1. A. This Section applies to policies and certificates issued any time prior to May 10, 2005.

2. B. Benefits under an individual long-term care insurance policy are deemed reasonable in relation to premiums if the expected loss ratio is at least 60% calculated in a manner that provides for adequate reserving of the long-term care insurance risk. In evaluating the expected loss ratio, the director shall consider all relevant factors, including:

   1. 1. Statistical credibility of incurred claims experience and earned premiums;
   2. 2. The period for which rates are computed to provide coverage;
   3. 3. Experienced and projected trends;
   4. 4. Concentration of experience within early policy duration;
   5. 5. Expected claim fluctuation;
   6. 6. Experience refunds, adjustments, or dividends;
   7. 7. Renewability features;
   8. 8. All appropriate expense factors;
   9. 9. Interest;
   10. 10. Experimental nature of the coverage;
   11. 11. Policy reserves;
   12. 12. Mix of business by risk classification; and
   13. 13. Product features such as long elimination periods, high deductibles, and high maximum limits.
3. C. A premium rate schedule or proposed revision to a premium rate schedule that is expected to produce, over the lifetime of the long-term care insurance policy, benefits that are less than 60% of the proposed premium rate schedule is deemed to be unreasonable.

4. D. Subsections (B) and (C) do 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 deemed to provide reasonable benefits in relation to premiums paid if the policy complies with all of the following:

   1. 1. The interest credited internally to determine cash value accumulations, including long-term care, if any, is 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. 2. The portion of the policy that provides life insurance benefits complies with the nonforfeiture requirements of A.R.S. § 20-1231;
   3. 3. The policy complies with the disclosure requirements of A.R.S. § 20-1691.06(A) through (E);

   4. 4. At the time of making a filing under A.R.S. § 20-1691.08, the insurer files an actuarial memorandum that includes the following information:

      1. a. A description of the basis on which the long-term care rates were determined;
      2. b. A description of the basis for the reserves;
      3. c. A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;
      4. d. A description and a table of each actuarial assumption used; for expenses, an insurer shall include percent of premium dollars per policy and dollars per unit of benefits, if any;
      5. e. A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;
      6. f. The estimated average annual premium per policy and the average issue age;

      7. g. A statement as to whether underwriting is performed, including:

         1. i. Time of underwriting;
         2. ii. A description of the type of underwriting used, such as medical underwriting or functional assessment underwriting; and
         3. iii. For a group policy, whether an enrollee’s dependents are subject to underwriting; and
      8. h. A description of the effect of the long-term care policy provisions 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.

Historical Note

Adopted effective August 10, 1992 (Supp. 92-3). R20-6-1013 recodified from R4-14-1013 (Supp. 95-1). Section R20-6-1013 renumbered to R20-6-1017; new Section R20-6-1013 renumbered from R20-6-1010 and amended by final rulemaking at 10 A.A.R. 4661, effective January 3, 2005 (Supp. 04-4). Section R20-6-1013 renumbered to R20-6-1012; new Section R20-6-1013 renumbered from R20-6-1014 and amended by final exempt rulemaking at 23 A.A.R. 1119, effective November 10, 2017 (Supp. 17-2).