Current through Register Vol. 46, No. 39, September 25, 2024
(a) For the
purposes of this section, the following definitions apply:
(1) A retrospective rate credit or
retrospective rate refund is an amount payable under nonparticipating group
policies. It reflects the difference between the premium charged and the actual
experience as calculated at the end of the policy year based upon a formula
approved by the board of directors. It is analogous to a dividend payable to a
participating group policyholder.
(2) A deposit premium is the scheduled
premium paid by the creditor during the policy year before the determination of
the retrospective premium.
(3)
Standard premium is the maximum premium calculated in accordance with the
provisions of section
185.7 of this Part.
(4) A retrospective premium is the premium
calculated at the end of the policy year based upon a formula and factors
stated in the policy and the actual incurred losses.
(b) Dividends and retrospective rate credits
must:
(1) be based upon an equitable,
objective formula applicable to all credit insurance policies;
(2) be set forth explicitly in
writing;
(3) be uniformly applied;
and
(4) have been approved by the
insurer's board of directors.
(c) No insurer issuing group credit insurance
may, by contract or otherwise, guarantee a dividend or retrospective rate
credit or guarantee the amount of premium to be retained by the company for
expenses, risk, and profit, as used in calculating such dividend or
retrospective rate credit. Any retention letter or other statement given to a
policyholder illustrating or describing the operation of dividends or
retrospective rate credits shall clearly state that it is not a guarantee and
that the dividend or retrospective rate credit is fully subject to change by
the insurance company.
(d) When the
deposit premium exceeds the identifiable charge to the debtor, an insurer may
incorporate into the policy, by rider or amendment thereto, a retrospective
premium plan provided the formula and range or description thereof, or
applicable factors are approved by the superintendent and such formula and
applicable factors are set forth in the policy. Such formula and factors shall
be subject to the following:
(1) the deposit
premium may not exceed the standard premium, but any differences shall be
justified and the deposit premium must be self-supporting based on reasonable
assumptions;
(2) any retrospective
premium determination must be based on loss ratios at least equal to those used
in determining the standard premium under section
185.7 of this Part;
(3) at the end of any policy year, if the
deposit premium exceeds the retrospective premium, any excess not exceeding the
creditor's cash contribution may, in accordance with the terms of the policy,
either be returned to the creditor or retained in the form of a claim
fluctuation fund to offset losses in later years;
(4) contributions to any claim fluctuation
fund shall be accumulated solely from creditor funds and limited to the excess
of 125 percent of the standard premium over the deposit premium, if payable in
advance, and to any excess of deposit premiums over retrospective premiums. The
amount of any claim fluctuation fund shall not exceed 100 percent of the
standard premiums for the latest policy year;
(5) at the end of any policy year, or at
termination of the policy, if the retrospective premium exceeds the deposit
premium and if the policy so provides, the insurer may charge the policyholder
for such excess up to the amount of the claim fluctuation fund, if any, plus up
to 25 percent of the year's deposit premium. Upon termination of the policy,
any balance remaining in the claim fluctuation fund shall be refunded to the
policyholder within two years from the date of termination; and
(6) any additional premium shall be paid out
of the creditor's funds and not charged to insured debtors.
