Nature of Administrative Rate Hearings

Abstract

Traditionally, administrative ratemaking policy is developed during consideration of a rate change proposal by an insurance company or rating bureau. The proposal review is one in which the dominant features are adjudicatory in nature: there is a factual controversy between specific parties the outcome of which affects only those insurers who proposed the rate change. Despite these characteristics, there has been a tendency by courts to categorize insurance rate hearings as legislative rather than adjudicatory in nature. This characterization seems to be due to the easily drawn analogy between public utility rate regulation and insurance rate regulation. Public utility regulation involves ratemaking by government, whereas most insurance regulatory policy involves ratemaking by individual insurers with the power of approval or disapproval the responsibility of the commissioner. This distinction is not one that has been cited by most courts as significant. Court opinions, however, do acknowledge the fact that insurance rate cases, like public utility rate cases, do not result in a determination of the legal consequences of past events. The outcome of both has prospective consequences.