R20-6-1013. Loss Ratio

A. This Section applies to policies and certificates issued any time prior to May 10, 2005. B. Benefits under an individual long-term care insurance policy are deemed reasonable in relation to premiums if the expected loss ratio is at least 60% calculated in a manner that provides for adequate reserving of the long-term care insurance risk. In evaluating the expected loss ratio, the director shall consider all relevant factors, including: 1. Statistical credibility of incurred claims experience and earned premiums; 2. The period for which rates are computed to provide coverage; 3. Experienced and projected trends; 4. Concentration of experience within early policy duration; 5. Expected claim fluctuation; 6. Experience refunds, adjustments, or dividends; 7. Renewability features; 8. All appropriate expense factors; 9. Interest; 10. Experimental nature of the coverage; 11. Policy reserves; 12. Mix of business by risk classification; and 13. Product features such as long elimination periods, high deductibles, and high maximum limits. C. A premium rate schedule or proposed revision to a premium rate schedule that is expected to produce, over the lifetime of the long-term care insurance policy, benefits that are less than 60% of the proposed premium rate schedule is deemed to be unreasonable. D. Subsections (B) and (C) do not apply to life insurance policies that accelerate benefits for long-term care. A life insurance policy that funds long-term care benefits entirely by accelerating the death benefit is deemed to provide reasonable benefits in relation to premiums paid if the policy complies with all of the following: 1. The interest credited internally to determine cash value accumulations, including long-term care, if any, is guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long-term care set forth in the policy; 2. The portion of the policy that provides life insurance benefits complies with the nonforfeiture requirements of A.R.S. § 20-1231; 3. The policy complies with the disclosure requirements of A.R.S. § 20-1691.06(A) through (E); 4. At the time of making a filing under A.R.S. § 20-1691.08, the insurer files an actuarial memorandum that includes the following information: a. A description of the basis on which the long-term care rates were determined; b. A description of the basis for the reserves; c. A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance; d. A description and a table of each actuarial assumption used; for expenses, an insurer shall include percent of premium dollars per policy and dollars per unit of benefits, if any; e. A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives; f. The estimated average annual premium per policy and the average issue age; g. A statement as to whether underwriting is performed, including: i. Time of underwriting; ii. A description of the type of underwriting used, such as medical underwriting or functional assessment underwriting; and iii. For a group policy, whether an enrollee’s dependents are subject to underwriting; and h. A description of the effect of the long-term care policy provisions on the required premiums, nonforfeiture values, and reserves on the underlying life insurance policy, both for active lives and those in long-term care claim status.