(a) (1) The plan of operation adopted pursuant to subdivision (c) of Section 1063 shall contain provisions whereby each member insurer is required to recoup, in the year following the premium charge, a sum calculated to recoup the premium charge paid by the member insurer under this article by way of a surcharge on premiums charged for insurance policies to which this article applies.
(2) Amounts recouped shall not be considered premiums for any other purpose, including the computation of gross premium tax or agents’ commission.
(b) (1) The amount of any surcharge shall be separately stated on either a billing or policy declaration sent to an insured. The association shall determine the rate of the surcharge and the collection period for each category, and these shall be mandatory for all member insurers of the association who write business in those categories.
(2) Each member insurer shall file a report in accordance with the provisions of the plan of operation indicating the amount of surcharges it has collected.
(A) Member insurers who collect surcharges in excess of premium charges paid in the preceding year pursuant to Section 1063.5 shall remit the excess to the association as an additional premium within 30 days after the association has determined the amount of the excess recoupment and given notice to the member insurer of that amount. The excess shall be applied to reduce future premium charges in the appropriate category.
(B) Member insurers who report surcharge collections that are less than what they paid in the preceding year’s premium charge shall receive reimbursement from the association for the shortfall in surcharge collection.
(c) (1) The plan of operation may permit a member insurer to omit collection of the surcharge from its insureds when the expense of collecting the surcharge would exceed the amount of the surcharge.
(2) A member insurer electing to omit collecting surcharges from any of its insureds shall not be entitled to any reimbursement from the association pursuant to subdivision (b).
(3) However, this section does not relieve the member insurer of its obligation to recoup the amount of surcharge otherwise collectible.
(d) This section applies only to premium charges paid on or after January 1, 2017.
(Amended by Stats. 2017, Ch. 561, Sec. 139. (AB 1516) Effective January 1, 2018.)
Last modified: October 25, 2018