Tenn. Comp. R. & Regs. 0780-01-04-.06 - PREMIUMS AND IDENTIFIABLE CHARGES

(1) The Commissioner shall disapprove rates or forms if the benefits are not reasonable in relation to the premium charged. The basic prospective test of the reasonableness of this relationship is that an anticipated loss ratio of not less than 50% will be developed on all but joint life coverages, for which a loss ratio of not less than 66 2/3% will be considered reasonable. Rates will be tested retrospectively using the reporting forms which are required to be filed annually.

(2) A creditor may remit and an insurer may collect premiums on either a single premium basis or on a monthly outstanding balance basis. If the creditor adds identifiable insurance charges for credit insurance to the total amount of indebtedness, the creditor has loaned the premium or insurance charge to the debtor and the premium on the insurance charge is deemed collected for the insurer as soon as it is added to the indebtedness. In that event the creditor must remit and the insurer must collect on a single premium basis only. A creditor may remit and an insurer may collect on the monthly basis if the insurance charge or premium is not added to the amount of the loan and does not constitute part of the outstanding indebtedness, or if no direct or indirect finance, carrying, credit or service charge is made to the debtor in connection with the insurance charge or premium.

(3) It shall be presumed that the benefits are not reasonable in relation to the premium charged if the premium rates as filed with the Commissioner exceed the following:

(a) Credit Life Insurance

1. The credit life insurance rates filed with the Commissioner shall be considered reasonable by the Commissioner if the single premium rate for single life decreasing term credit life insurance does not exceed seventy-five cents (73 cents) per annum per one hundred dollars (5100) of initial insured indebtedness, and the single premium rate for single life level term credit life insurance does not exceed a single premium race of one dollar and thirty-eight cents ($1.38) per annum per one hundred dollars ($100) of insured indebtedness.

2. From and after May 1, 1973 a single premium rate of 97.5 cent per annum ($.0813 per month) per 3100 of initial insured indebtedness for joint life (2 lives) decreasing term credit life insurance or a premium payable monthly at the rate of $$1.50 per $1,000 of outstanding indebtedness insured on joint (2 lives) basis.

3. A minimum premium of fifty cents (50 cents) shall be considered reasonable on any policy of credit life insurance. In the event any premium is unearned and to be returned to the insured, no returned premium calculated at less than one dollar ($1.00) need to be refunded.

4. On and after January 1, 1970, such premium rates as may be promulgated from time to time by the Commissioner.

(b) Credit Accident and Health Insurance.

1. From April 15, 1969, through December 31, 1969, the rates shown in Table III, appended hereto.

2. On and after January 1, 1970, such premium rates as may be promulgated from time to time by the Commissioner.

3. The premium rates for joint credit accident and health insurance shall be no greater than 1.9 times the rates for single coverage.

If premiums or identifiable charges are paid monthly on outstanding balances, the monthly premiums shall be related to single premiums or identifiable charges by using the following formula:

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(c) In the promulgation of rates for 1970 and subsequent years, the Commissioner shall be guided by the claim costs and loss ratios demonstrated on Tennessee business and reported on the forms prescribed, but may also use the results of any national mortality or morbidity investigation. The premium rates specified are considered reasonable for pollices which:

1. May condition coverage on the debtor's being in active employment at the time the indebtedness is incurred.

2. Extend coverage to all debtors regardless of age or to all debtors not older than a specified limit, which shall be not less than age 65 at the time the insurance becomes effective.

3. May except from coverage suicide committed, while sane or insane, within two years from the most recent date of issue of the policy or certificate.

(4) An insurer may receive approval of a different premium rate or schedule of premium rates to be used in connection with a particular policy form, or a class or classes of the debtors of a creditor, if the insurer demonstrates to the satisfaction of the Commissioner that the mortality or morbidity experience which may reasonably be anticipated will develop a loss ratio in excess of 50% if the applicable rate standards hereinabove prescribed are used. This may be accomplished by use of either of two methods:

(a) Development of a life insurance rate based on the actual ages and amounts of insurance of those insured, and based on the mortality and interest assumptions used for valuation, with evidence that the age distribution is representative of the composition of the group and can reasonably be expected to remain at the level so determined. If this method is used, the life insurance rate must be redetermined and refiled annually, or at any time the policy provisions are changed in such a manner as to affect the rate.

(b) When experience is available, the following method may be used:

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If this method is used, approval will not be given for a period longer than the credibility period utilized in the filing.

(5) If when based on the experience of the most recent three years as reported on the forms prescribed by the Commissioner, a company's claim experience is such that

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the company shall not use prima facie rates provided above but shall file rates based upon one of the methods in paragraph (4).

(6) If a company proposes to write any type of coverage other than those described herein, it may request a public hearing to determine if a public needs exists for such coverage, and to determine, through credible statistics the initial rate to be employed, except that no hearing will be required to establish the need for lump-sum disability benefits or 7-day non-retroactive accident and health coverages.

(7) If, after study and hearing, the Commissioner determines that prescribed rates as provided in paragraph (2) do not accomplish the purposes of this section, he may prescribe that all rates be calculated in conformity with the methods described in paragraph (3) or in any other appropriate manner.

(8) The ultimate objective of these regulations is that premiums shall be such as to produce single life loss ratios of at least 50%. Since premiums must include margins for taxes and expenses of insurance companies, compensation agreements with creditors which approach or exceed 50% of earned premiums cannot contemplate such loss ratio. Compensation as used herein means commissions, dividends, retrospective rate credits , service fees, expense allowances or reimbursement, gifts or any other form of compensation.

No insurer shall pay or propose to pay, directly or indirectly, to any creditor as compensation for that creditor, total compensation as defined above in excess of 40% of premiums earned excepting that if provision is made for refund of unearned commissions in the event of termination of coverage, commissions may be paid in one sum at the time the single premium policy or certificate is written.

(9) Where an identifiable charge for group credit insurance is made to insured borrowers or purchasers such charge shall not exceed the premium provided for in the group policy issued to the creditor at the date of issue of the certificate.

TABLE I

If C is	z	l-z
less than $10,000	.1414	.8586
$10,000 but less than $20,000	.2458	.7542
$20,000 but less than $30,000	.3162	.6838
$30,000 but less than $40,000	.3741	.6259
$40,000 but less than $50,000	.4243	.5757
$50,000 but less than $60,000	.4690	.5310
$60,000 but less than $70,000	.5100	.4900
$70,000 but less than $80,000	.5477	.4523
$80,000 but less than $90,000	.5831	.4169
$90,000 but less than $100,000	.6165	.3835
$100,000 but less than $150,000	.7071	.2929
$150,000 but less than $200,000	.8367	.1633
$200,000 but less than $250,000	.9487	.0513
$250,000 and over	1.0000	.0000

TABLE II

Coverage
Life:	Premium	k
S.P. Reducing	.75	.405
S.P. Level	1.38	.414
Outstanding Balance	1.17	.407
Accident and Health:
7 day retroactive		.430
all others		.500

TABLE III

No. of Months	Nonretroactive Benefits		Retroactive Benefits
in which	14 day	30 day	7 day	14 day	30 day
Indebtness	Nonretroactive	Nonretroactive
is repayable			Retroactive	Retroactive	Retroactive
1	$ .13	$---	$ .58	$ .40	$-----
2	.42	.13	1.01	.81	.56
3	.68	.35	1.34	1.12	.91
4	.90	.53	1.60	1.36	1.17
5	1.08	.70	1.82	1.55	1.38
6	1.24	.85	2.01	1.71	1.54
7	1.37	.98	2.18	1.86	1.69
8	1.50	1.09	2.32	1.98	1.82
9	1.61	1.20	2.46	2.10	1.94
10	1.71	1.30	2.58	2.20	2.04
11	1.81	1.39	2.69	2.30	2.14
12	1.89	1.48	2.79	2.39	2.23
13	1.97	1.56	2.89	2.47	2.32
14	2.05	1.63	2.98	2.55	2.40
15	1.70	3.06	2.62	2.47	2.32
16	2.19	1.77	3.14	2.69	2.55
17	2.26	1.83	3.25	2.76	2.61
18	2.32	1.89	3.29	2.82	2.68
19	2.38	1.95	3.36	2.88	2.74
20	2.44	2.01	3.43	2.94	2.80
21	2.49	2.07	3.50	3.00	2.85
22	2.55	2.12	3.56	3.05	3.91
23	2.60	2.17	3.62	3.11	2.96
24	2.65	2.22	3.68	3.16	3.02
25	2.70	2.27	3.74	3.21	3.06
26	5.75	2.32	3.79	3.26	3.12
27	2.80	2.37	3.85	3.31	3.16
28	2.84	2.41	3.90	3.35	3.21
29	2.89	2.46	3.95	3.40	3.56
30	2.93	2.50	4.01	3.44	3.30
31	2.97	2.54	4.06	3.49	3.35
32	3.02	2.59	4.11	3.53	3.39
33	3.06	2.63	4.16	3.57	3.43
34	3.10	2.67	4.21	3.16	3.47
35	3.14	2.71	4.25	3.65	3.51
36	3.18	2.75	4.30	3.69	3.55
37	3.22	2.79	4.35	3.73	3.59
38	3.26	2.83	4.39	3.77	3.63
39	3.30	2.86	4.44	3.81	3.67
40	3.34	2.90	4.48	3.85	3.71
41	3.37	2.94	4.52	3.89	3.75
42	3.41	2.98	4.57	3.92	3.78
43	3.45	3.01	4.61	3.96	3.82
44	3.48	3.05	4.65	3.99	3.85
45	3.52	3.08	4.69	4.03	3.89
46	3.55	3.12	4.73	4.06	3.93
47	3.59	3.15	4.77	4.10	3.96
48	3.62	3.18	4.81	4.13	4.00
49	3.65	3.22	4.85	4.17	4.03
50	3.69	3.25	4.89	4.20	4.06
51	3.72	3.28	4.93	4.23	4.10
52	3.75	3.32	4.97	4.27	4.13
53	3.79	3.35	5.00	4.30	4.16
54	3.82	3.38	5.04	4.33	4.19
55	3.85	3.32	5.08	4.36	4.22
56	3.88	3.44	5.11	4.39	4.25
57	3.91	3.47	5.15	4.42	4.29
58	3.94	3.50	5.18	4.45	4.32
59	3.97	3.54	5.22	4.49	4.35
60	4.00	3.57	5.26	4.52	4.38

Notes

Tenn. Comp. R. & Regs. 0780-01-04-.06

Original rule certified June 10, 1974. (3)(a) - Amendment filed January 9, 1975; effective February 8, 1975. Amendment filed March 31, 1995; effective June 16, 1995.

Authority: T.C.A. §§ 45-5-403, 56-7-901 and 56-8-110.