:3-17.3(c) provides for the annual renewal fee. One commenter believed that the $100.00 registration fee is insufficient to reflect the Department's costs in registering a person or entity as a rate intervenor. The commenter believes that the initial registration fee should be a larger, more realistic amount because of the Department's upfront costs. The commenter suggested that the Department amend this provision to require an initial application fee of $1,000.

The commenter believes that this fee amount will be more representative of the costs of the Department and reflect the difficulty of reviewing an initial application over an renewal. The commenters also recommended that the Department set forth in the proposal the possibility that the applicant may become liable for any costs associated with a prolonged investigation should there be any inaccuracies in the application.

A second commenter suggested amending the annual renewal fee found in N.J.A.C. 11:3-17.3(c), from $100.00 to $500.00.

RESPONSE: The Department believes that the proposed fees are adequate and reflect the costs associated with the Department registering entities and individuals as rate intervenors.

COMMENT: One commenter expressed concern with N.J.A.C. 11:3-17.4 which addresses penalties for intervenors or filers. The commenter stated that this provision establishes no monetary penalties on the part of an intervenor for filing a frivolous registration or a frivolous intent to intervene. The commenter stated that a monetary penalty should be imposed so as to deter this activity.

RESPONSE: The Department believes that frivolous attempts to intervene are not likely to occur. An intervenor is only reimbursed for its reasonable advocacy and witness fees and expenses, if it makes a substantial contribution to the adoption of the Commissionerís Final Decision and Order on the rate filing.

COMMENT: One commenter objected to N.J.A.C. 11:3-17.4(e), which addresses the revocation of an intervenor's registration. The commenter suggested that the Department amend this provision so that an insurer may also recommend revocation of an intervenor's registration.

RESPONSE: The Department disagrees with the commenter. The intervenor is representing the interest of the public; therefore, the Department does not believe that it would be appropriate to have filers recommend revocation.

COMMENT: Several commenters objected to N.J.A.C. 11:3-17.5(a)2 which addresses notification of a rate increase to all registered intervenors by e-mail or fax and by posting on the Department's website.

One commenter stated that this provision is unnecessary and goes beyond the statutory responsibility of the Department.

A second commenter stated that this provision should be eliminated. The commenter stated that the authorizing statute requires the Department to provide notification to the public in a newspaper or newspapers of general circulation throughout New Jersey. The commenter stated that this is the only notification responsibility imposed by the statute on the Department. The commenter believes that persons who have registered as intervenors should retain the responsibility of monitoring such publications for notice of a rate filing.

RESPONSE: The Department does not believe that the notification requirements of N.J.A.C. 11:3-17.5(a)2 are unnecessary or go beyond the statutory responsibility of the Department. N.J.S.A. 17:29A-46.8e specifically requires that the public be notified of a proposed rate change in a newspaper or newspapers of general circulation throughout the State. The statute does not prohibit or limit the Department only to utilizing these methods. The Department believes that notification by e-mail, fax or the posting on its website is appropriate.

COMMENT: One commenter objected to N.J.A.C. 11:3-17.6, the procedures to intervene in a rate filing. The commenter stated that there appears to be no limit on the number of intervenors who may intervene in a rate filing. The commenter stated that the insurer may ultimately have the burden of discovery requests from numerous intervenors and the potential consequence of reimbursing fees for numerous duplicative, or even invalid, technical examinations. The commenter stated that the lack of restrictions on the number of intervenors and the intervenor's technical examinations, along with the right of the intervenor to receive fees and expenses from the filer, will result in "open season" on insurers. Finally, the commenter stated that the insurer will have no way to determine the likely ultimate costs in advance of making the rate filing.

RESPONSE: The Department does not believe that there needs to be a limit on the number of intervenors that can participate in a rate filing. The Department believes that it is unlikely that there will be situations in which numerous intervenors intervene in the same rate filing. The costs of information requested by an intervenor are borne by the intervenor. In the event that the intervenor makes a substantial contribution to the process, then the intervenor may be awarded reasonable advocacy and witness fees and expenses as a result.

COMMENT: One commenter objected to N.J.A.C. 11:3-17.6(b) which requires the intervenor to notify the Department and the filer of its intent to intervene within 15 days of the Department's receipt of the rate filing. The commenter stated that this process is backwards. The commenter stated that a legitimate rate intervenor would not be able to determine whether it should become involved in the process until it has seen and reviewed the particular rate filing. The commenter stated that by allowing an intervenor to participate in the process before it has even seen the rate filing can only encourage frivolous and unwarranted interventions which will disrupt the process. The commenter suggested that the Department amend this provision to require that the rate intervenor has five calendar days from the Department's receipt of the rate filing to request a copy of the filing. The intervenor would then have an additional five calendar days to notify the Department of its intention to intervene if, after review of the filing, it believes intervention is appropriate.

Finally, the commenter stated that when a rate intervenor files a notice of intent to intervene, he should also provide some type of preliminary showing that intervention is appropriate and justified. The commenter stated that a rate intervenor could intervene for the sole purpose of causing substantial delays in the process. The commenter stated that to ensure that the process is not unjustifiably delayed, the better approach would be to require the intervenor to show at the outset that there is a legitimate justification for his intervention.

RESPONSE: The Department will be proposing amendments to these rules in the near future which will address the intervenorís notice requirement to the Department and the filer of its intention to continue intervention.

The Department does not believe that it is necessary for an intervenor to make a preliminary showing that intervention is appropriate and justified. The Department believes that frivolous attempts to intervene are not likely to occur. An intervenor is only reimbursed for its reasonable advocacy and witness fees and expenses, if it makes a substantial contribution to the adoption of the Commissionerís Final Decision and Order on the rate filing.

COMMENT: Two commenters expressed similar concerns about N.J.A.C. 11:3-17.6(b) and 17.6(c)1. One commenter stated that N.J.A.C. 11:3-17.6(b), which permits an intervenor to request and receive a copy of the rate filing and any amendments and supplements, is too broad.

A second commenter noted that N.J.A.C. 11:3-17.6(c)1 requires an insurer to provide the rate intervenor with the information the rate intervenor requests. The commenter stated that the intervenor should not have access to information filed in conjunction with a rate filing that is a trade secret or is otherwise confidential under New Jersey law.

RESPONSE: The Department is amending N.J.A.C. 11:3-17.6(c)1 to include a provision that permits the filer to deny a request that involves information that is a trade secret or otherwise confidential. In these cases, the filer must notify the intervenor and the Department of the reasons for the denial. The Department may either deny the intervenorís request or direct the filer to provide the information.

COMMENT: One commenter objected to N.J.A.C. 11:3-17.6(c) which refers to requests for clarifying or explanatory information by a rate intervenor after a filing is deemed complete by the Department as "limited discovery."

The commenter stated that "discovery" is not a proper term to be used here because of its general legal meaning. The commenter stated that discovery is the process of finding new relevant evidence about a subject in dispute. Limited discovery usually means discovery of new relevant evidence, limited to only certain enumerated topics, to be carried out over a short period of time. Discovery requests are always much broader than simply explanatory or clarifying information. A better term would be "limited requests."

RESPONSE: The Department agrees with the commenter and has amended this provision accordingly.

COMMENT: One commenter recommended that in N.J.A.C. 11:3-17.6(c)1, a mechanism be added that would permit a filer to request an extension of time to comply with the request beyond the 15 day time period if it is not objecting to the request for information. The commenter also stated that the proposal provides the intervenor 75 days in which to file a Final Report. The commenter believes that this is too long and would only serve to prolong an already lengthy process. The commenter recommended that the Department amend this provision to 30 days, which should provide the intervenor sufficient time to develop its views and positions.

RESPONSE: The Department does not believe that a filer needs more than 15 days to comply with a request for information. The Department believes its timeframes provide sufficient time for information to be exchanged without interfering with the time given for the Department or intervenor to conduct its review of a rate filing. The Department believes that 75 days after the Departmentís receipt of the rate filing is an appropriate amount of time for the intervenor to file a final report. The intervenor has to request and gather the necessary information in order to do an analysis of the rate filing. Thirty days may not be a reasonable amount of time in all circumstances.

COMMENT: Several commenters objected to N.J.A.C. 11:3-17.6(c) which allows the intervenor to request information directly from the insurance company. The commenter stated that this provision should be deleted. The commenter believes that the Department has the statutory responsibility to review and approve rate filings. If the Department determines that it has all the necessary information needed to meet its statutory responsibility, an intervenor should not be allowed to second guess that decision and demand further information from the insurance company. The commenter did not believe that this is the intervenor's statutory responsibility. The intervenor should be limited to reviewing the documentation found sufficient by the Department for the purpose of reviewing and approving a rate filing. Therefore, the commenter states that only the first sentence of N.J.A.C. 11:3-17.6(c) should be maintained.

A second commenter stated that the Department should evaluate all requests from the intervenor to ensure that the data is indeed needed and is likely to lead to substantial contributions.

A third commenter stated that if the filing is incomplete and does not satisfy the requirements of N.J.A.C. 11:3-16, then the Department should notify the insurer as to what information is missing, and the intervenor should not have the right to discover additional information. Additionally, the commenter believes lengthy delays would result from this provision.

RESPONSE: The Departmentís determination that a filing is complete does not mean that the information submitted as part of that filing may not need further clarification or explanation. N.J.A.C. 11:3-17.6(c) now provides that intervenors cannot request supplemental information beyond limited requests to seek clarifying or explanatory information. This is consistent with the current filings practice. The Department believes that this is appropriate and consistent with the amended definition of "substantial contribution."

COMMENT: One commenter objected to N.J.A.C. 11:3-17.6(d). The commenter believes that under no circumstances should there be direct contact between the filer and the intervenor. All correspondence and requests related to a filing should go through the Department. The commenter does not believe that there is a need for the intervenor to have direct contact with a filer because it is sure to be an adversarial relationship. The commenter stated that the Department should have the responsibility to evaluate the filing to determine if additional information is needed. Moreover, this requirement will prevent insurers from being beleaguered with requests from multiple intervenors asking for the same or similar documentation. The commenter stated that the Department has already specified in the proposed regulation the data elements that are required for a rate filing.

RESPONSE: The Department believes that an intervenorís requests for information would be handled more expeditiously if the intervenor requested the information directly from the filer, instead of sending the request(s) to the Department and having the Department forward them to the filer.

COMMENT: One commenter expressed concern with N.J.A.C. 11:3-17.6(c)1 which addresses the process that an intervenor must follow in requesting information on a filing. The commenter stated that N.J.A.C. 11:3-17.6(b) contains provisions for the rate intervenor to pay the Department for the cost of copying and mailing the rate filing; however, there is no provision in proposed N.J.A.C. 11:3-17.6(c)1 for the rate intervenor to pay the expenses of the filer for any relevant information that may be necessary to clarify or explain information contained in the filing. The commenter recommended that the Department add language requiring the intervenor to pay the expenses for information requested of the filer as permitted under the statute.

RESPONSE: The intervenor pays for any requested information. It is not the filerís responsibility. If it is determined that the intervenor has made a substantial contribution to the final administrative determination, then the intervenor may have its reasonable advocacy and witness fees and expenses reimbursed pursuant to N.J.A.C. 11:3-17.7.

COMMENT: One commenter expressed concern with N.J.A.C. 11:3-17.6(d) which addresses dissemination of the intervenor's Final Report on the rate filing.

The commenter stated that the insurer, having made the filing and likely having provided additional information to the intervenor pursuant to the proposed rules, should also receive a copy of the Final Report. The commenter believes that the filer should be made aware of certain factors that might be involved in the Department's decision-making process. If a hearing is requested, there is no reason why the insurer should have to go through the exercise of requesting the Final Report as part of discovery. The commenter stated that this is especially important in the situation contemplated by this subsection where a hearing on a rate filing is scheduled quickly and pursuant to the proposed regulations the intervenor can provide the Final Report only 14 days before the hearing. The commenter stated that discovery for a rate hearing is usually over by then.

The commenter stated that N.J.A.C. 11:3-17.6(d) should be amended to begin by reading (addition in boldface) "The intervenor's Final Report on the rate filing shall be filed with the Department and with the filer within 75 days Ö"

RESPONSE: The Department agrees with the commenter and has amended this provision to indicate that the report shall be provided to the filer.

COMMENT: Several commenters expressed concern with the timeframe in N.J.A.C. 11:3-17.6 for providing a final report. One commenter stated that the 75 day timeframe in which the intervenor may file a final report should be limited to 30 days after the Departmentís receipt of the rate filing or 14 days before the hearing, whichever is earlier. The commenter stated that an intervenor will have the necessary expertise to make a determination much more quickly than the 75 days provided in the proposal. The commenter also believes that the reference to "14 days of the hearing" in N.J.A.C. 11:3-17.6(d) should cross reference N.J.A.C. 11:3-18.4(d).

A second commenter stated that this provision requires that the intervenor's final report on the filing be filed within 75 days of the receipt of the filing or within 14 days of a hearing, whichever is earlier. For the sake of avoiding undue delays, the commenter suggested that the timeframes be shortened to 30 days and five days, respectively.

RESPONSE: The Department does not believe that 30 days is a reasonable maximum amount of time for an intervenor to request information, review the filing and adequately develop its analysis or arguments regarding a filerís rate filing. The Department similarly does not believe that five days prior to a hearing is a reasonable amount of time. The Department is amending N.J.A.C. 11:3-17.6(d) to reference N.J.A.C. 11:3-18.4.

COMMENT: One commenter objected to N.J.A.C. 11:3-17.7, the awarding of fees and expenses. The commenter stated that any awarding of fees and expenses should be for actual and not speculative fees and expenses and only if the intervenor made a "substantial contribution" to the filing. The commenter stated that the proposal should be amended to provide for reimbursement to a filer in the event that an intervenor files a frivolous intervention. The commenter stated that this section should be amended to provide that a filer may object to the awarding of fees and expenses for a substantial contribution as defined in N.J.A.C. 11:3-17.2. The commenter stated that California CCR Section 2662.3 provides good guidance in that the awarding of expenses and fees only occurs if the Commissioner finds that the intervenor made a substantial contribution as defined in the regulation.

RESPONSE: N.J.S.A. 17:29A-46.8g provides that the intervenor shall be awarded reasonable advocacy and witness fees and expenses, if it has made substantial contribution to the adoption of any order or decision. Any application by an intervenor for fees and expenses would, of course, require appropriate supporting documentation as part of the affidavit of expenses referenced in N.J.A.C. 11:3-17.7(a).

COMMENT: One commenter stated that the awarding of fees and expenses does not provide an insurer with a means to predict the potential cost of making a rate filing. The commenter stated that there are no limitations on the number of intervenors, technical examination "expert" fees charges or expenses. The commenter stated that if one intervenor commissions an actuarial review and retains attorneys to aid in discovery, even if unwarranted, the fees could easily reach thousands of dollars.

RESPONSE: An intervenor is only reimbursed for reasonable advocacy and witness fees and expenses if it has made a substantial contribution to the adoption of the Commissionerís Final Order and Decision.

COMMENT: One commenter expressed its objection to N.J.A.C. 11:3-17.7. The commenter stated that there is no provision for the filer to object to the Commissioner's decision. The commenter believes that if the Commissioner determines that the intervenor's involvement in a rate proceeding is meritable, any recovery costs should come from the Department's budget and not the filer. Finally, the commenter stated that in addition to detailing its contribution to the Commissioner's final decision, the commenter believes that the intervenor should affirm that it has adhered to and relied upon the "Actuarial Standards of Practice" and the "Statement of Principles Regarding Property and Casualty Ratemaking" in its analysis and evaluation.

RESPONSE: The determination by the Commissioner of the awarding of advocacy and witness fees and expenses is in accordance with N.J.S.A. 17:29A-46.8g. The Department does not want to unnecessarily restrict individuals or entities from participating in the process as long as they satisfy the basic requirements of this rule. The Department does not believe that it is necessary specifically to require that the intervenor affirm that it adhered to or relied on the Actuarial Standards of Practice and the Statement of Principles Regarding Property and Casualty Ratemaking. The award of advocacy and witness fees and expenses is based on whether the intervenor made a "substantial contribution" to the Commissionerís Final Decision and Order.

COMMENT: One commenter stated that Appendix A sets forth the rate intervenor registration form. This form should reflect higher minimum qualification standards discussed in the comments above. The commenter stated that it should require that the registration form be accompanied by actual documentation to support the assertions made in the registration form. Finally, the Department should conduct an independent review and verification of the assertions and documents submitted by the intervenor. The Departmentís review process should be more than merely accepting the certification and then taking enforcement action at some future date if statements made in the registration are found to be inaccurate.

RESPONSE: The Department believes that the form utilized in Appendix A is appropriate for a person or entity to certify to the qualifications of this rule. As noted in response to comments above, the registration process does not contemplate the kind of review associated with a licensing process.

COMMENT: Several commenters expressed concern with the progress of new rules on expedited rate filings.

One commenter stated that the Legislatureís reference to the expedited prior approval rate filing statute in the rate intervenor statute implies that the Legislature anticipated expedited rate filing procedures to be in place prior to rate intervenor procedures, or at least concurrent with the rate intervenor procedures.

A second commenter stated that the Legislature authorized the establishment of rate intervenors with the specific intent that filers would have the opportunity to file under an expedited rate procedure without the participation of rate intervenors. The commenter stated that these proposed new rules, without an expedited rate regulation, are fundamentally flawed. The commenter believes that the adoption of the rate intervenor procedures will seriously complicate the prior approval process. The Legislature repealed the flex law and replaced it with an expedited rate process. AICRA rolled back rates fifteen percent and authorized a rate intervenor process, but the Legislature carved out expedited rate filings from the purview of an intervenor, leaving no doubt that the expedited rate process must be in place before an intervenor rule could be implemented. Therefore, it is incumbent upon the Department to adopt the expedited rate filing regulations before the rate intervenor regulation can even be considered.

A third commenter stated that expedited rate filings are necessary in order to enable insurers to keep pace with inflation and to create a healthy competitive environment. The commenter stated that without the expedited rate filing, the rate intervenor proposal offers little relief to the automobile insurance industry with respect to insurance premiums keeping pace with inflation.

RESPONSE: These comments are beyond the scope of this rate intervenor rule adoption. The Department is proposing the expedited rate filing rules, N.J.A.C. 11:3-16B, published elsewhere in this issued of the New Jersey Register .

Federal Standards Statement

A Federal standards analysis is not required because these adopted new rules are not subject to any Federal requirements or standards.

Full text of the adoption follows (additions to proposal indicated in boldface with asterisk *thus*; deletion from the proposal indicated in brackets with asterisks *[thus]*;

11:3-17.3 Intervenor registration requirements

    1. Any person or entity that wishes to register as an intervenor in a rate filing shall certify to the following qualifications in the application form incorporated herein by reference as Appendix A to this subchapter.

1. - 2. (No change form proposal.)

    1. Sufficient access to a qualified actuary *(for example, a Fellow of the Casualty Actuarial Society or a Member of the American Academy of Actuaries)* and sufficient expertise to conduct a technical examination of a rate filing;

4. - 5. (No change.)

(b) Ė (d) (No change.)

11:3-17.6 Procedures for intervening in a rate filing

(a) - (b) (No change from proposal.)

(c) If the Department determines that the filing is complete in that it satisfies the requirement set forth in N.J.A.C. 11:3-16, no supplemental information beyond limited *[discovery]* *requests* to seek clarifying or explanatory information shall be permitted *for the intervenor*. The following procedures may be used *by the intervenor* to obtain clarifying, explanatory or supplemental information if necessary:

1. - 3. (No change from proposal.)

*4. If a filer denies an intervenorís information request because the filer believes that the information is a trade secret or is otherwise confidential under New Jersey law, the filer shall notify the intervenor and the Department of these reasons not later than 10 days from receipt of the intervenorís request. After review of the filerís reasons for denial, the Commissioner shall either direct the filer to provide all or part of the information within a specified time, or deny the intervenorís request.*

(d) The intervenorís Final Report on the rate filing shall be filed with the Department *and provided to the filer* within 75 days after the Departmentís receipt of the rate filing or *[within]* 14 days *[of]* *prior to* the hearing *in accordance with N.J.A.C. 11:3-18.4*, whichever is earlier.

 

APPENDIX A

New Jersey Department of Banking and Insurance

Office of Property/Casualty

RATE INTERVENOR REGISTRATION

Name ________________________________________________________________

 

______________________________________________________________________

(Street Address) (City/Town) (State) (Zip Code)

(Area Code) Ė Phone Number Fax Number E-Mail Address

*Rate Intervenors are subject to *[an annual]* *a registration* fee of $100.00, which shall accompany this registration form and shall be made payable to: New Jersey Department of Banking and Insurance. *Rate Intervenors are also subject to an annual renewal fee.*

(I)(We) have expertise in the insurance laws of this State.

(I)(We) have an understanding of the actuarial principles employed in establishing rates and rating systems.

(I) (We) have sufficient access to a qualified actuary and possess sufficient expertise to conduct a technical examination of a rate filing.

(I) (We) have sufficient resources to intervene in the rate filing process as provided in N.J.A.C. 11:3-17.

(I) (We) represent the interest of consumers and accept a duty of fidelity to do so.

(I) (We) have not been convicted of any crime or lost a professional license for misconduct.

(I) (We) certify that the foregoing statements made are true. *(*I am*) (We are)* aware that if any of the statements are willfully false, *(*I am*) (We are)* subject to punishment.

 

 

 

 

Date Signature