Marketing of Crop Hail Insurance in North Dakota 2004

[LOGO] Jim Poolman Commissioner of Insurance DEPARTMENT OF INSURANCE STATE OF NORTH DAKOTA # BULLETIN 2003-6 TO: All Property and Casualty Insurance Companies Writing Crop Hail Insurance in North Dakota FROM: Jim Poolman, Commissioner of Insurance DATE: December 1, 2003 SUBJECT: Marketing of Crop Hail Insurance in North Dakota 2004 Jim Poolman # SCOPE AND APPLICABILITY This bulletin pertains to all insurance companies seeking to market policies for the coverage of crop hail insurance in the State of North Dakota for the 2004 season. Crop hail insurance includes policies providing crop hail coverage, companion hail coverages and supplemental crop products not subsidized by the Federal Crop Insurance Corporation. # CROP FILING PROGRAM CHANGES – BACKGROUND A task force consisting of members from the agent, company, farm and National Crop Insurance Service communities was convened this year at the request of Commissioner Jim Poolman. The purpose was to review the present program and offer recommendations to the Commissioner on ways to improve the system and make it more responsive and efficient. The task force completed its report in September. The Commissioner took the task force recommendations under advisement and elected to adopt most of the recommendations. Those recommendations resulting in program changes affecting filing forms, processes or Department position are reflected in this bulletin. Interested parties can find the report as well as the Commissioner's decisions on the Department web site, www.state.nd.us/ndins/. # FILING DEADLINE All new or revised crop hail and companion hail rate filings for use in 2004 are due no later than February 1, 2004 (postmarked). All new product (policy and form) filings, as well as revisions to existing products intended for use in 2004, are due no later than February 1, 2004 (postmarked). 600 EAST BOULEVARD DEPT 401 • BISMARCK, ND 58505-0320 • (701) 328-2440 • FAX (701) 328-4880 Consumer Hotline: 1-800-247-0560 • Relay North Dakota 1-800-366-6888 (TTY) insuranc@state.nd.us Bulletin 2003-6 December 1, 2003 Page Two The Department encourages companies to file in advance of the deadline if they are able. This will avoid potential delays and expedite the process. Note: Due to some of the changes in the crop filing program requirements, particularly those involving the expense history reporting, the Department plans to change the filing deadline for the 2005 season to December 31, 2004. With the short turn around time left this year the Department elected to keep the February deadline in place for the 2004 season filings rather than change it. ### FILING PROCEDURES The North Dakota Insurance Department will review crop form and rate filings according to the criteria set forth in this bulletin. Except as otherwise provided herein, forms and loss costs for crop hail insurance shall be as filed by the National Crop Insurance Services (NCIS). Companies may file form and rate/rule filings as one filing or may file them separately, the department will accept them in either format. ### Filing Fee- Retaliatory Only North Dakota does not require a filing fee for form and rate filings. However, if a company is domiciled in a state that requires filing fees of North Dakota companies, we do retaliate by requiring those companies pay the same fee when filing in North Dakota. ### Use of Filing Transmittal Forms Policy, Form, and Rate Filing Transmittal Form - ND1000 – SFN51679 (11/2003) – This general filing transmittal form is required on all filings (rate and form) to the Department. Refer to Department Bulletin 98-1 dated May 23, 1998, for general filing instructions (refer to www.state.nd.us/ndins). Companies who wish to use the National Association of Insurance Commissioner's Uniform Filing Transmittal Form titled Property and Casualty Transmittal Document PC TD-1, in lieu of the ND1000 may do so (refer to www.naic.org/rates_forms/trans_docs.htm). Forms can be downloaded from both sites. Crop Insurance Rate Filing - NDPC200 – SFN51682 (11/2003) – This form is required with all rate filings (refer to the Department's website at www.state.nd.us/ndins). The form can be downloaded from this site. Note: This form has been revised significantly. The Department will only accept the revised form with an edition date of 11-2003. Any company who needs assistance in preparing either of the transmittal forms can call Mike Andring at (701) 328-4937. Bulletin 2003-6 December 1, 2003 Page Three ## Form Filing Forms once filed by a company need not be refiled on an annual basis. Companies who are filing new forms, form changes, and new product forms must adhere to the following steps: 1. Companies proposing to use NCIS forms must file by reference, indicating by memorandum a list of forms they will use (to include name, form number, and edition date). 2. Companies proposing to use independent policy forms can file a copy of each form along with a memorandum explaining how the policy differs from the NCIS form and what impact it makes on coverage and rate. 3. Companies proposing to use a deviated or modified NCIS form must file a copy of the form along with the memorandum explaining the change and how it affects the coverage and the rate. ## Rate Filing Biennial filing of loss costs by NCIS – In 2001 the Department and NCIS agreed to start a biennial filing procedure beginning in 2001 with the next filing to be in the fall of 2003 for the 2004-2005 seasons. However, due to the market issues in 2002, the Department requested a filing in January 2003 inclusive of 2002 loss history to be effective for the 2003 season. The Department then required all companies to file in 2003 for 2003 based upon the updated loss costs. At this time NCIS will not be filing loss cost revisions again in 2003 for 2004-2005 but is expected to file in the fall of 2005 for the 2006-2007 seasons. Biennial filing of company rates – Under the new NCIS biennial filing procedures the Department would not require a company to file rates in the off year if they were not making any changes. The Department does ask that the company send a letter to the Department confirming that it will not be filing a revision for the off year and their intention to write business for the upcoming season. The final average loss costs now in place for 2003 are applicable for 2004 and 2005 seasons. Although companies were required to file in 2003 for 2003, the Department will require all companies to file in 2004 for the 2004 season because of the program changes and to get back to the original biennial process. The 2005 season would be an off year and companies will not be required to file for the 2005 season unless the company is making a change for the season. Rates for independent supplemental MPCI products – Independent supplemental MPCI product rates filed prior to the date of this bulletin need not be refiled. Companies wishing to file revised rates for these products may do so subject to the filing deadline. Bulletin 2003-6 December 1, 2003 Page Four Use of NCIS Final Average Loss Costs – Each company must adhere to the NCIS loss cost. No deviations or modifications of the NCIS loss cost will be accepted. Rounding rules - The Department no longer stipulates a specific rounding procedure. Each company is required to file the rounding procedures/rule that it uses in its ratemaking process. Rate filings must include the following: 1. Crop Insurance Rate Filing - NDPC200 cover page – Adoption of Advisory Organization Loss Costs. Only one cover page is necessary to summarize the overall filing impact. 2. The company's three-year pure loss experience and expenses. The use of the most recent year's experience is optional. Use Crop Insurance Rate Filing - NDPC200, Page 4, Historical Expense Exhibit. 3. The company's proposed loss cost multiplier for each product and/or tier of loss costs, including the development and support for the multiplier. Separate multipliers may be filed based upon product (i.e., crop hail versus companion hail), marketing type (i.e., agent, direct marketing, internet marketing), rating tiers (i.e., loss cost ranges, production expense, fixed expenses). Use Crop Insurance Rate Filing - NDPC200, Page 2, Development of Loss Cost Multiplier if the filing does not include fixed expense components. Use one form for each separate loss cost multiplier you are filing. Use Crop Insurance Rate Filing - NDPC200, Page 3, Development of Loss Cost Multiplier with Fixed Expense Component if the filing includes a fixed expense component. Use one form for each separate loss cost multiplier you are filing. 4. A cover letter or filing memorandum detailing the rationale for your request. 5. A copy of the proposed rates for new non NCIS products must include a filing memorandum with statistical and actuarial documentation as appropriate to support the request. 6. Crop Insurance Rate Filing - NDPC200, Page 5, Summary of Loss Cost Multipliers. Use appropriate number of forms needed to summarize all loss cost multipliers. Bulletin 2003-6 December 1, 2003 Page Five # DISCOUNTS PERMITTED # Cash Discounts The Insurance Department recognizes cash discounts offered for receipt of premium before July 1 or for payment in full with application for new policies written after July 1, provided the discount does not exceed 5%. The cash discount will be allowed on policy changes after July 1, if the original policy was paid on a cash discount basis and payment is received with the change. The purchaser of a crop hail insurance policy is entitled to a cash discount in the event the company provides one, therefore, applications for crop hail insurance based upon filings providing the cash discount shall include notice to the purchaser specifically waiving his or her option to elect a cash discount in the event the purchaser declines to pay the premium by July 1. If the purchaser has been properly informed, waives the cash discount, and does not make full payment at the time of application, the agent can take advantage of the cash discount by submitting full payment with the application to the company. The agent and the purchaser would, however, be in violation of the rebate statute if the agent were to subsequently pass on a cash discount to the purchaser in an agency billing. # DISCOUNTS NOT PERMITTED The following discounts are not permitted: total limit of liability, total premium volume, MPCI (federal crop) package, claims free history, tie ins with other lines of insurance (i.e., farmowners, autos, etc.), and direct marketing. (Any request for a direct marketing or internet type expense reduction must be filed and justified in the same manner as any other loss cost multiplier request.) # COMPANION HAIL PRODUCTS Endorsement 2002-NCIS 653 is intended to be used in conjunction with the crop hail policy form to provide optional and supplemental coverage to the underlying MPCI or FCIC policy. Since the marketing of this form as a stand-alone policy is contrary to its intended usage, such marketing will not be permitted. This prohibition extends to other non-standard companion hail type policies as well. Bulletin 2003-6 December 1, 2003 Page Six ## MARKETING IN ADVANCE OF RATE FILING APPROVAL The company can market previously approved contracts prior to the new season rates being approved by the Department, if they provide the purchaser with appropriate disclosures indicating the rates that will be applied to the contract will be those approved for that season, not the prior season and provide a procedure by which the purchaser can cancel the contract without penalty AFTER notification of the approved rate. Note: Companies that are not filing a rate revision during an off year are not subject to this condition and may use the previously filed rates. ## CONTINUOUS POLICY Some companies market contracts which are termed “Continuous Policies”. The policy generally provides automatic coverage at last year’s levels to new crops early in the season but require confirmation by a certain date and the creation of a new policy, in order to continue the coverage. Since a continuous policy provides for an automatic renewal of the contract, companies intending to nonrenew an account must take steps to see that all criteria set forth in the contract and in statute are followed, making sure the policyholder receives sufficient advance notice. ## DIVIDENDS N.D. Admin. Code § 45-05-02-03 permits dividends but prohibits the use of dividends in the marketing of crop hail insurance. ## PREVIOUS BULLETINS Effective December 1, 2003, this bulletin supersedes the following Department bulletin: Bulletin 2001-6 The Crop Hail Insurance Rate Filing Form NDPC200 – SFN 51682 Edition (5/98) found in Bulletin 98-1 is replaced with the new Edition (11/2003) which can be found as an attachment to this bulletin. JP/njb Attachment [LOGO] CROP INSURANCE RATE FILING - NDPC200 NORTH DAKOTA INSURANCE DEPARTMENT SFN 51682 (11/2003) ## Adoption of Advisory Organization Loss Costs Date: 1. Insurer Name 2. Advisory Organization: 3. Advisory Organization Reference Filing Number: 4. The above insurer hereby declares that it is a member, subscriber or service purchaser of the named advisory organization for this line of insurance. The insurer hereby files to be deemed to have independently submitted as its own filing the loss costs in the captioned Reference Filing. The insurer's rates will be the combination of the prospective loss costs, the loss cost multipliers, and if utilized, the fixed expense component specified in the attachments. 5. A. Rate Change due to Advisory Organization's revised Loss Costs: % B. Rate Change due to Insurer's revised Loss Cost Multipliers: % C. Total Rate Change: % D. Proposed Effective date of Rate Change: 6. Cash Discount: % 7. Indicate below which of the supplemental pages of form NDPC200 are included with this filing. ☐ A. Page 2 - Development of Loss Cost Multiplier is required for each separate tier or product. Use this form if not filing a fixed expense component. If filing multiple tiers or products, use one form (page 2) for each tier or product filed. ☐ B. Page 3 - Development of Loss Cost Multiplier with Fixed Expense Component is required for each separate tier or product. Use in place of page 2 if filing a fixed expense component. If filing multiple tiers or products, use one form (page 3) for each tier or product filed. ☐ C. Page 4 - Historical Expense Exhibit ☐ D. Page 5 - Summary of Loss Cost Multipliers SFN 51682 (11/2003) Page 2 # Development of Loss Cost Multiplier Insurer Name: 1. Description of Crop Insurance Product for which this page applies: (Product type, Market type, rate/loss cost tier, etc.) 2. Development of Expense Ratio Attach 3 year insurer expense history and any other additional supporting information. This filing will not be considered unless the completed Expense history form is attached. | EXPENSE PROVISIONS | Previous | Proposed | | --- | --- | --- | | A. Total Regular Commissions: | % | % | | B. Other Acquisition Expense: (including Contingent Commissions): | % | % | | C. General Expense: | % | % | | D. Loss Adjustment Expense: | % | % | | E. Taxes, Licenses & Fees: | % | % | | F. Underwriting Profit: | % | % | | G. Other (Explain): | % | % | | H. TOTAL: | % | % | | 3. Expected Loss Ratio: ELR = 100% - 2H | % | % | | --- | --- | --- | | 4. Company Formula Loss Cost Multiplier = 1.00 / #3 | | | | --- | --- | --- | | 5. Total rate level change for the coverages to which this page applies: | % | | --- | --- | SFN 51682 (11/2003) Page 3 # Development of Loss Cost Multiplier with Fixed Expense Component Insurer Name: 1. Description of Crop Insurance Product for which this page applies: (Product type, Market type, rate/loss cost tier, etc.) 2. Development of Expense Ratio: Attach 3 year insurer expense history and any other additional supporting information. This filing will not be considered unless the completed Expense history form is attached. | EXPENSE PROVISIONS | Overall | Variable | Fixed | | --- | --- | --- | --- | | A. Total Regular Commissions: | % | % | % | | B. Other Acquisition Expense: (including Contingent Commissions): | % | % | % | | C. General Expense: | % | % | % | | D. Loss Adjusting Expense: | % | % | % | | E. Taxes, Licenses & Fees: | % | % | % | | F. Underwriting Profit | % | % | % | | G. Other (Explain) | % | % | % | | H. Total | % | % | % | 3A. Expected Loss Ratio: ELR = 100% - Overall 2H: % 3B. Variable Expected Loss Ratio = 100% - Variable 2H: % 4. Formula Expense Constant: [(1.00 / 3A) - (1.00 / 3B)] x Average Underlying Loss Cost: 5. Formula Variable Loss Cost Multiplier:(1.00 / 3B): 6. Total Rate level change for the coverages to which this page applies: % SFN 51682 (11/2003) Page 4 # Historical Expense Exhibit Insurer Name: | | Countrywide | | | | | | North Dakota | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Year | | | | | | | | | | | | | 3 Year Historical Avg % of Premium | | | $ Amount | % of Prem | $ Amount | % of Prem | $ Amount | % of Prem | $ Amount | % of Prem | $ Amount | % of Prem | $ Amount | % of Prem | | | Crop Hail Premiums * | | 100% | | 100% | | 100% | | 100% | | 100% | | 100% | 100% | | Actual Losses ** | | | | | | | | | | | | | | | Regular Commissions | | | | | | | | | | | | | | | Other Acquisition (incl Cont. Commissions) | | | | | | | | | | | | | | | General Expense | | | | | | | | | | | | | | | Loss Adjustment Expense | | | | | | | | | | | | | | | Taxes, Licenses & Fees | | | | | | | | | | | | | | | Other Expense (Explain) | | | | | | | | | | | | | | | Profit(Loss) | | | | | | | | | | | | | | * Includes premium from Crop Hail and Companion Hail policies. ** Does not include any Loss Adjustment Expense SFN 51682 (11/2003) Page 5 # Summary of Loss Cost Multipliers Insurer Name: Crop Hail Products | Rate/Loss Cost Tier | Regular Commission Level | Expense Ratio | Fixed Expense Component | Profit Load | | --- | --- | --- | --- | --- | | | % | % | | % | | | % | % | | % | | | % | % | | % | | | % | % | | % | | | % | % | | % | Companion Hail Products | Rate/Loss Cost Tier | Regular Commission Level | Expense Ratio | Fixed Expense Component | Profit Load | | --- | --- | --- | --- | --- | | | % | % | | % | | | % | % | | % | | | % | % | | % | | | % | % | | % | | | % | % | | % |