1. (a) Find the Credibility Factor (“Z”) from TABLE 1 (Section 2670.9) for the experience group. Where actual loss ratios are less than 45%, use the premium earned for the experience group during the experience period; otherwise, use the Reported Claims Count. If either of these measures cannot be directly determined, the Commissioner may accept reasonable approximations of them.

2. (b) 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 for the experience period adjusted to the prima facie rate level for the initial annual review and adjusted to the current effective rate level for subsequent annual reviews.

   For credit unemployment insurance, the actual loss ratio for each year of the experience period shall be multiplied by the ratio of the prospective unemployment rate minus 3.0% to the historical unemployment rate for that year minus 3.0%. Each year the Commissioner shall determine the prospective and historical unemployment rates to be used.

   CLR = Z (ALR) + .60(1-Z)

3. (c) Calculate the maximum permitted premium rate (“MaxPP”) using the following formulas.

   For the initial review:

   MaxPP = CLR x Prima Facie Rate/ .6

   For subsequent reviews:

   MaxPP = CLR x Current Approved Rate/ .6

   Rates shall be calculated and applied separately for property and unemployment.

4. (d) Credibility adjusted loss ratios and maximum permitted premium rates shall be redetermined annually.
5. (e) For the initial review, rates for programs whose provisions differ significantly from the benchmarks shall be set so that the loss ratio shall not be less than the permissible loss ratio set forth in Section 2670.6. Prima Facie Rates and Permissible Loss Ratio for Benchmark Programs and shall be approved by the Commissioner before their use. For subsequent reviews, the maximum permitted premium rate shall be calculated as above.

Note: Authority cited: Sections 779.21, 779.36, 12921 and 12926, Insurance Code; Credit Insurance General Agents Association v. Payne, 16 Cal.3d 651 (1976); and 20th Century v. Garamendi, 8 Cal.4th 216 (1994). Reference: Sections 779.36, 1861.01 and 1861.05, Insurance Code.

History

1. New section filed 3-10-2003; operative 4-9-2003. Submitted to OAL for printing only pursuant to Government Code section 11343.8 as a regulation that establishes rates in accordance with Government Code section 11340.9(g) (Register 2003, No. 11).

2. Change without regulatory effect withdrawing and repealing section pursuant to settlement agreement in Consumer Credit Insurance Association v. John Garamendi (California Superior Court No. 03CS00533) filed 5-27-2004 pursuant to section 100, title 1, California Code of Regulations (Register 2004, No. 22).

3. New section filed 4-28-2006; operative 5-28-2006. Submitted to OAL for printing only pursuant to Government Code section 11343.8 as a regulation that establishes rates in accordance with Government Code section 11340.9(g) (Register 2006, No. 17).