HB2174 - Insurance; modeling and data organizations

Senate Engrossed House Bill insurance; modeling organizations; predictive models (now: insurance; modeling and data organizations) State of Arizona House of Representatives Fifty-seventh Legislature Second Regular Session 2026 CHAPTER 247 HOUSE BILL 2174 AN ACT amending sections 20-235, 20-341, 20-368, 20-370, 20-381, 20-387, 20-388, 20-390, 20-392, 20-393, 20-394, 20-396, 20-409 and 20-3604, arizona revised statutes; RELATING to transaction of insurance business. (TEXT OF BILL BEGINS ON NEXT PAGE) Be it enacted by the Legislature of the State of Arizona: Section 1. Section 20-235, Arizona Revised Statutes, is amended to read: START_STATUTE 20-235. Insurers; financial disclosure; requirements A. The director may adopt rules which require each insurer licensed to write property or casualty insurance in this state to report its loss and expense experience, investment income, administrative expenses and other data, as he may require, for classes of risks which he may designate. Such reports shall be in addition to the annual statement required by section 20-223. B. The department may designate one or more rate service organizations or advisory organizations modeling and data organizations to gather and compile the experience and data. C. The director by order may require an insurer authorized to transact insurance in this state to submit statistical and other financial data including the information prescribed in subsection A of this section in a form and content consistent with rules adopted pursuant to subsection A, with any model guideline, regulation, rule or act adopted by the national association of insurance commissioners or with the classification basis used by the insurer. The director shall prescribe the time period and form in which the data shall be submitted. D. An insurer who fails to provide the information required under subsection C of this section is subject to payment of a late fee of not more than one hundred dollars for each day of delinquency. The director shall notify an insurer of late fees that it will incur as a result of noncompliance with this section at least ten days prior to the date any such late fees become due. END_STATUTE Sec. 2. Section 20-341, Arizona Revised Statutes, is amended to read: START_STATUTE 20-341. Purpose of insurance rate regulation A. The purpose of this article is to promote the public welfare by regulating insurance rates to the end that they shall not be excessive, inadequate or unfairly discriminatory, and to authorize and regulate cooperative action among insurers in rate making and in other matters within the scope of this article. Nothing in this article is intended to prohibit or discourage reasonable competition, or to prohibit or encourage, except to the extent necessary to accomplish the purpose stated in this section, uniformity in insurance rates, rating systems, rating plans or practices. This article shall be liberally interpreted to carry into effect the provisions of this section. B. Where the rules and regulations of a rating bureau or advisory organization modeling and data organization conflict with the law, the rules and regulations do not apply. END_STATUTE Sec. 3. Section 20-368, Arizona Revised Statutes, is amended to read: START_STATUTE 20-368. Modeling and data organizations A. Every group, association or other organization of insurers, whether located within or outside this state, which assists insurers which make their own filings or rating organizations in rate making, by the collection and furnishing of loss or expense statistics, or by the submission of recommendations, but which does not make filings under this article, shall be known as an advisory organization a modeling and data organization . B. Every advisory organization modeling and data organization shall file with the director: 1. A copy of its constitution, its articles of agreement or association or its certificate of incorporation and a copy of its bylaws, rules and regulations governing its activities. 2. A list of its insurer members , if applicable . 3. The name and address of a resident of this state upon whom notices or orders of the director or process affecting the advisory organization modeling and data organization may be served. 4. An agreement that the director may examine the advisory organization in accordance with the provisions of section 20-370. C. If, after a hearing, the director finds that the furnishing of such information or assistance involves any act or practice which is unfair or unreasonable or otherwise inconsistent with the provisions of this article, he may issue a written order specifying in what respects such act or practice is unfair or unreasonable or otherwise inconsistent, and requiring the discontinuance of such act or practice. D. No insurer which makes its own filings nor any rating organization shall support its filings by statistics or adopt rate making recommendations furnished to it by an advisory organization a modeling and data organization which has not complied with this section or with an order of the director involving such statistics or recommendations issued under subsection C of this section. If the director finds the insurer or rating organization to be in violation of this subsection, he may issue an order requiring the discontinuance of the violation. E. This section does not preclude a modeling and data organization from filing a model pursuant to section 20-390, subsection C. END_STATUTE Sec. 4. Section 20-370, Arizona Revised Statutes, is amended to read: START_STATUTE 20-370. Examinations of rating organizations A. The director, as often as he deems it expedient, may make or cause to be made an examination of each rating organization licensed in this state , each advisory organization referred to in section 20-368 and each group, association or other organization referred to in section 20-369. The reasonable costs of such examination shall be paid by the rating organization , advisory organization or group, association or other organization examined upon presentation to it of a detailed account of the cost. B. The officers, managers, agents and employees of the rating organization , advisory organization or group, association or other organization may be examined at any time under oath, and shall exhibit all books, records, accounts, documents or agreements governing its method of operation. C. The director shall furnish two copies of the examination report to the organization, group or association examined and shall notify the organization, group or association that, within twenty days thereafter, it may request a hearing on the report or on any facts or recommendations in the report. Before filing the report for public inspection, the director shall grant a hearing to the organization, group or association examined. D. The report of the examination, when filed for public inspection, shall be admissible in evidence in any action or proceeding brought by the director against the organization, group or association examined, or its officers or agents, and shall be prima facie evidence of the facts stated in the report. E. The director may withhold the report of the examination from public inspection for such time as the director deems proper. F. In lieu of the examination, the director may accept the report of an examination made by the insurance supervisory official of another state, pursuant to the laws of such state. END_STATUTE Sec. 5. Section 20-381, Arizona Revised Statutes, is amended to read: START_STATUTE 20-381. Definitions In this article, unless the context otherwise requires: 1. "Advisory organization": (a) Means any person other than a single insurer who assists two or more insurers or rate service organizations in the making of rates by compiling and furnishing loss or expense statistics or other statistical information and data, or by the submission of recommendations as to rates, forms or supplementary rate information. (b) Does not include a joint underwriting association, any actuarial or legal consultant, any employee of an insurer or insurers under common control or management or their employees or manager. 2. 1. "Loss cost adjustment": (a) Means that portion of a rate filed by an insurer with the director that includes the insurer’s general expenses, total product expenses, taxes, licenses and fee expenses and underwriting profit and contingencies. (b) Does not include loss adjustment expenses or prospective loss costs. 3. 2. "Loss cost modification factor" means that rating factor filed by an insurer with the director for the purpose of modifying the rate service organization’s prospective loss cost filing. 3. "Modeling and data organization": ( a ) Means any person other than a single insurer who assists two or more insurers or rate service organizations in the making of rates by compiling and furnishing loss or expense statistics or other statistical information and data, or by the submission of recommendations as to rates, forms or supplementary rate information. ( b ) Does not include a joint underwriting association, any actuarial or legal consultant, any employee of an insurer or insurers under common control or management or their employees or manager. 4. "Prospective loss costs" means the historical aggregate losses and loss adjustment expenses filed by a rate service organization with the director on which a portion of a rate is based, adjusted through actuarial trending to a future point in time and developed to their ultimate values. 5. "Rate": (a) Means that cost of insurance per exposure unit whether expressed as a single number or as a prospective loss cost with an adjustment to account for the treatment of expenses, profit and individual insurer variation in loss experience before any application of individual risk variations based on loss or expense considerations. (b) Does not include the minimum premium. 6. "Rate service organization": (a) Means any person other than a single insurer who assists insurers by compiling and furnishing loss or expense statistics and recommending, making or filing rates, forms or supplementary rate information. (b) Does not include a joint underwriting association, any actuarial or legal consultant, any employee of an insurer or insurers under common control or management, or their employees or manager. 7. "Supplementary rate information": (a) Means any manual or plan of rates, statistical plan, classification, rating schedule, minimum premium, schedule of fees, including membership fees charged by a reciprocal or mutual insurer, rating rule, rate related underwriting rule and other information used by an insurer in making rates. (b) Does not include the final rate pages that combine the prospective loss costs with the loss cost adjustments. END_STATUTE Sec. 6. Section 20-387, Arizona Revised Statutes, is amended to read: START_STATUTE 20-387. Delegation of rate making and rate filing obligations A. An insurer may establish rates and supplementary rate information based on the factors in section 20-384 using, if desired, the recommendations of an advisory organization a modeling and data organization , or rates and supplementary rate information prepared by a rate service organization, with average expense factors determined by the rate service organization or with such modification for its own expense and loss experience as the credibility of that experience allows. B. An insurer may discharge its obligations pursuant to section 20-385 by giving notice to the director that it uses rates and supplementary rate information prepared by a designated rate service organization, with such information about modifications of the rates as is necessary to inform the director. The insurer's rates and supplementary rate information are those filed by the rate service organization, including any amendments to the rate as filed, subject to the modifications filed by the insurer. C. Licensed rate service organizations, advisory organizations modeling and data organizations and admitted insurers are authorized to exchange information and experience data with rate service organizations, advisory organizations modeling and data organizations and insurers in this and other states and may consult with them with respect to rate making. END_STATUTE Sec. 7. Section 20-388, Arizona Revised Statutes, is amended to read: START_STATUTE 20-388. Disapproval of rates If the director finds that a rate is not in compliance with section 20-383, the director shall issue an order specifying in what respects it so fails and stating that, within thirty days after the order is issued, the rate is no longer effective. The order does not affect any contract or policy made or issued prior to the effective date of the order. The order shall be served immediately pursuant to section 20-151. Any insurer, rate service organization or advisory organization modeling and data organization may request a hearing pursuant to title 41, chapter 6, article 10, and the request for a hearing stays the effectiveness of the order as provided in section 20-162. END_STATUTE Sec. 8. Section 20-390, Arizona Revised Statutes, is amended to read: START_STATUTE 20-390. Modeling and data organizations; filing with director A. An advisory organization a modeling and data organization shall not conduct its operations in this state until it files with the director: 1. A copy of its constitution, charter, articles of organization, agreement, association or incorporation and a copy of its bylaws and any other rules or regulations governing its activities. 2. A list of its insurer members and subscribers , if applicable . 3. The name and address of one or more residents of this state upon whom notices, process affecting it or orders of the director may be served. B. An advisory organization a modeling and data organization shall promptly file any amendments to a document required to be filed pursuant to this section. C. A MODELING AND DATA ORGANIZATION Shall FILE WITH THE DIRECTOR MODELS TO BE USED BY INSURERS IN THIS STATE FOR MAKING RATES. THE DIRECTOR MAY REQUIRE THE modeling and data organization to file SUPPORTING DATA OR ANY ADDITIONAL INFORMATION RELATED TO THE CONTENT OF THE MODEL AND THE OUTPUTS of the MODEL NECESSARY TO VERIFY THAT THE MODEL COMPLIES WITH THE REQUIREMENTS OF THIS TITLE. D. MODELS, ANY SUPPORTING DATA OR ADDITIONAL INFORMATION requested BY THE DIRECTOR and model outputs filed by modeling and data organizations pursuant to subsection c of this section are CONFIDENTIAL AND NOT SUBJECT TO SUBPOENA or title 39, chapter 1. C. E. It is unlawful for an advisory organization a modeling and data organization to engage in any unfair or unreasonable practice. END_STATUTE Sec. 9. Section 20-392, Arizona Revised Statutes, is amended to read: START_STATUTE 20-392. Rate agreements among insurers prohibited A. Except with respect [Text truncated for display. Full text available on LegiScan.]