§ 89.83. Rates.
(a) General. Accident and health insurance rate filings will be examined for actuarial adequacy, consistency and equity, including nondiscrimination aspects. Data required should be broken down by the type of filing as prescribed in subsections (b) and (c). The Department will consider in its rate review, along with other pertinent data, the loss ratios submitted by companies as anticipated to be accumulated over the entire period of coverage.
(b) New filings. New filings shall conform with all of the following:
(1) With regard to rates for policies which are initially filed for approval, the Department will not consider acceptable anticipated loss ratios which are lower than the following levels:
Type Percentage Industrial policies 45 All other policies 50
(2) The company shall maintain its records in a condition that loss ratios may be traced on a closed block basis for each calendar year, thus yielding durational loss ratios relative to a given calendar year of underwriting.
(3) New filings shall also conform with all of the following:
(i) An actuarial memorandum shall be submitted describing how premium rates were computed. The memorandum shall include suitable data indicating the basis for the rates, such as the expected claim costs, the tables or experience, if any, upon which the rates have been based, and an explanation of how the premium rates were obtained.
(ii) If modifications have been based on judgment, this should be indicated as well as any other relevant information which the company considers appropriate.
(iii) Rates shall be adequate but not excessive, provide for internal equity, and be consistent with rates for any concurrent coverage available.
(c) Revision of current rates. Revision of current rates shall conform with the following:
(1) With regard to rate revision, the following minimum loss ratios shall be used in establishing an appropriate level of rate increases:
Type Percentage Industrial policies 50 All other policies 60 (2) Where revision of current rates is involved, benefits should be described, a copy of the appropriate form should be attached and all of the following data shall be furnished:
(i) A statement as to the reason for the revision, the nature of the revision, the detailed areas revised, existing rates, revised rates, the percentage increase or decrease in each rating category and an estimate as to the expected average aggregate increase or decrease in premiums, the recent experience under existing rates showing premiums on both a written and earned basis and showing losses on both a paid and incurred basis.
(ii) If rate increases are not substantial in amount or percentage and there are no unusual re-rating features, the statement required by subsection (a) shall normally suffice in conjunction with completed rate sheets in dollar amounts for categories submitted in duplicate. If, however, rating revisions are substantial, the Department may request any or all of the following information:
(A) Details as to dollar amounts, percentage increases and the effective date of the last increase.
(B) Commission scales by duration and additional expense allocations which are available in the records of the company and are deemed appropriate for purposes of determining surplus strain.
(C) The following data for every rating category, both nationwide and for this Commonwealth:
(I) Premiums written and derivation of premiums earned from changes in unearned premiums and active life reserves. Explicit details as to the type of reserve and basis of its calculation should be supplied for any amounts designated as ‘‘held in reserve.’’ Whether these are accrued claim liabilities or active life reserves or contingency reserves should be specified and a general statement should be made as to the basis of calculation.
(II) Claims paid and derivation of claims incurred from accrued claim liabilities identifying reported and unreported accruals separately. Cash, incurred and supplemental loss ratios should be computed. A loss ratio analysis available by duration should be supplied. If separate figures for this Commonwealth are not available, estimates as to amounts applicable in this Commonwealth should be made.
(D) The Department will examine requests for rate increases on an individual basis as appropriate. It is realized that there are many factors relative to a determination of a reasonable loss ratio for a given coverage. Some of the factors are type of coverage, level of premiums, loss ratio trends, modal expenses, active life and claim reserves as they pertain to rate increases, statistical significance of experience figures in each rating category, previous history of dividend distribution and absolute size of the most recent loss ratios. A minimum experience period of 3 years will be required prior to the approval of a substantial rate increase.
(iii) Data submitted for rate revision should be in agreement with annual statement data filed with this Department.
(d) Filing procedure. Proposed rate sheets shall be filed in duplicate on 8 1/2 by 11-inch sheets with the name and address of the company appearing on the rate sheet, unless submitted in notebook form.
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