New Jersey Administrative Code
Title 11 - INSURANCE
Chapter 4 - ACTUARIAL SERVICES
Subchapter 34 - LONG-TERM CARE INSURANCE
Section 11:4-34.17 - Loss ratio

Universal Citation: NJ Admin Code 11:4-34.17

Current through Register Vol. 56, No. 18, September 16, 2024

(a) This section applies to all rates for individual long-term care policies except those covered pursuant to 11:4-34.8 and 34.18.

(b) Premiums and benefits under long-term care insurance policies whose rates are subject to this section shall meet the loss ratio requirements of 11:4-18.5.

(c) Carriers shall include with each submission of new or revised rates for individual long-term care insurance an actuarial memorandum which includes anticipated loss ratio, methodology for calculating gross premiums, an explanation and documentation supporting the premium assumptions and the objective basis for any rate differentials. The following information shall be included in the actuarial memorandum:

1. The number of years for which the policy is expected to be issued in this State (with these rates), and the number of policies for each form expected to be issued in each year. If the policies are no longer being issued, the actuarial memorandum shall so state;

2. The anticipated and aggregate loss ratios calculated over the life of the policy form, showing separately the present value of past and future paid benefits and the present value of past and future paid or written premiums. Any required additional active life reserves are not reflected in either the past and future benefits nor the past and future premiums;

3. The benefits, on both a paid and incurred basis, and the premiums, on both a paid/written and earned basis, for each of the years recognized in the calculation of the anticipated and aggregate loss ratios. For incurred benefits, changes in active life reserves shall be shown separately;

4. Paid and incurred/earned loss ratios for each of the years recognized in (c)3 above, where the incurred/earned loss ratio should be calculated both without and with the change in active life reserves;

5. The assumptions used in the calculation of the loss ratio, including:
i. The annual claim costs (ultimate) by attained age and sex;

ii. The select and/or anti-select morbidity factors by policy duration (year) by issue age and sex;

iii. The lapse and mortality rates, by policy duration by issue age and sex;

iv. The secular trend factors by policy duration by issue age and sex;

v. The interest rates by policy duration, which rates shall equal a carrier's recent, current and future expected new investment return rates (after investment expenses, but before Federal income taxes). Alternatively, the Department will permit use of a six percent interest rate graded linearly to four percent over 10 years and four percent thereafter or a five percent level interest rate. The Commissioner shall review annually the alternate interest rate and adjust those rates based on corporate bond yields for Aaa and Baa bonds as reported in U.S. Financial Data which is published by the Research and Public Information Division of the Federal Reserve Bank of St. Louis. The Commissioner shall provide public notice of new alternate interest rates by publication in the New Jersey Register;

vi. Expenses by policy duration, including commission, override and bonus rates; other marketing expense rates; other maintenance expense rates; any new-market expense rates; other acquisition expense rates; and the explicit profit margin or risk charged on a per policy issue, per policy in force, per dollar of claim, per dollar of premium, and any other applicable basis;

vii. The distribution of expected policies by policy and rider benefits by issue age and sex; and

viii. A summary statement of the underwriting standards (such as short form medical and risk questionnaire, long form medical and risk questionnaire, medical examination), the marketing distribution system, and the market (that is, the segment(s) of the general public, for example, middle income based on predetermined ZIP code selections) for the policy forms;

6. The specific formulas and methodology used in calculating gross premiums; and

7. A certification signed by an actuary who is a member of the American Academy of Actuaries stating that the assumptions are appropriate to the policy form, reasonably represent the expected experience for the policy form and fully disclose the basis of the calculation of the anticipated loss ratio.

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