(1)
New Forms
With respect to a new form, benefits may be considered
reasonable in relation to premiums provided the anticipated loss ratio is at
least as great as shown in the following table:
| Type of |
Renewal Clause |
| Coverage |
OR |
CR |
GR |
NC |
| Medical Expense |
60% |
55% |
55% |
50% |
| Loss of Income and Other |
60% |
55% |
50% |
45% |
Definitions of Renewal Clause
OR - Optionally Renewable: renewal is at the option of the
insurance company.
CR - Conditionally Renewable: renewal can be declined by the
insurance company only for stated reasons other than deterioration of
health.
GR - Guaranteed Renewable: renewal cannot be declined by the
insurance company for any reason, but the insurance company can revise rates on
a class basis.
NC - Non-Cancellable: renewal cannot be declined nor can
rates be revised by the insurance company.
If satisfactory justification is submitted to the Department
of Insurance for a policy form, including riders and endorsements, under which
the expected average annual premium per policy is $100 or more but less than
$200, the company may be permitted to subtract up to 5 percentage points from
the numbers in the table above, or if less than $100, subtract up to 10
percentage points.
The average annual premium per policy and the average
anticipated loss ratio shall be computed by the insurer based on an anticipated
distribution of business by all applicable criteria having a price difference,
such as age, sex, amount, dependent status, rider frequency, etc., except
assuming an annual mode for all policies (i.e., the fractional premium loading
shall not affect the average annual premium or anticipated loss ratio
calculation).
(2) Rate
Revisions.
With respect to filings of rate revisions for a previously
approved form, benefits may be considered reasonable in relation to premiums
provided the following standards are met:
(a) With respect to policies issued on and
after the effective date of the revision, the standards are the same as in
Paragraph (1) of this Rule, except that the average annual premiums shall be
determined based on an actual rather than an anticipated distribution of
business.
(b) With respect to
policies issued prior to the effective date of the revision, both subparagraph
(a) above and this subparagraph (b) shall be at least as great as the standards
in Paragraph (1) of this Rule:
1. The
anticipated loss ratio over the entire period for which the revised rates are
computed to provide coverage;
2.
The ratio of (i) to (ii) where:
(i) is the sum
of the accumulated benefits, from the original effective date of the form to
the effective date of the revision, and the present value of future benefits,
and
(ii) is the sum of the
accumulated premiums, from the original effective date of the form to the
effective date of the revision, and the present value of the future premiums,
such present values to be taken over the entire period for which the revised
rates are computed to provide coverage, and such accumulated benefits and
premiums to include an explicit estimate of the actual benefits and premiums
from the last date as of which an accounting has been made to the effective
date of the revision. Interest shall be used in the calculation of these
accumulated benefits and premiums and present values only if it is a
significant factor in the calculation of this loss ratio.
3. Other methods, in addition to those in
this Paragraph (2) may be used to calculate rate revisions. However, the
minimum anticipated loss ratio thus calculated must be at least as great as the
standards in Paragraph (1), with consideration given active life reserves, and
such methods must be approved by the Insurance Commissioner.
(3) Anticipated loss
ratios different from those indicated in Paragraphs (1) and (2) above will
require justification based on the special circumstances that may be
applicable.
(a) Examples of coverages that may
receive special consideration are as follows:
1. accident only;
2. short term non-renewable, e.g., airline
trip; student accident;
3.
specified peril, e.g., cancer, common carrier; and
4. other special risks.
(b) Examples of other factors that may
receive special consideration are as follows:
1. marketing methods, giving due
consideration to acquisition and administration costs and to premium
mode;
2. extraordinary
expenses;
3. high risk of claim
fluctuation because of the low loss frequency or the catastrophic or
experimental nature of the coverage; and
4. product features such as long elimination
periods, high deductibles and high maximum limits.
(4) Companies are urged to review
their experience periodically and to file rate revisions, as appropriate, in a
timely manner to avoid the necessity of later filing of exceptionally large
rate increases.
Notes
Tenn. Comp. R. & Regs. 0780-01-92-.08
Emergency rule filed
August 29, 2011; effective through February 25, 2012. Original rule filed
November 22, 2011; effective February 20,
2012.
Authority: T.C.A. ยงยง
4-5-206,
56-1-212,
56-2-201,
56-2-301,
56-26-102,
56-26-103,
56-26-114, 56-26202,56-27-112,
56-28-106, 56-29-117, 56-32-107 and
Public Law
111-148 as amended by
Public Law
111-152 (2010).
