California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 4.10 - Rates for Credit Property Insurance and Credit Unemployment Insurance › Article 3 - Regulation of Rates › Section 2670.7 - Calculation of the Maximum Permitted Premium

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Find the Credibility Factor ("Z") from
				  TABLE 1 (Section
				  2670.9) for the experience group.
				  Where actual loss ratios are less than 45%, use the premium earned for the
				  experience group during the experience period; otherwise, use the Reported
				  Claims Count. If either of these measures cannot be directly determined, the
				  Commissioner may accept reasonable approximations of them.
(b) Calculate the credibility adjusted loss
				  ratio ("CLR") for the experience group using the following formula, where ALR
				  is the actual loss ratio for the experience group for the experience period
				  adjusted to the prima facie rate level for the initial annual review and
				  adjusted to the current effective rate level for subsequent annual reviews.
For credit unemployment insurance, the actual loss ratio
					 for each year of the experience period shall be multiplied by the ratio of the
					 prospective unemployment rate minus 3.0% to the historical unemployment rate
					 for that year minus 3.0%. Each year the Commissioner shall determine the
					 prospective and historical unemployment rates to be used.
CLR = Z (ALR) + .60(1-Z)
(c) Calculate the maximum permitted premium
				  rate ("MaxPP") using the following formulas.
For the initial review:
MaxPP = CLR x Prima Facie Rate/ .6
For subsequent reviews:
MaxPP = CLR x Current Approved Rate/ .6
Rates shall be calculated and applied separately for
					 property and unemployment.
(d) Credibility adjusted loss ratios and
				  maximum permitted premium rates shall be redetermined annually.
(e) For the initial review, rates for
				  programs whose provisions differ significantly from the benchmarks shall be set
				  so that the loss ratio shall not be less than the permissible loss ratio set
				  forth in Section
				  2670.6. Prima Facie Rates and
				  Permissible Loss Ratio for Benchmark Programs and shall be approved by the
				  Commissioner before their use. For subsequent reviews, the maximum permitted
				  premium rate shall be calculated as above.
1. New
					 section filed 3-10-2003; operative 4-9-2003. Submitted to OAL for printing only
					 pursuant to Government Code section
					 11343.8 as
					 a regulation that establishes rates in accordance with Government Code section
					 11340.9(g)
					 (Register 2003, No. 11).
2. Change without regulatory effect
					 withdrawing and repealing section pursuant to settlement agreement in Consumer
					 Credit Insurance Association v. John Garamendi (California Superior Court No.
					 03CS00533) filed 5-27-2004 pursuant to section
					 100, title 1, California Code of
					 Regulations (Register 2004, No. 22).
3. New section filed 4-28-2006;
					 operative 5-28-2006. Submitted to OAL for printing only pursuant to Government
					 Code section
					 11343.8 as
					 a regulation that establishes rates in accordance with Government Code section
					 11340.9(g)
					 (Register 2006, No. 17).
Note: Authority cited: Sections
						779.21,
						779.36,
						12921 and
						12926,
						Insurance Code; Credit Insurance General Agents Association v. Payne, 16 Cal.3d
						651 (1976); and 20th Century v. Garamendi, 8 Cal.4th 216 (1994). Reference:
						Sections
						779.36,
						1861.01 and
						1861.05,
						Insurance Code.