Indiana Administrative Code › Title 760 - DEPARTMENT OF INSURANCE › Article 1 - GENERAL PROVISIONS › Rule 9 - Accident and Sickness Insurance-Valuation of Individual Policies › Section 9-3 - Valuation standards

Current through July 10, 2024
Authority: IC
				  27-1-3-7
Affected: IC
				  27-8-5-1;
				  IC
				  27-8-5-3
Sec. 3.
STANDARDS OF VALUATION.
(a) Standards of valuation for policies
				issued January 1, 1952 to December 31, 1963. The minimum reserves on all
				"non-cancellable, guaranteed-renewable, fixed- or level-premium accident and
				health policies" issued from January 1, 1952 to December 31, 1963, inclusive,
				shall be continued on the same basis as prescribed by the Indiana Department of
				Insurance ruling dated November 19, 1951.
(b) Standards of valuation for policies of
				Type A, B, or C listed under II. During the period within which the
				renewability of the policy is guaranteed or the insurer's right to refuse
				renewal is limited, the minimum reserve for policies of Type A, B or C issued
				on or after January 1, 1964 shall be an amount computed on the basis of
				two-year preliminary term tabular mean reserves employing the following
				assumptions:
Mortality: 1958 Commissioners Standard Ordinary Table or
				  1941 Commissioners Standard Ordinary Table or American Men Ultimate
				  Table.
Maximum Interest Rate-3 1/2% compounded annually
Morbidity or other Contingency:
Disability due to accident and sickness-Conference
				  Modification of Class III Disability Table.
Hospital Expense Benefits -1956 Inter-company Hospital
				  Table.
Surgical Expense Benefits -1956 Inter-company Surgical
				  Table.
For accident only, major medical expense, and other benefits
				  not specified above, each company is required to establish reserves that place
				  a sound value on the liabilities under such benefit.
Such mean reserves shall be diminished or offset by
				  appropriate credit for the valuation net deferred premiums. In no event,
				  however, shall the aggregate reserves for all policies issued on or after
				  January 1, 1964 and valued on the mean reserve basis, diminished by any credit
				  for deferred premiums, be less than the gross pro rata unearned premiums under
				  such policies.
Negative Reserves. The negative reserves on any benefit may
				  be offset against positive reserves for other benefits in the same individual
				  or family policy, but if all benefits of such policy collectively develop a
				  negative reserve, credit shall not be taken for such amount.
(c) Standard of valuation for policies of
				Type D or E listed under II. For policies of Type D or E, the minimum reserve
				shall be the pro rata gross unearned premium.
(d) Alternative valuation procedures and
				assumptions. Provided the reserve on all policies to which the method or basis
				is applied is not less in the aggregate than the amount determined according to
				the applicable standards specified above, an insurer may use any reasonable
				assumptions as to the interest rate, mortality rates, or the rates of morbidity
				or other contingency, and may introduce an assumption as to the voluntary
				termination of policies. Also, subject to the preceding condition, the insurer
				may employ methods other than the methods stated above in determining a sound
				value of its liabilities under such policies, including but not limited to the
				following:
(i) the use of mid-terminal
				reserves in addition to either gross or net pro rata unearned premium reserves;
(ii) optional use of either the
				level premium, the one-year preliminary term, or the two-year preliminary term
				method;
(iii) prospective
				valuation on the basis of actual gross premiums with reasonable allowance for
				future expenses;
(iv) the use of
				approximations such as those involving age groupings, groupings of several
				years of issue, average amounts of indemnity;
(v) the computation of the reserve for one
				policy benefit as a percentage of, or by other relation to, the aggregate
				policy reserves, exclusive of the benefit or benefits so valued;
(vi) the use of a composite annual claim cost
				for all or any combination of the benefits included in the policies valued.
For statement purposes the net reserve liability for active
				  lives may be shown as (i) the mean reserve with offsetting asset items for net
				  unpaid and deferred premiums, (ii) the excess of the mean reserve over the
				  amount of net unpaid and deferred premiums, or (iii) it may, regardless of the
				  underlying method of calculation, be divided between the gross pro rata
				  unearned premium reserve and a balancing item for the "additional
				  reserve."