Disability rate filings: rate making information forms

Issued and entered June 9, 1978 by Thomas C. Jones, Commissioner of Insurance

The attached forms should be completed and submitted with any filing proposing rate modifications for the following types of coverages:

1. Individual policies of disability insurance as defined in Section 3400 of the Michigan Insurance Code of 1956, as amended (the Code); MCLA 500.3400, MSA 24.13400.

2. Family expense insurance policies as defined in Section 3620 of the Code, MCLA 500.3620, MSA 24.13620.

These forms, as described below, require that ratemaking information be submitted in a format which will allow the Commissioner of Insurance (Commissioner) to perform his or her statutory obligation under Section 2242 of the Code, MCLA 500.2242; MSA 24.12242, of determining whether benefits are unreasonable in relation to the premiums charged.

Form 78081 allows an analyst to identify the policy type and form number, its current status, the applicable permissible loss ratio, and the previous rate changes. Form 78082 displays historical premium and loss experience. The data in this exhibit should be consistent with the company's annual statements and accident and health policy experience exhibits. Reconciliation must must be provided for any difference between the data in Form 78082 and the accident and health policy experience exhibits. Premium and loss data should be shown for each year since first issued. At the company's option, cumulative experience and the most recent five calendar year experience may be substituted. Data should be national experience, but a company may also submit Michigan experience if credible. If rates vary by state, differences should be explained and justified.

It is anticipated that most filers will base rate changes on cumulative experience to date. However, the Commissioner recognizes that loss ratios, especially paid to written ratios, can disguise emerging experience. If a company projects experience beyond the most recent data period, the following criteria will be used to evaluate that portion of the filing.

1. Projections should be based on actual and credible experience for the particular form, should produce results which reasonably can be expected to happen, and must be fully explained and justified.

2. Projections must take into account and benefit limits, such as per day maximums or per procedure maximums, and any trend built into premium calculations.

3. Premiums should be adjusted to current rate levels.

4. Most recently available data must be used.

5. Any reserve changes or any other adjustments affecting premiums and losses must be explained and justified.

Compliance with the Bulletin and Forms 78081 and 78082 is in addition to any other requirements prescribed by the Commissioner or required by the Code. These requirements affect only filings which change overall rate levels on policies currently being issued in Michigan or on policies where renewal premiums are being collected. Each request must include a proposed rate schedule, a loss ratio certification required by Administrative Rule R 500.804, and a rate certification required by Bulletin 77-1 regarding interim filing procedures for rates subject to Section 2027 of the Code, MCLA 500.2027, MSA 24.12027.

Therefore, I am directing, by Order 78-1175-R which adopts this Bulletin, pursuant to authority granted to the Commissioner by the Code, that all insurers authorized to issue policies of life and disability insurance shall make filings for: (1) Individual policies of disability insurance as defined in Section 3400 of the Code, MCLA 500.3400, MSA 24.13400, and (2) Family expense insurance policies as defined in Section 3620 of the Code, MCLA 500.3620, MSA 24.13620, in accordance with forms which are attached and incorporated in this Bulletin as Forms 78081 and 78082.

Failure to substantially comply with these forms with instructions may result in rejection of the materials submitted as not constituting a rate filing for purposes of the Code.

Filings should be sent to:

Commissioner of Insurance

Michigan Insurance Bureau
Department of Commerce
Post Office Box 30220
Lansing, Michigan 48909

Attention: Life and Health Standards Market Standards Division

All filings shall be accompanied by a transmittal letter that summarizes the rate request and the forms and supporting material provided by the Company. The transmittal letter should include the name and phone number of the company's contact person for the filing.

This Bulletin shall be effective July 1, 1978.