Policyholder surcharge
The policyholder surcharge applies to all lines of insurance and must be at a uniform rate that is “reasonably calculated.” It also must be stated on either a billing statement or a policy statement sent to an insured.
“Reasonably calculated” means the policyholder surcharge is based on the part of the fraud and regulatory surcharges that are applicable to that policy. For example, if personal lines auto insurance makes up 40% of a company’s premium volume, then 40% of the company’s fraud and regulatory surcharges should be uniformly charged to personal lines auto policies.
“Uniformly charged” means the policyholder surcharge is based on the policy’s annual premium and not a fixed amount assessed without considering the policy’s annual premium.
If an insurer decides to collect the fraud and regulatory surcharges from its policyholders, may a policy be canceled for non-payment if the policyholder does not remit the policyholder surcharge with the premium payment?
No. The fraud and regulatory surcharge and policyholder surcharges are not considered part of the premium. An insurer can't cancel a policy because a policyholder fails to remit the surcharge to the insurer.
Does an insurer have to file new rates (if rates/rating manuals must be filed for a line of business) if it does not plan to recoup the fraud and regulatory surcharges by using a direct policyholder surcharge?
No. If an insurer continues to include fraud and regulatory surcharges in its rate structure, a new rate filing is not necessary. See Section 2 of Understanding the fraud and regulatory surcharges for further guidance.