69O-149.008. Loss Ratio Guarantee Filings

(1) Applicability. This rule is applicable to individual accident and health insurance policy forms whose original new product filing is submitted for approval on or after October 1, 1991 and to rate revisions for policy forms submitted for approval before October 1, 1991. Insurers are not required to make filings pursuant to the provisions of Section 627.410(8), F.S. However, insurers may elect to exercise the loss ratio guarantee option in Section 627.410(8), F.S., in lieu of making filings pursuant to Sections 627.410(6) and (7), F.S. If an insurer elects the loss ratio guarantee option, then the provisions of Section 627.410(8), F.S., and this rule are mandatory. Medicare Supplement policies, as defined by Section 627.672, F.S.; long-term care policies, as defined by Section 627.9404, F.S.; and other policy forms under which more than 50% of the policies are issued to individuals age 65 or over, are not eligible to be filed pursuant to the loss ratio guarantee provisions of Section 627.410(8), F.S.

(2) Initial Filing Exercising the Loss Ratio Guarantee Option. In order for an insurer to exercise the rate filing option in Section 627.410(8), F.S., the initial loss ratio guarantee filing for new products and for rate revisions to already-approved forms shall be made in compliance with Rules 69O-149.001 through 69O-149.006, F.A.C., and shall be accompanied by a specific written statement regarding the details of the loss ratio guarantee, documenting the durational and lifetime loss ratios. The terms of the guarantee, and the durational and lifetime loss ratios, are subject to Office approval. The guarantee shall be signed by an officer of the insurer.

(3) Rate Renewals Pursuant to a Currently Approved Loss Ratio Guarantee. The rates shall be considered approved upon receipt by the Office of a filing which contains the rates and any modification factors, if applicable, and is accompanied by the most current approved loss ratio guarantee. This guarantee shall:

(a) Be in writing;

(b) Be signed by an officer of the insurer;

(c) Contain a presentation of the anticipated lifetime and durational target loss ratios contained in the actuarial memorandum in the filing when it was originally approved. If statutory changes render any portion of the original actuarial memorandum obsolete, an amended memorandum shall be filed to reflect those changes and shall contain revised durational and lifetime target loss ratios, which are subject to approval by the Office;

(d) Contain a guarantee that the applicable loss ratios for the experience period in which the revised rates will take effect, and for each one year experience period thereafter until further revised rates are filed, will meet the applicable durational and lifetime target loss ratios;

(e) Contain a certification, signed by an actuary, that the currently expected lifetime loss ratio is not more than 5% less than the filed lifetime loss ratio. The certification shall contain the currently expected lifetime loss ratio and its justification;

(f) Contain a guarantee that the applicable loss ratio results for the experience period shall be audited at the insurer’s expense by an independent auditor. An independent auditor shall be an actuary or an accountant who is without bias with respect to the insurer and who is free from any obligation to or interest in the insurer, its management, or its owners. The independent auditor shall not have any relationships with the insurer or any conflict of interest which would impair integrity or objectivity or give the impression of impairing integrity or objectivity. The audit shall be performed in the second calendar quarter of the year following the end of the experience period and the results of the audit shall be reported to the Office no later than the end of that quarter. The audit shall be performed in accordance with generally accepted actuarial and accounting principles and shall conform to the actuarial demonstration requirements set forth in Rule 69O-149.006, F.A.C.;

(g) Contain a guarantee that a refund will be made to policyholders, of the amount necessary to bring the applicable experience period loss ratio up to the durational target loss ratios referred to in paragraph (c), above. Any such refund shall:

1. Be proportional, based on earned premium during the experience period;

2. Be made to all policyholders in this state who are insured under the applicable policy form as of the last day of the experience period;

3. Not be required for an individual if that refund would be less than $10. Refunds of less than $10 shall be aggregated and paid proportionally to the policyholders receiving refunds;

4. Include interest compounded monthly at the then current variable loan interest rate for life insurance policies established by the National Association of Insurance Commissioners, from the end of the experience period until the date of payment;

5. Be paid during the third calendar quarter of the year following the experience period. However, no refund shall be made until 60 days after the filing of the audit report required by paragraph (f), above; and

6. Be calculated so that the refund is subtracted from earned premiums in the loss ratio calculation. The premium refund shall not be considered a benefit payment; and

(h) Contain a guarantee that if the applicable loss ratio exceeds the durational target loss ratio for that experience period by more than 20% of the durational target loss ratio, the insurer shall withdraw the policy form for purposes of issuing new policies, if so directed by the Office. This guarantee will apply only when there are at least 2,000 policyholders nationwide or 2,000 accumulated policyholder years.

(4) “Applicable loss ratio” shall be defined as the loss ratio attributable solely to this state if there are 2,000 or more policyholders in the state. If there are at least 500 policyholders in the state, but fewer than 2,000, the applicable loss ratio shall be the linear interpolation between the nationwide and state-only loss ratios. For example, if there are 1,200 policyholders in the state, the applicable loss ratio is

(1,200 - 500)	state	+	(2,000 - 1,200)	U.S.
_____________	x loss ratio		_____________	x loss ratio
(2,000 - 500)			(2,000 - 500)

 

If there are fewer than 500 policyholders in the state, the applicable loss ratio shall be the nationwide loss ratio.

Specific Authority 624.308 FS. Law Implemented 627.410 FS. History–New 5-14-92, Formerly 4-149.008.