Credit Life and Accident and Health Rates

Department ofInsurance October 26, 2018 Bulletin 246 CREDIT LIFE AND ACCIDENT AND HEALTH RATES This bulletin is directed to all insurers engaged in the business ofselling credit insurance in the state ofIndiana. Pursuant to 760 IAC 1-5.1-4, benefits provided by consumer credit insurance policies must be reasonable in relation to the premium charged. A loss ratio ofnot less than 55% is regarded as reasonable. 760 IAC 1-5.1 (the Rule) provided p1ima facie rates considered to be meet the reasonableness requirement. 760 IAC 1-5.1-9 requires the Commissioner to review the loss ratio standards and the prima facie rates contained in the Rule on a triennial basis. This bulletin is intended to fulfill the requirements ofthe Rule. The applicable provisions of760 IAC 1-5.1 were effective January 1, 2003, and rates were last reviewed in 2015 (see Bulletin 222). With the conclusion ofthe calendar year 2017 there are three new years ofexperience available, and the triennial review is due. Discount Rate Pursuant to 760 IAC 1-5.1-9, every three years the discount rate is to be adjusted based on the sales ofthe three-year Treasury Notes on the last day ofthe last three calendar years. The rates paid at the last day of2015, 2016, and 2017 are listed below: Calendar Year 3 Year Treasury Rate 2015 1.31 2016 1.47 2017 1.98 Average for 3 years 1.59 Based upon this information the discount rate would increase from the prior analysis. Conclusion The discount rates to be used are 1.99% for life and 1.59% for accident and health. The life discount rate includes 0.4% for mortality. Life Actual Experience Based on data received from the National Association of Insurance Commissioners (NAIC), credit life insurance has generated the following loss ratios over the last three calendar years: Calendar Year Loss Ratio 2015 62.2 2016 57.2 2017 65.3 Aggregate for 3 years 61.6 Adjusting the above loss ratios for the adjustment to prima facie rates would result in the following loss ratios: Calendar Year Loss Ratio 2015 59.2 2016 54.6 2017 65.4 Aggregate for 3 years 59.7 The loss ratio for credit life has been slightly above 55%; therefore, an increase of 8.5% to the prima facie rate is indicated. Conclusion Based on the above information, the Commissioner has determined that, pursuant to 760 !AC 1-5.1, the aggregate rate adjustment indicated for life prima facie is 8.5%. The credit life prima facie rates for monthly outstanding balance basis are therefore increased to: 1) Seventy one cents ($0.71) per month per one thousand dollars ($1,000) of outstanding insured debt on single life; and 2) One dollar and eighteen ($1.18) per month per one thousand dollars ($1,000) of outstanding insured debt on joint life ifpremiums are payable on a monthly outstanding balance basis. 2 Accident and Health/Disability Actual Experience Based on data received from the NAIC, credit accident and health insurance has generated the following loss ratios over the last three calendar years: Calendar Year Loss Ratio 2015 46.9 2016 43.9 2017 39 Aggregate for 3 years 43.3 Adjusting the above loss ratios for the adjustment to prima facie rates would result in the following loss ratios: Calendar Year Loss Ratio 2015 50.8 2016 47.7 2017 41.9 Aggregate for 3 years 46.8 The aggregate loss ratio has been less than the statutory target of 55% indicating a decrease in the rates of 15%. • Conclusion The rate adjustment indicated for accident and health is a decrease of 15%. Thus, the rates are shown below. The credit accident and health prima facie rates are single premium rates based on type ofcoverage (14 day retroactive and non-retroactive and 30 day retroactive and non-retroactive) and length ofloan. 3 Original Number 14Day 14 Day 30Day 30Day ofEqual Monthly Retroactive Non-retroactive Retroactive Non-retroactive Installments Policy Policies Policies Policies 6 1.12 0.73 0.76 0.57 12 1.50 1.05 1.03 0.77 24 2.01 1.45 1.45 1.01 36 2.48 1.90 1.88 1.36 48 2.76 2.18 2.15 1.62 60 3.00 2.41 2.39 1.83 72 3.22 2.62 2.60 2.02 84 3.41 2.81 2.79 2.23 96 3.59 3.00 2.97 2.41 108 3.78 3.17 3.15 2.58 120 3.95 3.33 3.32 2.75 Rates other than the prima facie rates announced in this bulletin may be used if they are filed with the Department and approved as reasonable in relation to the benefits provided. Information on filing rates may be found on the Department's web site at www.in.gov/idoi. Questions regarding this bulletin should be directed to Compliance@idoi.in.gov. Stephen . Robertson, Insurance Commissioner 4