Credit Life and Accident and Health Rates

Indiana Depmtment of Insurance November 30, 2021 Bulletin 262 CREDIT LIFE AND ACCIDENT AND HEALTH RATES This Bulletin is directed to all insurers engaged in the business of selling credit insurance in the state oflndiana. 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 of not less than 55% is regarded as reasonable. 760 IAC 1-5.1-1 et seq. (the "Rule") provided prima facie rates considered to meet the reasonableness requirement. 760 IAC 1-5.1-9 requires the Co111111issioner 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 of the Rule. The applicable provisions of the Rule were effective Januaty I, 2003, and rates were last reviewed in 2018 ( see Bulletin 246). With the conclusion of the calendar year 2020 there are three new years of experience 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 of the three-year Treasmy Notes on the last day of the last three calendar years. The rates paid at the last day of 2018, 2019, and 2020 are listed below: Calendar Year 3 Year Treasury Rate 2018 2.46 2019 1.62 2020 0.17 Average for 3 vears 1.42 Based upon this information the discount rate would decrease from the prior analysis, which produced an average of 1.59%. Conclusion The discount rates to be used are 1.82% for life and 1.42% for accident and health. The life discount rate includes 0.4% for mortality. Life Actual Experience Based on data received from the National Association oflnsurance Commissioners (NAIC), credit life insurance has generated the following loss ratios over the last three calendar years: Calendar Year Loss Ratio 2018 54.7 2019 59.4 2020 64.5 APPregate for 3 vears 59.6 Adjusting the above Loss Ratios for the adjustment to prima facie rates would result in the following loss ratios. Calendar Year Loss Ratio 2018 62.3 2019 59.3 2020 66,6 A1n1:regate for 3 years 62.7 The loss ratio for credit life has been above 55%; therefore, an increase of 14% to the prima facie rate is indicated. Conclusion Based on the above information, the Commissioner has determined that, pursuant to the Rule, the aggregate rate adjustment indicated for life prima facie is 14%. The credit life prima facie rates for monthly outstanding balance basis are therefore increased to: 1) Eighty-one cents ($0.81) per month per one thousand dollars ($1,000) of outstanding insured debt on single life, and 2) One dollar and thirty-five ($1.35) 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 HealthIDisability 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 2018 46,0 2019 49.5 2020 42.8 Auureimte for 3 vears 46.1 Adjusting the above Loss Ratios for the adjustment to prima facie rates would result in the following loss ratios. Calendar Year Loss Ratio 2018 54.2 2019 53.3 2020 54.4 Aur,regate for 3 vears 53.9 While this loss ratio is below the statutory target of 55%, the indicated reduction to the rates would only be 2%. Conclusion Based on the above information, Commissioner has determined that, pursuant to the Rule, the aggregate rate adjustment indicated is de minimis. Thus, the rates below remain unchanged from those established by Bulletin 246. 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 of Equal Monthly Installments 14-Day Retroactive Policies 14-Day Nometroactive Policies 30-Day Retroactive Policies 30-Day Nonretroactive 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 am10unced 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. Amy L. Be rd, Insurance Commissioner 4