assessment as well as on a pre-funded basis. Of course, an overall limit would be fixed. The corporation would also have the authority to borrow funds when necessary. In addition to providing the insolvency coverage, the Corporation also has the advan tages of (1) assisting state regulation in preventing insolvencies; (2) providing expert staff aid to the states; and (3) pursuing criminal prosecutions on a continuous, hard hitting basis. The federal approach was not designed with this in mind. Attacking the problem at the state level has an additional source of strength. In times of great economic stress the NAIC, through its Valuation of Securities Committee, has the power to revalue the assets of all companies. This was done following the debacle of 1929 and was also employed in the panic of 1907. Upon two historic occasions, the NAIC provided the machinery to save the insurance business when other financial insti tutions were undergoing serious difficulties. The Corporation could prove to be flexible and effective in attacking the insolvency problem in various ways. And, it would do so utilizing the resources of the business which has the knowledge. the expertise, and a strong interest in solving the problem. Further more, it would do so within the general framework of state regulation of the insurance business. 1. Summary. This section has reviewed a variety of factors related to the insolvency problem including the magnitude of the problem, the federal appraisal of the problem, the relationship of the industry to the problem, a review of state activity, the residual nature of the problem, some negatives in federally administered guaranty fund approaches, and some alternative approaches within the framework of state regulation. The alternatives raised - although not an exhaustive list - indicate the variety of approaches involved which individual states may want to consider as being suitable to meet their needs. TO PROHIBIT UNFAIR DISCRIMINATION IN UNDERWRITING, CLAIMS HANDLING AND AGENT TERMINATIONS SENATE OF MARYLAND No. 219 THE PRESIDENT-Economic Affairs. By the SENATE, January 29, 1970. Introduced, read first time and referred to the Committee on Economic 1 A BILL ENTITLED AN ACT to add new sections, Sections 234A, 234B, 234C, and 234D to Article 48A, title "Insurance Code," subtitle 15, "Unfair Trade Practices," of the Annotated Code of Maryland (1957 Edition, 1968 Replacement Volume), to follow immediately after Section 234 thereof to establish standards of fairness in insurance underwriting, claim payment, and treatment of agents or brokers, and to confer authority on the Insurance Commissioner to remedy failure to observe such standards. SECTION 1. Be it enacted by the General Assembly of Maryland, 2 That new Sections 234A, 234B, 234C, and 234D be added to Article 3 48A, title "Insurance Code," subtitle 15, "Unfair Trade Practices," 4 of the Annotated Code of Maryland (1957 Edition, 1968 Replace5 ment Volume) to follow immediately after Section 234, thereof, to 6 read as follows: 1 234A. Unfairness in Underwriting. 2 (a) No insurer shall cancel or refuse to underwrite or renew a 3 particular insurance risk or class of risks for any arbitrary, capri4 cious, unfair or discriminatory reason, including but not limited 5 to, a refusal or cancellation based in whole or in part upon the race, 6 creed, color, religion, or national origin of an applicant or policy7 holder. 8 (b) No insurer shall require the existence of special conditions, 9 facts, or situations as a condition to its acceptance or renewal of, 10 a particular insurance risk or class of risks unless the insurer can 11 demonstrate by substantial evidence that the requirement to be satis12 fied will materially reduce its loss exposure; and further that said 13 requirement shall not be applied in any instance in an arbitrary, 14 capricious, unfair, or discriminatory manner based in whole or part 15 upon the race, creed, color, religion, or national origin. 16 234B. Unfairness in Claim Payment. 17 No insurer shall delay or refuse payment of a claim where such 18 delay or refusal would be arbitrary, capricious, unfair, or discrimi19 natory, or based in whole or part upon the race, creed, color, re20 ligion, or national origin of the claimant. EXPLANATION: Italics indicate new matter added to existing law. [Brackets] indicate matter stricken from existing law. SENATE BILL NO. 219 21 234C. Unfairness in Treatment of Agent or Broker. 22 No insurer may cancel or amend a written agreement with an 23 agent, or broker, or refuse to accept business from such agent or 24 broker if the cancellation or amendment is arbitrary, capricious, 25 unfair, discriminatory, or based in whole or part upon the race, 26 creed, color, religion, or national origin of the agent or broker. 27 234D. 28 29 Commissioners' Authority. If the Commissioner in a specific instance shall make a finding that an insurer has violated Sections 234A, 234B, or 234C, he may, 30 in addition to the exercise of any power granted elsewhere in this 81 Article, order the insurer to accept the risk, pay the claim, or accept 32 the business, as the case may be. All hearings and proceedings con33 ducted under Sections 234A, 234B, and 234C, as well as any decision 34 of the Commissioner, shall be subject to appeal by any party in35 volved; said hearings, proceedings, and appeal shall be in accordance 36 with the provisions of Section 40 of Article 48A of the Annotated Code of Maryland. 37 1 2 SEC. 2. And be it further enacted, That this Act shall take effect July 1, 1970. You have recently requested an opinion of this office on the following questions: 1. 2. 3. 4. Is the Board authorized or required by law to con- Is the Board authorized or required by law to consider or include in its automobile rate-making formula or premiums the overall investment income of insurers attributable to their business done in Texas in prescribing and promulgating rates of premium? Is the Board authorized or required by law to consider or include in its automobile insurance rate-making formula or premiums the overall countrywide investment income of the insurers attributable to their automobile insurance premiums in prescribing and promulgating rates of premium? Is the Board authorized or required by law to consider or include in its automobile insurance rate-making formula or premiums the investment income of the insurers attributable to their Texas automobile insurance premiums? follows: Article 5. 01, Texas Insurance Code provides, in part, as "... The Board shall have the sole and exclusive power and authority, and it shall be its duty to determine, fix, prescribe, and promulgate just, reasonable and adequate rates of premiums to be charged and collected by all insurers writing any form of insurance on motor vehicles in this State, including fleet or other rating plans designed to discourage losses from fire and theft and similar hazards and any rating plans designed to encourage the prevention of accidents. In promulgating any such rating plans the Board shall give due consideration to the peculiar hazards and experience of individual risks, past and prospective, within and outside the State and to all other relevant factors, within and outside the State. The Board shall have the authority also to alter or amend any and all of such rates of premiums so fixed and determined and adopted by it, and to raise or lower the same or any part thereof. " Article 5.03, Texas Insurance Code provides as follows: "On and after the filing and effective date of such classification of such risks and rates, no such insurer shall issue or renew any such insurance at premium rates which are greater or less than, or different from, those approved by the Board as just, reasonable, and adequate for the risk to which they respectively apply, and not confiscatory as to any class of insurance carriers authorized by law to write such insurance." Article 5. 04, Texas Insurance Code reads: "To insure the adequacy and reasonableness of rates the Board may take into consideration past and prospective experience, within' and outside the State, and all other relevant factors, within and outside the State, gathered from a territory sufficiently broad to include the varying conditions of the risks involved and the hazards and liabilities assumed, and over a period sufficiently long to insure |