Section 117C. (a) The following method of determination of premium rates with
(b) The following are the procedures for determining the maximum premium rates
A. Rate Review.
(1) Minimum loss ratio test: Benefits will be considered reasonable in
(i) for credit life insurance, fifty per cent and
(ii) for credit accident and health insurance, fifty-five per cent.
In applying the minimum loss ratio test, the commissioner shall make
(2) When deviated rates are in use: If an insurer has deviated rates approved
(3) Frequency of rate review:
(i) The rate review will be made each year for all classes of business except
(ii) The rate review will be made every three years for the motor vehicle
B. Use of Nominal Rates.
An insurer that has filed rates which are equal to or lower than the nominal
C. Use of deviated rates.
(1) Use of rates higher than nominal rates:
If the minimum loss ratio test produces a loss ratio that exceeds the minimum
(2) Use of rates lower than nominal rates:
If the minimum loss ratio test produces a loss ratio that is lower than the
(3) Determination of deviated rates for all classes of business except for
If deviated rates are to be filed under clauses (1) or (2), the insurer may
(i) Applied uniformly to all accounts of the insurer;
(ii) Applied on an equitable basis approved by the commissioner to only one or
(iii) Applied according to a case rating procedure on file with the
(4) Determination of deviated rates for the motor vehicle dealers class of
(i) The motor vehicle dealers class of business case rate for each plan of
(ii) The commissioner shall on or before October first, nineteen hundred and
(iii) The commissioner shall on or before October first, nineteen hundred and
The rate for each account which has been deviated must be redetermined on the
D. Use of rates determined by standard case rating procedure.
An insurer, by written notice to the commissioner of its election to do so,
(1) Determination of case rate:
An insurer may use a rate for an account not greater than the case rate for
(i) Single account cases and multiple account cases:
If the account is within the definition of a single account case or of a
(ii) Pooled account cases:
If the account is in a pooled account case, the case rate for each account
(iii) New accounts without experience:
If a new account of an insurer has no experience in this commonwealth, the
(2) Calculation of case rate:
(i) Symbols and Definitions
NR = Nominal Rate
ALR = Actual Loss Ratio for case at Nominal Rate Basis
ELR = Minimum Loss Ratio Standard of clause (1) of paragraph A.
Z = Credibility Factor for Case
CLR = Credibility Adjusted Case Loss Ratio at Nominal Rate Basis
= (Z × ALR) + ((1 - Z) × ELR)
E = Expense Loading in nominal rate
= (1 - ELR) × NR
NCR = New Case Rate
(ii) New Case Rate
For credit accident and health insurance where CLR is greater than ELR:
NCR = NR (1 + 1.1 (CLR - ELR))
For all other credit accident and health insurance and for all credit life
NCR = (NR × CLR) + E
(3) Minimum changes:
If the new case rate does not differ by more than five per cent from the
(4) Case rate period:
A case rate will be in effect for a period of time not longer than the
(5) Change of insurers:
If a creditor changes insurers, the case rate in effect for his account on the
E. Filing of Rates.
An insurer who has elected to file higher rates under clause (1) of paragraph
F. Reports of Experience:
(1) Each insurer writing said life insurance and accident and health insurance
(2) The commissioner shall summarize said insurance claims experience and loss
(3) Each insurer writing said life insurance and accident and health insurance
For the purpose of the reporting in this paragraph, for nineteen hundred and
G. As used in this section the following terms, unless the context clearly
(1) “Account”, the aggregate credit life insurance or credit accident and
(2) “Average Number of Life Years”, the average number of group certificates
(3) “Case” a “Single Account Case”, a “Multiple Account Case” or a
(i) “Single Account Case”, an account that is at least as credible as the
An insurer may make this election by notice to the commissioner, in writing,
(ii) “Multiple account case”, with the approval of the commissioner, two or
(iii) “Pooled account case”, a combination of all the insurer’s accounts of
(4) “Class of business”, a grouping of the classes of business listed below:
(i) credit unions;
(ii) commercial, cooperative & savings banks;
(iii) finance companies;
(iv) motor vehicle dealers;
(v) other sales finance;
(vi) production credit associations;
(vii) bank—agricultural loans;
(viii) all others
(5) “Credibility factor”, the extent to which the past experience of a case
(6) “Credibility table”, for purposes of the standard case rating procedure
The above integral numbers represent the lower end of the bracket for each “Z” factor. The upper is 1 less than the lower end for the next higher “Z” factor.
(7) “Earned premiums at rates in use”, actual earned premiums, that is, the premiums earned at the premium rates actually charged for coverage in force during the experience period.
(8) “Earned premiums at the nominal rates”, the actual earned premiums adjusted to the amount which would have been earned had the premium rate charged for coverage in force during the experience period been equal to the nominal rate. Reasonable methods of approximation approved by the commissioner may be used.
(9) “Experience”, earned premiums, incurred claims, incurred claim count, number of life years insured, and average amount of insurance during the experience period.
(10) “Experience period”, the most recent period of time for which experience is reported, but not a period longer than three full years. Experience period for the motor vehicle dealer pooled account case means the most recent three calendar years for which experience is reported.
(i) If a case develops one hundred per cent credibility in less than three years, the experience period for that case will be the number of full years needed to develop one hundred per cent credibility.
(ii) If a case develops the minimum credibility elected by the insurer in less than three years, the experience period for that case, at the option of the insurer, will be the number of full years needed to develop minimum credibility or three full years.
(iii) New accounts with experience:
If a new account of an insurer has experience in this commonwealth with a prior insurer, the new insurer must use the most recent experience of the account with the prior insurer to the extent necessary to fill out an experience period.
(iv) Accounts with multi-state experience:
If an account has experience in more than this commonwealth, an insurer may use only the experience of the account in this commonwealth to rate the case or, with the approval of the commissioner, may use the multi-state experience of the account for this purpose applied on an equitable basis.
The provisions of subclause (i), (ii), (iii) and (iv) shall not apply to motor vehicle dealers.
(11) “Incurred claims”, total claims paid during the experience period, adjusted for the change in the claim reserve.
(12) “Incurred claim count”, the number of claims incurred for the case during the experience period. This means the total number of claims reported during the experience period, whether paid or in the process of payment, plus any incurred but not reported at the end of the experience period, less the number of claims incurred but not reported at the beginning of the experience period. If a debtor has been issued more than one certificate for the same plan of insurance, only one claim is counted. If a debtor receives disability benefits, only the initial claim payment for that period of disability is counted.
(13) “Loss Ratio”, the ratio of incurred claims to earned premiums at the nominal rate.
(14) “Nominal rates”, the premium rates shown below for credit life insurance and credit accident and health insurance.
(i) For credit life insurance the nominal rates per one thousand dollars of insurance in force per month shall be sixty-nine cents for single life insurance, and one hundred and sixty per cent of said single life insurance rate for joint life insurance.
(ii) For credit accident and health insurance, single premium rates for each one hundred dollars of initial insured indebtedness shall be seventy cents per annum for each of the first four years of the term of coverage, fifty cents per annum for each of the next three years of the term of coverage and twenty-five cents per annum for each year of the term of coverage thereafter. The initial insured indebtedness is the total of all monthly insurance benefits provided.
A monthly rate of one dollar and twenty cents for each one thousand dollars of remaining insured indebtedness each month, reduced by three cents for each year by which the initial scheduled duration of the insurance exceeds sixty months, shall be considered the equivalent of the above single premium rates. The “remaining insured indebtedness each month”, as used in the preceding sentence, is the total of the monthly insurance benefits remaining.
For credit accident and health insurance in connection with interest bearing indebtedness, other than pre-computed indebtedness, a monthly premium rate of one dollar and fifty cents for each one thousand dollars of the remaining principal indebtedness, exclusive of finance charges, shall be considered the equivalent of the above single premium rates.
(15) “Plan of insurance” unless otherwise filed and approved means
(i) credit life insurance on a flat rated basis other than revolving accounts, e.g. including joint and single life coverage, decreasing and level insurance,
(ii) credit life insurance on a revolving account basis,
(iii) credit life insurance on an age-graded basis,
(iv) credit accident and health insurance other than on revolving accounts combining outstanding balance and single premium,
(v) credit accident and health insurance on a revolving account basis.