Mich. Admin. Code R. 500.1507 - Expense allocation
Rule 7.
(1) Expense
provisions for each category of expenses must be reasonably allocated among
classifications in a manner that equitably reflects variations, if any, in the
manner in which those expenses are anticipated to be incurred with respect to
the groups of individuals or risks defined by those classifications. Expenses,
other than allocated loss adjustment expenses, must not be presumed to be
incurred proportionally to classification relativities based on anticipated
loss.
(2) Expense provisions for
premium taxes, if any, must reflect the applicable premium tax rate.
(3) Expense provisions for each other
category of expenses must be reasonably allocated among classifications based
on losses, coverages, exposures, or other basis that equitably measures the
variations, if any, in the manner in which those expenses are anticipated to be
incurred with respect to the classifications. Expense allocation methods may
include percentage-of-premium, uniform-per-coverage, uniform-per-exposure, or
other basis, as appropriate and justified.
Notes
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