1. (a) As used in §§ 2248.39 through 2248.42:

   1. (1) “Experience group” means the experience under a plan of insurance of one creditor or more than one creditor. For the purpose of defining and using experience group for life insurance and for disability insurance the separate plans of insurance are: Class, as defined in § 2248.33; life/disability; single life/joint life; open end/closed end; and, single premium/monthly premium. In addition, for disability insurance separate plans also include elimination period and retroactive/nonretroactive for disability. The insurance plans of each creditor in a multiple creditor group must be reasonably similar and each creditor-plan must provide the same type of life or disability coverage (from § 2248.31) and be in the same Class of Business (from § 2248.33).

      For purposes of determining deviated rates, the Commissioner may allow a combination of experience groups for single life/joint life for life and disability insurance, and elimination period, retroactive/nonretroactive for disability insurance to maintain an appropriate relationship between rates, where such combination is justified by the carrier to the satisfaction of the Commissioner.

      If an experience group has experience in more than this State, an insurer may use only the experience of the experience group in the State to rate the group or, with the approval of the Commissioner, an insurer may use the multi-State experience of the experience group for this purpose if it is more credible than the California experience and is generated by the same or similar plans of insurance and is adjusted to account for differences in premium rates.

      Insurers using multiple-creditor groups for the purpose of determining downward or upward deviated rates shall establish written standards for the inclusion of individual creditor-groups within such multiple creditor groups. Such standards shall be applied uniformly regardless of the type of deviation contemplated.

   2. (2) “Experience period” means the most recent period of time for which experience is reported, but not for a period longer than three full years. An experience period shall end on December 31st of each calendar year.

      1. (A) If an experience group develops a Credibility Factor of 1 from TABLE 4 (“Rate Deviation Credibility Table” in § 2248.47) in less than three years, the experience period for that case will be the number of full years needed to attain that Credibility Factor.

      2. (B) An insurer may elect a level of credibility within the range of TABLE 4 for an experience group. If an experience group develops the minimum credibility elected by the insurer in less than three years, the experience period for that group may be, at the option of the insurer, either the number of full years needed to develop the elected minimum credibility or three full years. If an experience group fails to attain such minimum credibility within three full years, the credibility actually attained in that period shall be used for determining downward deviated rates.

         Experience incurred in the period immediately preceding the effective date of this regulation may be used to the extent necessary to fill out the experience period.

      3. (C) If a new experience group of an insurer has experience in this State with a prior insurer, the new insurer must use the most recent experience of the experience group with the prior insurer to the extent necessary to fill out an experience period. Other data or projections may be used if the Commissioner finds them to be more credible.
   3. (3) “Incurred Claim Count”, as used in TABLE 4, means the number of claims incurred for the experience group during the experience period. This means the total number of claims reported during the experience period, whether paid or in the process of payment plus any incurred but not reported (IBNR) at the end of the experience period less the number of claims incurred but not reported at the beginning of the experience period. If a debtor has been issued more than one policy or certificate for the same plan of insurance, only one claim is counted. If a debtor receives disability benefits, only the initial claim payment for that period of disability is counted.
   4. (4) “Average Number of Life years”, as used in TABLE 4, means the average number of group certificates or individual policies in force during the experience period (without regard to multiple coverage) times the number of years in the experience period, or some equivalent calculation.
2. (b) Find the Credibility Factor (“Z”) from TABLE 4 for the experience group. For life insurance, and for disability insurance, where actual loss ratios are less than 45%, use the Average Number of Life years; otherwise, use either the Average Number of Life Years or the Incurred Claims Count. If either of these measures cannot be directly determined, the Commissioner may accept reasonable approximations of them.

3. (c) For life insurance and for disability insurance, calculate the credibility adjusted loss ratio (“CLR”) for the experience group using the following formula, where ALR is the actual loss ratio for the experience group on the prima facie rate basis.

   1. (1) Where CLR is equal to or less than PLR less .05, the downward deviated rate may not exceed the new case rate (“NCR”) calculated as:

      NCR = PFR [1 - (PLR-CLR)]

   2. (2) Where CLR exceeds PLR + .05, the upward deviated rate may not exceed the new case rate (“NCR”) calculated as:

      NCR = PFR [1 + 1.2(CLR-PLR)]

   CLR = Z (ALR) + PLR(1-Z)

   Calculate the new case rate (“NCR”) for the experience group according to the formulas below, where PFR is the prima facie rate for the experience group.

4. (d) Calculations for new case rates or deviated rates under Class A shall use two adjustments, before and after applying the formulas. First, adjust the earned premiums by deducting 10 cents per 1000. Apply the formulas and then add back 10 cents per 1000 to obtain the final new case or deviated rate.

Note: Authority cited: Sections 779.21 and 779.36, Insurance Code. Reference: Sections 779.9, 779.13, 779.16 and 779.36, Insurance Code; Sections 18191, 18290-18292, 22314, 22315 and 22455, Financial Code; and Credit Insurance General Agents Association v. Payne, (1976) 16 Cal. 3d 651.

History

1. New section filed 4-14-94; operative 5-16-94. Submitted to OAL for printing only pursuant to Government Code section 11343(a)(1) (Register 94, No. 15).

2. Amendment of section and Note filed 10-2-2001; operative 10-1-2001. Submitted to OAL for printing only pursuant to Government Code section 11340.9(g) (Register 2001, No. 40).

3. Amendment of subsections (a)(1), (c)(1) and (d) filed 1-9-2002; operative 1-9-2002. Submitted to OAL for printing only pursuant to Government Code section 11340.9(g) (Register 2002,, No. 2).