Rule 20:06:21:05 Loss ratios.
20:06:21:05. Loss ratios. This section applies to all
long-term care insurance policies or certificates except those covered under
§ 20:06:21:61 and §§ 20:06:21:63 to 20:06:21:69, inclusive.
A long-term care insurance policy sold
in this state shall meet or exceed the minimum loss ratio. The minimum loss
ratio for an individual policy is 60 percent. The minimum loss ratio for a
group policy is 65 percent. Long-term care insurance coverage sold through the
mail or mass media advertising is considered an individual policy and not a
group policy. The loss ratio shall be calculated based on earned premium and
incurred loss in the aggregate. The premium shall be designed to develop at
least the minimum loss ratio over the lifetime of the policy. An anticipated
loss ratio shall be based on generally accepted actuarial principles and
practices as published in the Actuarial
Standards of Practice.
All filings of rates and rating
schedules shall demonstrate that actual and expected losses, in relation to
premiums, comply with the requirements of this section.
Loss ratio requirements do not apply
to long-term care riders attached to or provisions included in life insurance
In evaluating the expected loss ratio,
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
(4) Concentration of
experience within early policy duration;
(5) Expected claim
(6) Experience refunds,
adjustments, or dividends;
(7) Renewability features;
(8) All appropriate expense
(10) Experimental nature of
(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.
16 SDR 208, effective June 3, 1990; 22 SDR 106, effective February 18, 1996; 25
SDR 13, effective August 9, 1998; 26 SDR 26, effective September 1, 1999; 27
SDR 54, effective December 4, 2000; 28 SDR 157, effective May 19, 2002; 30 SDR
39, effective September 28, 2003.
Authority: SDCL 58-17B-8.
Implemented: SDCL 58-17B-8.
Actuarial Standards of Practice,
American Academy of Actuaries. Copies may be obtained free of charge on the
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