PREFILED JAN 09 2026
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REFERENCE TITLE: insurance; modeling organizations; predictive models |
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State of Arizona House of Representatives Fifty-seventh Legislature Second Regular Session 2026
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HB 2174 |
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Introduced by Representatives Livingston: Blackman
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AN ACT
amending section 20-381, arizona revised statutes; amending title 20, chapter 2, article 4.1, arizona revised statutes, by adding section 20-390.01; RELATING to the 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 20-381, Arizona Revised Statutes, is amended to read:
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 and other statistical information and data, or by the submission of recommendations as to rates, forms or supplementary rate information.
(b) Does not include:
(i) 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.
(ii) Any person that furnishes nonstatistical information or data, including data that has not been aggregated and analyzed by the person for use by an insurer for risk-based underwriting.
(iii) A modeling organization.
2. "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. "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.
4. "Modeling organization" means any person that prepares predictive models that are used by insurers in a rate filing but that does not make rates or submit recommendations regarding rates or supplementary rate information.
5. "Predictive model" means a statistical or mathematical model that is used to predict future outcomes or events.
4. 6. "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. 7. "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. 8. "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, a modeling organization, any actuarial or legal consultant, any employee of an insurer or insurers under common control or management, or their employees or manager.
7. 9. "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.
Sec. 2. Title 20, chapter 2, article 4.1, Arizona Revised Statutes, is amended by adding section 20-390.01, to read:
20-390.01. Modeling organizations; filing with director
A. A modeling organization may not make predictive models available for use by an insurer in this state until the modeling organization files all of the following with the director:
1. A copy of the modeling organization's constitution, charter, articles of organization, agreement, association or incorporation.
2. If the modeling organization has two or more member insurers or is controlled directly or indirectly by two or more insurers, a copy of the modeling organization's bylaws and any other rules or regulations that govern the modeling organization's activities.
3. The name and address of one or more residents in this state on whom notices, process affecting the modeling organization or orders of the director may be served.
4. The types of insurance for which the modeling organization has prepared and plans to file one or more predictive models.
B. A modeling organization shall promptly file any amendment to any document that is required to be filed pursuant to subsection A of this SECTION.
C. A modeling organization may file with the director predictive models to be used by insurers in this state. The director may require the filing of supporting data or any additional information related to the content of the predictive model to verify that the predictive model complies with the requirements of this title. Authorized insurers may not use a predictive model unless the predictive model has been approved by the director.
D. Predictive models and any supporting data or additional information requested by the director pursuant to subsection C of this section are confidential, are not subject to subpoena and are exempt from title 39, chapter 1.
E. It is unlawful for a modeling organization to engage in any unfair practice.
Sec. 3. Applicability
This act applies to predictive models that are filed with the department of insurance and financial institutions for approval from and after December 31, 2026. Predictive models that have been filed with and approved by the department of insurance and financial institutions before January 1, 2027 do not need to be refiled with the department after the effective date of this act.