28 Tex. Admin. Code § 3.5002 - Definitions
The following words and terms, when used in this chapter, have the following meanings unless the context clearly indicates otherwise.
(1) Account--The aggregate
credit life insurance or credit accident and health coverage for a single class
of business written through a single creditor, or written through more than one
creditor under common control or ownership, by the insurer, whether coverage is
written on a group or individual policy basis.
(2) Actual earned premium--The total of all
premiums earned at the premium rates actually charged and in force during the
experience period.
(3) Approved
deviation by case--A premium rate or premium rate schedule adjusted in
accordance with the deviation procedures set out in Division 6 of this
subchapter (relating to Deviation Procedures).
(4) Automatic deviation--A premium rate that
is filed pursuant to Insurance Code §
1153.105.
(5) Average number of life years--The average
of the number of group certificates or individual policies in force each month
during the experience period (without regard to multiple coverage) times the
number of years in the experience period.
(6) Case--Either a "single account case" or a
"multiple account case" as follows:
(A)
Single account case--An account that is at least 25% credible or, at the option
of the insurer, any higher percentage as determined by the credibility table
set out in §
3.5603 of this title (relating to
Credibility Table). An insurer exercising this option must in writing notify,
and obtain written approval of the commissioner, of the credibility factor it
will use to define a "single account case." Once the commissioner is so
notified, the credibility factor will remain in effect for the insurer until a
different election has been filed in writing by the insurer and approved by the
commissioner.
(B) Multiple account
case--A combination of all the insurer's accounts of the same class of business
with experience in this state, excluding all single account cases of the
insurer defined in subparagraph (A) of this paragraph, or with the approval of
the commissioner; "multiple account case" also means two or more accounts of
the insurer, having like underwriting characteristics which are combined by the
insurer for premium rating purposes, excluding all "single account cases" as
defined in subparagraph (A) of this paragraph and other "multiple account
cases" defined previously.
(7) Class of business--A class of business
listed as follows:
(A) Class A--Commercial
banks, savings and loan associations and mortgage companies;
(B) Class B--Finance companies and small loan
companies;
(C) Class C--Credit
unions;
(D) Class D--Production
credit associations (agriculture and horticulture P.C.A.s);
(E) Class E--Dealers (including auto and
truck, other dealers, and retail stores); and
(F) Class F--Other than subparagraphs (A) -
(E) of this paragraph.
(8) Closed-end transactions--Credit
transactions other than "open-end transactions" as defined in this
section.
(9) Credibility
factor--The degree to which the past experience of a case can be expected to
occur in the future. The credibility factor is based either on the average
number of life years or the incurred claim count during the experience period
as shown in the credibility table set out in §
3.5603 of this title. The insurer
must notify the commissioner in writing, and obtain written approval of the
commissioner, about which of the two methods it will use in measuring
credibility. Once the commissioner is so notified, the method will remain in
effect for the insurer until a change has been filed with and approved by the
commissioner.
(10) Credit
disability--Credit Accident and Health.
(11) Earned premium at presumptive premium
rate--Premium earned during the experience period at the presumptive premium
rate set forth in §
3.5206 of this title (relating to
Presumptive Premium Rates). If the rate for a case is not the presumptive
premium rate, premium earned at the presumptive premium rate must be determined
in accordance with the conversion method set forth in Form CI-EP-L or Form
CI-EP-DIS, as appropriate, provided by the department for that purpose, and set
out in an attachment by the insurer to its deviation request form. The forms
can be obtained from the Texas Department of Insurance, Life and Health
Division, Filings Intake, MC-LH-LHL, P.O. Box 12030, Austin, Texas 78711-2030.
The forms can also be obtained from the department's internet website at
www.tdi.texas.gov/forms.
(12) Experience--The earned premiums and
incurred claims for a single or multiple account case. Experience will be the
most recent experience in this state for a class of business, and may include
the experience of the case while with a prior insurer to the extent necessary
to achieve credibility.
(13)
Experience period--The period of time for which experience is reported, but not
for period longer than three years.
(14) 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.
(15) Incurred claims--The liability resulting
from the happening of the contingency insured against whether paid, reported,
not reported or resisted on accounting dates, valued by date of occurrence and,
without reduction for reinsurance, at amounts, excluding claims expenses,
sufficient to discharge the company from all liability and is equal to claims
paid minus unreported claims beginning of period plus unreported claims end of
period minus claim reserve beginning of period plus claim reserve end of
period.
(16) Open-end transactions
or revolving accounts--Transactions in which credit is extended by a creditor
under an agreement whereby:
(A) the creditor
reasonably contemplates repeated transactions;
(B) the creditor may impose a finance charge
from time to time on an outstanding unpaid balance; and
(C) the amount of credit that may be extended
to the debtor during the term of the plan (up to any limit set by the creditor)
is generally made available to the extent that any outstanding balance is
repaid.
(17) Presumptive
premium rate--The rate established by the commissioner and set out in §
3.5206 of this title.
(18) Pro rata method--A method used in
determining premium refunds based on the assumption that premiums are earned in
equal increments over the term of the policy. The premium refunds are
calculated by multiplying the original gross premium by a factor determined by
the formula t/n, in which t is the number of months remaining from its
evaluation date to the end of the loan and n is the number of months in the
original term.
(19) Rule of
anticipation (aka the single premium method)--A method used in determining
premium refunds in which the unearned premium is equal to the gross single
premium for the remaining term and remaining benefits.
(20) Sum of the digits method, aka rule of 78
method--A method used in determining premium refunds in which an unearned
premium factor is calculated by dividing the sum of the original number of
monthly payments by the sum of the remaining number of monthly payments. The
premium refunds are calculated by multiplying the original gross premium by a
factor determined by the formula (t * (t+1)/(n * (n+1), in which t is the
number of months remaining from its evaluation date to the end of the loan and
n is the number of months in the original term.
Notes
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