(1) Each
carrier shall collect and file with the Commissioner by June 30 of each year,
addressed to the Director of the State Rating Bureau, the following experience
data contained in the form prescribed by the Commissioner in
211
CMR 146.102: Appendix A for
each calendar year since inception, for all years accumulated at the interest
assumptions used in the applicable expected durational loss ratio: Earned
Premium, Incurred Claims, Actual Durational Loss Ratio and Expected Durational
Loss Ratio. The calculation shall include Massachusetts experience when
credible and national experience when Massachusetts experience is not credible.
The carrier shall clearly specify in any calculations whether the experience
reported is nationwide or for Massachusetts only.
(2) If on the basis of the experience data as
reported, the carrier's Expected Durational Loss Ratio exceeds its Actual
Durational Loss Ratio, then the carrier shall compare the ratio of it s Actual
Durational Loss Ratio to its Expected Durational Loss Ratio using the following
chart in order to determine whether a corrective action is required:
| Number of Reported Claims in the Period | Ratio
Indicating that Insurer Action is Necessary |
| 1,000 or more | 0.90 or less |
| 100 999 | 0.80 or less |
| 25 99 | 0.65 or less |
| 0 - 24 | 0 or less |
(3) If
corrective action is required according to the foregoing chart, a carrier shall
comply with the following:
(a) A preliminary
plan outlining the policy forms which require carrier corrective action shall
be made with the June 30 filing. If, in the opinion of the carrier's actuary,
the ratio indicating that insurer action is necessary is due to unusual reserve
fluctuations, economic conditions, or other nonrecurring conditions, the
preliminary plan should include that opinion, with appropriate justification.
In such a case, the Commissioner may exempt the policy form from the need for a
corrective action plan for that year. Filing of the final corrective action
plan itself shall be made by the later of October 1 or three months from the
date of denial of the exemption, and must contain the information required
under
211 CMR
42.06(2).
(b) For policies that are not noncancelable,
a corrective action plan shall demonstrate the plan proposing to reduce
premiums, apply dividends, increase benefits, or use any combination of these
or other methods to make corrections so that the carrier's specified disease
product can achieve, as certified by an actuarial fellow as satisfying sound
and reasonable actuarial principles, the loss ratio level that was part of the
original policy filing with the State Rating Bureau and that satisfied the
requirements of
211 CMR
42.06. Any such plan is subject to approval
by the Commissioner and any plan to increase benefits may not be included as
part of the insurer's plan without offering the alternative option of
appropriate premium reductions. Failure to submit such a plan within the
required time period will be a violation of
211
CMR 146.00 and will subject the insurer to the
penalties of M.G.L. c. 175, § 189.
(c) For policies that are noncancelable, a
corrective action plan shall demonstrate the continued reasonableness of the
benefits in relation to premiums, as certified by an actuarial fellow as
satisfying sound and reasonable actuarial principles, justifying continued use
of the policy form or shall demonstrate any correction actions to reduce
premiums, apply dividends, increase benefits, or use any combination of these
or other methods to make corrections so that the carrier's specified disease
product can achieve, as certified by an actuarial fellow as satisfying sound
and reasonable actuarial principles, the loss ratio level that was part of the
original policy filing with the State Rating Bureau to satisfy the requirements
of
211 CMR
42.06. Any such plan is subject to approval
by the Commissioner and any plan to increase benefits may not be included as
part of the insurer's plan without offering the alternative option of
appropriate premium reductions. Failure to submit such a plan within the
required time period will be a violation of 211 CMR 146.000 and will subject
the insurer to the penalties of M.G.L. c. 175, § 189.
