LAC 37:XIII.1935. Loss Ratio (Formerly §1931)

A. This Section shall apply to all long-term care insurance policies or certificates except those covered under §1917, §1937, and §1939. B. Benefits under long-term care insurance policies shall be deemed reasonable in relation to premiums, provided the expected loss ratio is at least 60 percent, calculated in a manner which provides for adequate reserving of the long-term care insurance risk. In evaluating the expected loss ratio, due consideration shall be given to 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. Section 1935.B shall 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 considered to provide reasonable benefits in relation to premiums paid, if the policy complies with all of the following provisions: 1. the interest credited internally to determine cash value accumulations, including long-term care, if any, are 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 meets the nonforfeiture requirements of R.S. 22:936; 3. the policy meets the disclosure requirements of R.S. 22:1186(H), (I) and (J); 4. any policy illustration that meets the applicable requirements of Regulation 55; and 5. an actuarial memorandum is filed with the insurance department that includes: 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 must 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 at the time of application. The statement shall indicate whether underwriting is used and, if used, the statement shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting. Concerning a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs; and h. a description of the effect of the long-term care policy provision 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.