Washington Administrative Code › Title 284 - Insurance Commissioner, Office of the › Chapter 284-60 - Disability insurance loss ratios › Section 284-60-050 - Loss ratio requirements for individual disability insurance forms

Current through Register Vol. 24-14, July 15, 2024
The following standards and requirements apply to individual
				disability insurance forms:
(1)
			 Benefits shall be deemed reasonable in relation to the premiums if the overall
			 loss ratio is at least sixty percent over a calculating period chosen by the
			 insurer and satisfactory to the commissioner.
(2) The calculating period may vary with the
			 benefit and renewal provisions. The company may be required to demonstrate the
			 reasonableness of the calculating period chosen by the actuary responsible for
			 the premium calculations. A brief explanation of the selected calculating
			 period shall accompany the filing.
(3) Policy forms, the benefits of which are
			 particularly exposed to the effects of inflation and whose premium income may
			 be particularly vulnerable to an eroding persistency and other similar forces,
			 shall use a relatively short calculating period reflecting the uncertainties of
			 estimating the risks involved. Policy forms based on more dependable statistics
			 may employ a longer calculating period. The calculating period may be the
			 lifetime of the contract for guaranteed renewable and noncancellable policy
			 forms if such forms provide benefits which are supported by reliable statistics
			 and which are protected from inflationary or eroding forces by such factors as
			 fixed dollar coverages, inside benefit limits, or the inherent nature of the
			 benefits. The calculating period may be as short as one year for coverages
			 which are based on statistics of minimal reliability or which are highly
			 exposed to inflation.
(4) A request
			 for a rate increase to be effective at the end of the calculating period shall
			 include a comparison of the actual to the expected loss ratios, shall employ
			 any accumulation of reserves in the determination of rates for the new
			 calculating period, and shall account for the maintenance of such reserves for
			 future needs. The request for the rate increase shall be further documented by
			 the expected loss ratio for the new calculating period.
(5) A request for a rate increase submitted
			 during the calculating period shall include a comparison of the actual to the
			 expected loss ratios, a demonstration of any contributions to and support from
			 the reserves, and shall account for the maintenance of such reserves for future
			 needs. If the experience justifies a premium increase it shall be deemed that
			 the calculating period has prematurely been brought to an end. The rate
			 increase shall further be documented by the expected loss ratio for the next
			 calculating period.
(6) The
			 commissioner may approve a series of two or three smaller rate increases in
			 lieu of one large increase. These should be calculated to reduce lapses and
			 anti-selection that often result from large rate increases. A demonstration of
			 such calculations, whether for a single rate increase or for a series of
			 smaller rate increases, satisfactory to the commissioner, shall be attached to
			 the filing.
(7) Companies shall
			 review their experience periodically and file appropriate rate revisions in a
			 timely manner to reduce the necessity of later filing of exceptionally large
			 rate increases.
Statutory Authority:
				  RCW
				  48.02.060. 83-14-002 (Order R 83-1), §
										284-60-050, filed 6/23/83,
				  effective 9/1/83.