: The rule interprets, clarifies and implements the related statutes for Reasonableness of Benefits in Relation to Premiums; establishes ARC filing procedures; and requires the experience exhibit in the actuarial memorandum be in an Excel document.

DEPARTMENT OF FINANCIAL SERVICES
OIR Insurance Regulation

RULE NO: RULE TITLE
69O-149.005: Reasonableness of Benefits in Relation to Premiums
PURPOSE AND EFFECT: : The rule interprets, clarifies and implements the related statutes for Reasonableness of Benefits in Relation to Premiums; establishes ARC filing procedures; and requires the experience exhibit in the actuarial memorandum be in an Excel document.
SUMMARY:
SUMMARY OF ESTIMATED REGULATORY COSTS: No Statement of Estimated Regulatory Cost was prepared.
Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.
SPECIFIC AUTHORITY: 624.308, 627.410(6)(b), (e), F.S.
LAW IMPLEMENTED: 626.9541(1), 627.410, 627.411(1)(a), (e), 627.9175, F.S.
IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE TIME, DATE AND PLACE SHOWN BELOW(IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):
TIME AND DATE: 9:30 a.m., May 22, 2006.
PLACE: 116 Larson Building, 200 East Gaines Street, Tallahassee, Florida.
Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Linda Ziegler, Life and Health Product Review, Office of Insurance Regulation, E-mail [e-mail]. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Linda Ziegler, Life and Health Product Review, Office of Insurance Regulation, E-mail [e-mail].

THE FULL TEXT OF THE PROPOSED RULE IS:

69O-149.005 Reasonableness of Benefits in Relation to Premiums.

(1) – (11) No change.

(12) Upon request of the Office, the company shall provide actuarial demonstration that benefits provided on a form currently available for sale bear a sound actuarial relationship to benefits provided in other forms currently available for sale in the same rating pool.

(13)(a) Whenever a company makes a non-contractual offering to existing insureds, without underwriting, to replace or exchange their policy with alternate coverage where the original policy is priced on an issue age rate schedule, the rate charged to the insured for the new policy shall recognize the policy reserve buildup, due to the prefunding inherent in the use of an issue at rate basis, to the benefit of the insured.  The method proposed by the company must be filed for approval.  The rate for the conversion shall be at the most similar rating class as was the original coverage.

(b) Not withstanding the above, a company may always convert at the original issue age and duration of the insured without providing justification to the Office.

Specific Authority 624.308(1), 627.410(6)(b)(d), (e) FS. Law Implemented 626.9541(1), 627.410(6)(d), (e), 627.410(7), 627.411(1)(a), (e), 627.9175 FS. History–New 7-1-85, Formerly 4-58.05, 4-58.005, Amended 4-18-94, 11-20-02, Formerly 4-149.005, Amended 5-18-04, Amended ____________.

 

69O-149.006 Actuarial Memorandum.

(1) – (2) No change.

(3) Deions.

(a) No change.

(b) The deions, by item number, of the terms listed above in subsection (2) follow:

1. – 22. No change.

23. Experience on the Form (Past and Future Anticipated): This section shall display the actual experience on the form and that expected for the future.

a. – c. No change.

d. The experience exhibit shall be available to be submitted upon request directly to the assigned analyst electronically in an active Excel worksheet or workbook, i.e., not converted to a PDF or other image format.  Formulas used to develop other values in the worksheet or workbook shall be included.  It is noted that the I-file system does provide for the submission of information on a trade secret basis.  If this is used, the company shall additionally file a workbook without the trade secret information for the public domain.

24. – 28. No change.

Specific Authority 624.308(1), 627.410(6)(b), (e) FS. Law Implemented 627.410(1), (2), (6), 627.411(1)(e) FS. History–New 7-1-85, Formerly 4-58.06, 4-58.006, Amended 4-18-94, 4-9-95, 11-20-02, 6-19-03, Formerly 4-149.006, Amended 5-18-04,___________.

 

69O-149.007 Annual Rate Certification (ARC) Filing Procedures.

(1) – (3) No change.

(4) Non-cancellable coverages which are no longer available for sale and which have not been sold or marketed for at least 5 years shall be eligible for an exemption from the filing requirements of this rule.  The exemption is limited to the ARC filing requirements and does not exempt the form from the reasonableness standards of Rule 69O-149.005, F.A.C.

(a) An insurer shall be exempt from the ARC filing requirements if the form meets compliance with the reasonableness standards.  A company that exercises this exemption and is subsequently discovered to have not met the standards shall, in addition to other administrative remedies, be required to enhance benefits and make refunds to bring the form into full compliance with the loss ratio standards of Rule 69O-149.005, F.A.C.

(b) Notwithstanding (a) above, a company may request such exemption in  writing, including an experience exhibit demonstrating compliance with the standards of Rule 69O-149.005, F.A.C., and how the form is reasonably expected to remain in compliance with such standards.  If the Office grants such exemption, the company shall not be subject to administrative remedies for failure to file or compliance with the loss ratio standards of Rule 69O-149.005, F.A.C.

(5) An ARC filing shall consists of:

(a) – (b) No change.

(c) A certification by an actuary, in accordance with subparagraph 69O-149.006(3)(b)28., F.A.C.  For policies subject to the provisions of Part II of Rule 69O-157, F.A.C., the certification in accordance with Rule 69O-157.108(1)(c), F.A.C., is required.

(6)(a) A filing shall include only forms that are pooled together for rating purposes as provided by Rule 69O-149.003(1), F.A.C. Separate filings shall be made for separate rating pools.

(b) Forms that are pooled together for rating purposes should be submitted under a single ARC filing. The company may request that an ARC filing may be made for a form separate from the other forms within the rating pool. Making separate ARC filings for forms that would otherwise be considered combined for rating purposes does not constitute a change in the forms to be pooled for rating purposes. At the time any of the forms would be filed for a rate change, all forms shall be pooled as required by subsection 69O-149.003(1), F.A.C., regardless of how the forms were filed for ARC compliance.

(7) No change.

(8) When a company using a current rate schedule is unable to demonstrate that the minimum loss ratio standards in Rule 69O-149.005, F.A.C., are met, it shall make a rate filing with the Office pursuant to Rule 69O-149.003, F.A.C., to reduce rates, enhance benefits, make refunds, or a combination of these both to satisfy the standards.

(a) A company may make a certification in compliance with this rule without such change to benefits, refunds, or premiums if the A/E ratio for the past experience periods are, both in pattern and aggregate value, consistently at or in excess of .85; or.

(b) For rating pools that are not fully credible, the company may make a certification in compliance with this rule if both the lifetime A/E ratio and the future A/E ratio are at or in excess of .85 when assuming best estimate assumptions in determining projected values. In determining the necessary adjustment, the company may assume up to a 15 percent margin in future projected claim costs and may target a future and lifetime actual to expected ratio of .85.

(c) If the certification in (a) or (b) is unable to be made, and the company has been in compliance with these rules, the company shall make a rate filing pursuant to Rule 69O-149.003, F.A.C., to reduce rates, enhance benefits, make refunds, or a combination of these which shall target a future A/E ratio of at least 1.0.

(9) – (10) No change.

Specific Authority 624.308 FS. Law Implemented 627.410 FS. History–New 5-14-92, Amended 11-20-02, Formerly 4-149.007, Amended 5-18-04, __________.

NAME OF PERSON ORIGINATING PROPOSED RULE: Linda Ziegler, Life and Health Product Review, Office of Insurance Regulation.
NAME OF SUPERVISOR OR PERSON WHO APPROVED THE PROPOSED RULE: Richard Robleto, Deputy Commissioner, Office of Insurance Regulation.
DATE PROPOSED RULE APPROVED BY AGENCY HEAD: April 12, 2006
DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAW: February 3, 2006.