Minnesota Administrative Rules
Agency 120 - Commerce Department
Chapter 2760 - CREDIT LIFE, ACCIDENT, HEALTH INSURANCE
Part 2760.0090 - PREMIUM RATE DEVIATION

Universal Citation: MN Rules 2760.0090

Current through Register Vol. 49, No. 13, September 23, 2024

Subpart 1. Use of deviated rates.

A. If the loss ratio of the insurer is 55 percent or more based on the most recent one to three calendar years' experience using the prima facie rates currently in use for any plan of coverage, the insurer may file for approval and use rates that are higher than those prima facie rates, reflecting the anticipated difference in claim cost.

B. If the loss ratio of the insurer is less than 42.5 percent based on the most recent three calendar years' experience using the prima facie rates currently in use for any plan of coverage, the insurer shall file for approval and use rates for that plan of coverage that are lower than prima facie rates, reflecting the anticipated difference in claim cost.

C. If deviated rates are to be filed under item A or B, the insurer may file rates for approval that will be:
(1) applied uniformly to all accounts of the insurer; or

(2) applied on an equitable basis approved by the commissioner to only one or more accounts of the insurer for which the experience has been more favorable or less favorable than expected.

For purposes of determining deviated rates under this subpart, rates for monthly premium plans may be determined separately for open-end and closed-end credit accounts.

Subp. 2. Use of rates for accounts.

An insurer, by written notice to the commissioner of its election to do so, may file and use premium rates to be used to rate one or more of its accounts in this state.

A. An insurer may use a rate for an account not greater than the account rate as follows.
(1) The actual loss ratio (ALR) is the prima facie loss ratio of the account being filed for any plan of coverage. It is the ratio of the actual incurred claims to the premiums based on current prima facie rates.

(2) The credibility factor (Z) is determined from the table in item D.

(3) The credibility adjusted loss ratio (CLR) is calculated using the following formula where PFLR is the loss ratio from part 2760.0040:

CLR = [ALR * Z] + [PFLR * (1-Z)]

(4) The account rate (AR) is calculated according to the following formula, where PFR is the prima facie rate, and the result is rounded to two decimal places:

AR = PFR * [1 - PFLR * (1-(CLR/PFLR))]

(5) The requested rate will be equal to the previous account rate if the new account rate calculated by the formula in subitem (4) is within five percent of the previous account rate. Otherwise, the requested rate will be equal to the new account rate calculated by the formula in subitem (4).

B. An account rate will be in effect for a period of time not longer than five years. An insurer may file for a new account rate before the end of an account rate period, but not more often than once during any 12-month period.

C. If a creditor changes insurers, the account rate established under this part in effect for the account on the date of the change will continue to be in effect for the account with the succeeding insurer for the remainder of the account rate period or until a new account rate for this account is established.

D. Credibility table based on life years or incurred claim count:

CREDIBILITY TABLE
Average Number of Life Years
Credit Life Plan Credit Accident and Health Plans Retroactive and Non-Retroactive Waiting Period Incurred Claim Credibility Factor Z
7-Day 14-Day 30-Day Count
1 1 1 1 1 0.00
1,800 95 141 209 9 0.25
2,400 126 188 279 12 0.30
3,000 158 234 349 15 0.35
3,600 189 281 419 18 0.40
4,600 242 359 535 23 0.45
5,600 295 438 651 28 0.50
6,600 347 516 767 33 0.55
7,600 400 594 884 38 0.60
9,600 505 750 1,116 48 0.65
11,600 611 906 1,349 58 0.70
14,600 768 1,141 1,698 73 0.75
17,600 926 1,375 2,047 88 0.80
20,600 1,084 1,609 2,395 103 0.85
25,600 1,347 2,000 2,977 128 0.90
30,600 1,611 2,391 3,558 153 0.95
40,000 2,106 3,125 4,651 200 1.00

The integral numbers in this item represent the lower end of the bracket for each Z factor. The upper end is one less than the lower end for the next higher Z factor.

Statutory Authority: MS s 62B.12

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