On appeal from the final order and determination of the Commissioner of Insurance.
R.s. Cohen, A.m. Stein and Kestin, (temporarily assigned). The opinion of the court was delivered by Arnold M. Stein, J.A.D. Kestin, J.s.c. (Temporarily Assigned), Concurring in part and Dissenting in part.
Aetna Casualty & Surety Company and its affiliate companies, the Standard Fire Insurance Company and the Automobile Insurance Company of Hartford, Connecticut, appeal the order of the Commissioner of Insurance denying its application for increase in private passenger automobile premium rates.
It was filed on June 29, 1990. The application then went back and forth between Aetna and the Department of Insurance, with the Department maintaining the position that the carrier's application was incomplete. Id. at 158, 590 A.2d 690. Allstate and Aetna then brought separate actions in the Chancery Division seeking to compel the Commissioner to accept their rate increase applications for filing. Judge Levy ordered the Commissioner to submit Allstate's and Aetna's filings to the Office of Administrative Law for contested case hearings. We affirmed in our opinion of May 14, 1991. Id. at 166, 590 A.2d 690.
The hearings began before the Administrative Law Judge on May 28 and were completed on June 10, 1991. The ALJ rendered his initial decision on September 15, 1991. He concluded that Aetna was not entitled to a rate increase but gave the carrier the option of submitting revised rate schedules consistent with his findings. The Commissioner affirmed, for somewhat different reasons than those set forth by the ALJ.
We accept the Commissioner's findings: as to the application of symbol drift in measuring premium trends; his method of calculating loss development factors for uninsured/underinsured (UM/UIM) motorist claims; and the application of twelve point historical data in calculating loss trends. These Conclusions are amply supported by substantial credible evidence in the record below and should not be disturbed. Clowes v. Terminix Intern., Inc., 109 N.J. 575, 587, 538 A.2d 794 (1988); In re N.J. Medical Malpractice, 246 N.J. Super. 109, 134, 586 A.2d 1317 (App.Div.1991).
We reverse the Commissioner's ruling applying the methodology providing a higher yield rate on invested policyholder
funds in effect at the time of Aetna's filing rather than that in effect at the time of the hearings. We agree with the ALJ's Conclusion that the new regulatory amendment (simple average of most recent 12 monthly numbers for Treasury constant three-year maturity rate) more accurately reflects actual yield rate than the previous calculation method (based on statutory interest rates used by the Internal Revenue Service). See N.J.A.C. 11:3-16.10(a)(8) effective November 26, 1990. The Disposition of this application was considerably delayed. It would be unrealistic and unfair to use an interest yield rate formula which the Department of Insurance recognized as obsolete well before these hearings began. We must assume that the most recent amendment to the regulation reflects a more current and accurate yield rate than that which it replaced. The current method of calculating the yield on premiums should be used. Its adoption preceded the ALJ hearings and its use would not prejudice the factual presentation of the parties.
The centerpiece of Aetna's appeal is the refusal by the ALJ and the Commissioner to consider as ratemaking factors the cost claimed to be associated with depopulation into the voluntary insurance market of drivers formerly insured by the Market Transition Facility (MTF), and that share of projected MTF losses predictably chargeable against Aetna. The argument was hastily conceived just before the ALJ hearings began. Aetna's original application filed back on June 29, 1990, did not and could not include an allowance for anticipated MTF deficits. The MTF did not begin to issue policies until October 1990, after Aetna had already filed. N.J.S.A. 17:33B-11c.
The contested hearings on the application finally commenced on May 28, 1991. Anxious to conclude this already aged application proceeding, Aetna did not amend its filing. Instead, for the first time, shortly before the commencement of hearings, the carrier sought to introduce evidence that its projected costs resulting from depopulation required an additional rate
increase of 21.2%, and that an additional 24.3% increase was needed to offset Aetna's estimated $8 million share of the operating shortfall incurred by the MTF during its first year of operation. This proof was first made available to the ALJ and opposing counsel in the form ...