Credit Life and Accident and Health Rates

Indiana Department oflnsurance December 19, 2024 Bulletin 277 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. ("Rule") provided prima facie rates considered to 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 ofthe Rule were effective January 1, 2003, and rates were last reviewed in 2021 (see Bulletin 262). With the conclusion ofthe calendar year 2023 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 ofthe three-year Treasury Notes on the last day ofthe last three calendar years. The rates paid at the last day of 2021, 2022, and 2023 are listed below: Calendar Year 3 Year Treasurv Rate 2021 0.97 2022 4.22 2023 4.01 Average for 3 years 3.07 Based upon this information the discount rate would increase from the prior analysis, which produced an average of 1.42%. Conclusion The discount rates to be used are 3.47% for life and 3.07% for accident and health. The life discount rate includes 0.4% for mortality. Life Actual Experience Based on data retrieved from Credit Insurance Experience Exhibits submitted annually by each insurance company, credit life insurance has generated the following loss ratios over the last three calendar years: Calendar Year Loss Ratio 2021 75.9 2022 67.4 2023 60.7 A2:2:regate for 3 years 68.2 Adjusting the above Loss Ratios for the adjustment to prima facie rates would result in the following loss ratios: Calendar Year Loss Ratio 2021 86.1 2022 70.1 2023 62.8 A2:2:regate for 3 vears 72.9 The loss ratio for credit life has been above 55%; therefore, an increase of 32.5% 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 32.5%. The credit life prima facie rates for monthly outstanding balance basis are therefore increased to: 1) One dollar and seven cents ($1.07) per month per one thousand dollars ($1,000) of outstanding insured debt on single life, and 2) One dollar and seventy-nine cents ($1.79) 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 retrieved from Credit Insurance Experience Exhibits submitted annually by each insurance company, credit accident and healtb insurance has generated the following loss ratios over the last three calendar years: Calendar Year Loss Ratio 2021 40.8 2022 40.3 2023 43.9 A1nrregate for 3 years 41.6 Adjusting the above Loss Ratios for the adjustment to prima facie rates would result in tbe following loss ratios: Calendar Year Loss Ratio 2021 51.5 2022 50.0 2023 53.5 A<><>regate for 3 vears 51.7 This loss ratio is below the target of 55% set forth in the Rule, and the indicated reduction to the rates would be 6.1 %. Conclusion The rate adjustment indicated for accident and health is a decrease of 6.1 %. Thus, the rates are shown below. The credit accident and healtb prima facie rates are single premium rates based on type of coverage (14-day retroactive and non-retroactive and 30­ day retroactive and non-retroactive) and length of loan. 3 Original Number of Equal Monthly Installments 14-Day Retroactive Policies 14-Day Nonretroactive Policies 30-Day Retroactive Policies 30-Day N onretroacti ve Policies 6 1.05 0.69 0.71 0.54 12 1.41 0.99 0.97 0.72 24 1.89 1.36 1.36 0.95 36 2.33 1.78 1.77 1.28 48 2.59 2.05 2.02 1.52 60 2.82 2.26 2.24 1.72 72 3.02 2.46 2.44 1.90 84 3.20 2.64 2.62 2.09 96 3.37 2.82 2.79 2.26 108 3.55 2.98 2.96 2.42 120 3.71 3.13 3.12 2.58 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. New rates may be implemented by insurers any time after the release ofthis Bulletin, but the reduced credit accident and health rates should be effective no later than July 1, 2025. Questions regarding this Bulletin should be directed to Compliance@idoi.in.gov. INDIANA DEPARTME 4