Code of Maine Rules
02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
031 - BUREAU OF INSURANCE
Chapter 220 - CREDIT LIFE AND HEALTH INSURANCE
Section 031-220-10 - Prima Facie Credit Accident and Health Insurance Rates

Universal Citation: 02 ME Code Rules ยง 031-220-10

Current through 2024-38, September 18, 2024

Credit accident and health insurance benefits provided in connection with forms filed in accordance with Title 24-A M.R.S.A., Section2858, and this Rule shall be deemed prima facie reasonable in relation to the premiums charged if the schedule of premium rates filed with such forms does not exceed the premium rate standard set forth below:

A. In the absence of an approved rate deviation, the rates per $100 of initial insured indebtedness in connection with closed-end transactions, or open-end transactions for which the number and amount of payments is fixed, are:

Term of Indebtedness* in months Non-Retroactive 30-Day Elimination Period Retroactive 30-Day Waiting Period
Rate Benchmark Loss Ratio Rate Benchmark Loss Ratio
6 0.93 50 1.70 59
12 1.46 55 2.11 67
18 1.75 60 2.43 70
24 1.96 64 2.69 72
30 2.14 67 2.94 73
36 2.31 69 3.15 74
42 2.48 70 3.32 75
48 2.63 71 3.48 76
54 2.77 72 3.61 77
60 2.89 73 3.73 78
72 3.12 74 3.92 80
84 3.32 75 4.17 80
96 3.48 76 4.38 80
108 3.61 77 4.57 80
120 3.71 78 4.73 80
132 3.80 79 4.88 80
144 3.87 80 5.00 80
156 3.97 80 5.11 80
168 4.05 80 5.20 80
180 4.13 80 5.27 80

* For truncated coverage, use the term of insurance.

For terms of indebtedness other than those shown, linear interpolation shall be used.

B. Prima facie monthly premium rates per $1,000 of outstanding indebtedness which are the actuarial equivalent of the prima facie single premium rates shall be computed by the following formula:

OBn = SPn Click here to view Image Gn

where OBn is the monthly premium per $1,000 of outstanding indebtedness;

SPn is the single premium rate per $100 of initial indebtedness;

n is the number of monthly payments; and

Gn = 1 + .0425 n/2 is an interest adjustment. Use of this adjustment

is optional.

C. Prima facie monthly premium rates per $1,000 of outstanding principal balance shall be computed as follows:

(1) For closed-end indebtedness or open-end indebtedness for which the number and amounts of payments is fixed, rates which are the actuarial equivalents of the prima facie single premium rates shall be computed by the following formula:

OPn = SPn Click here to view Image Gn

where OP is the monthly premium per $1,000 of outstanding principal balance;

i is the monthly finance rate;

Click here to view Image ; and

SPn, n and Gn are as defined in subsection B above.

(2) For revolving accounts, rates which are the actuarial equivalent of the prima facie single premium rates shall be computed by the following formula:

OPn = 10 Click here to view Image

where OP is the monthly premium per $1,000 of outstanding principal balance;

MB is the monthly benefit to be paid when the debtor is disabled

PB is the outstanding principal balance;

n is the maximum number of monthly benefit payments

SPn is the defined in subsection B above; and

LRn is the benchmark loss ratio.

The following are special cases of this formula:

(a) When the monthly benefit is 1/n of the outstanding balance at time of disability:

OPn = Click here to view Image[(n) (SPn) - (n-1) ( Click here to view Image) ( Click here to view Image)]

(b) When the monthly benefit is the amount necessary to pay off the indebtedness at time of disability in n months:

OPn = Click here to view Image - [(n) (SPn) - (n-1) ( Click here to view Image)( Click here to view Image)]

D. For critical period disability coverage, the prima facie single premium rates are those shown in Appendix B.

E. Alternative methods of converting single premium rates to monthly premium rates may be approved if it can be demonstrated that:

(1) In the aggregate, the premium for any case, as defined in Section 13, will not be greater than if the methods specified in subsections A through D above were used; and

(2) The method is not unfairly discriminatory.

F. Deviations

(1) The total deviated rates for a specified plan of benefit and term of indebtedness shall be the appropriate promulgated prima facie premium rate multiplied by the deviation ratio.
a. The deviation ratio shall be the ratio of the deviated rate for the average term of indebtedness for the plan to the corresponding prima facie rate.

b. The deviated rate for the average term of indebtedness for the plan shall be the sum of the expense loading and the product of the prima facie claim cost and the adjusted plan ratio.

c. The prima facie claim cost shall be the product of the prima facie rate and the benchmark loss ratio.

d. The expense loading shall be the difference between the prima facie rate and the prima facie claim cost.

e. The adjusted plan ratio shall be computed as follows:

[(-PR -(1) x Z] + 1

where PR is the plan ratio, which is the incurred loss ratio at prima facie rates divided by the benchmark loss ratio; and Z is the credibility factor from the table in Section 13.

f. The average term of indebtedness shall be the term associated with the average prima facie premium per $100 of insured indebtedness. For example, if the average prima facie rate for the 30 day non-retroactive plan is $2.31, then the average term of indebtedness is 36 months.

g. The incurred loss ratio at prima facie rates shall be the incurred losses divided by the sum of the earned premium at prima facie rates and the imputed investment income. Imputed investment income shall be the average of the beginning and ending premium reserve multiplied by 0.06.

The application of this formula is illustrated by the following examples:

CREDIT ACCIDENT AND HEALTH

UPWARD DEVIATION

Plan: 30 Day Non-Retroactive

A. Earned Premium at Prima Facie Rates 190,000
B. Incurred Losses 180,000
C. Imputed Investment Income 10,000
D. Incurred Loss Ratio at Prima Facie Rate [B / (A+C)] 90%
E. Number of Claims Incurred 150
F. Credibility Factor (from table) 90%
G. Average Term of Indebtedness ( in months) 30
H. Prima Facie Rate 2.13
I. Benchmark Loss Ratio 66%
J. Prima Facie Claim Cost [H x I] 1.41
K. Expense Loading [H-J] .72
L. Plan Ratio [D/I] 1.36
M. Adjusted Plan Ratio [(L-1) x F+1] 1.32
N. Deviated Rate for Average Term [(M x J) +K] 2.58
O. Deviation Ratio for All Terms [N / H] 121%

CREDIT ACCIDENT AND HEALTH

DOWNWARD DEVIATION

Plan: 30 Day Retroactive

A. Earned Premium at Prima Facie Rate 190,000
B. Incurred Losses 100,000
C. Imputed Investment Income 10,000
D. Incurred Loss Ratio at Prima Facie Rate [B / (A + C)] 50%
E. Number of Life Years Covered 3,000
F. Credibility Factor (from table) 90%
G. Average Term of Indebtedness (in months) 48
H. Prima Facie Rate 3.60
I. Benchmark Loss Ratio 74%
J. Prima Facie Claim Cost [H x I] 2.66
K. Expense Loading [H - J] .94
L. Plan Ratio [D / I] .68
M. Adjusted Plan Ratio [(L - 1) x F + 1] .71
N. Deviated Rate for Average Term [(M x J) + K] 2.83
O. Deviation Ratio for All terms [N / H] 78%
(2) The credibility factor is to be taken from the table in Section 13.

(3) If the indicated rate exceeds the current rate by less than 10 percent, the current rate shall continue in effect. If the indicated rate is less than the current rate by less than 10 percent, the current rate may continue in effect.

(4) If the indicated rate exceeds the current rate by more than 10 percent but the current rate will have been in effect for less than three years as of the date the deviated rate would otherwise take effect, the current rate shall continue in effect. If the indicated rate is less than the current rate by more than 10 percent but the current rate will have been in effect for less than three years as of the date the deviated rate would otherwise take effect, the current rate may continue in effect.

(5) Experience for the most recent three policy years must be used in determining the plan ratio. If the three-year experience cannot be determined because experience of the prior insurer cannot be obtained, the current rates shall be continued until three years of experience is developed, except:
a. If the prior insurer had scheduled a downward deviation, the new insurer must implement it; and

b. If an insurer has a large account and it has credible experience for a period less than three years, its experience may be used as the basis for a downward deviation.

(6) If a change of plan of benefits occurs, the rate deviation from prima facie for the new plan of benefits must be computed using the plan ratio developed from the prior plan.

(7) Deviations from the prima facie rates other than those indicated by paragraphs (1) through (5) above may be approved under the provisions of Title 24-A M.R.S.A., Section2858. However, in the absence of an approved special deviation under this provision, any downward deviation indicated by paragraphs (1) through (5) must be implemented.

(8) Upward deviations shall not be applied to debtors with closed-end loans whose coverage is already in force on the effective date of the deviation. Downward deviations need not be applied to debtors with closed-end loans whose coverage is already in force on the effective date of the deviation.

G. Premium rates for indebtedness repayable in installments other than as indicated above must be consistent with the above rates.

H. The premium rates specified are considered reasonable for policies which:

(1) Contain no provision excluding or denying a claim for disability resulting from pre-existing conditions except for those conditions for which the insured debtor received medical diagnosis or treatment within six (6) months preceding the effective date of the debtor's coverage and which caused loss within six (6) months following the effective date of the coverage;

(2) May except or restrict coverage for total disability resulting from pregnancy, or intentionally self-inflicted injuries;

(3) Do not condition eligibility for coverage on an employment requirement more restrictive than one requiring that the debtor be employed full-time on the effective date of coverage. Full-time means a regular work week of not less than 30 hours; and

(4) Provide or offer coverage to all debtors regardless of age or to all debtors not older than a specified age limit, which shall not be less than age 65 at the inception of the indebtedness or 66 at the scheduled maturity date of the transaction.

An insurer may file other forms of credit health insurance which meet the requirements of 24-A M.R.S.A., Section2858, provided no such insurance shall be issued with a waiting period, retroactive or non-retroactive, of less than 30 days. Premium rate standards for these contracts must be consistent with the above standards. If the credit health insurance requires evidence of individual insurability, a 10% reduction in the prima facie rate is required unless deviated rates based on experience are in use. No reduction is required if the monthly benefit exceeds $1,000. The Bureau may consider a different reduction if the insurer can provide support for the difference. Premium rates for use with forms which are more restrictive than those set forth above must reflect these variations to the extent that there is a measurable difference in the cost of the coverage provided.

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