Ariz. Admin. Code § 20-6-1009

Current through Register Vol. 30, No. 45, November 8, 2024

Section R20-6-1009 - Initial Filing Requirements

A. This Section applies to any long-term care policy issued in this state on or after May 10, 2005.

B. At the time of making a filing under A.R.S. § 20-1691.08, an insurer shall provide to the Director a copy of the disclosure documents required under R20-6-1008 and an actuarial certification that includes the following:

1. The initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated;

2. The policy design and coverage provided have been reviewed and taken into consideration;

3. The underwriting and claims adjudication processes have been reviewed and taken into consideration;

4. The premiums contain at least the minimum margin for moderately adverse experience as defined in subsection (4)(a) or the specification of and justification for a lower margin as required by subsection (4)(b).

a. A composite margin shall not be less than 10% of lifetime claims.

b. A composite margin that is less than 10% may be justified in uncommon circumstances. The proposed amount, full justification of the proposed amount and methods to monitor developing experience that would be the basis for withdrawal of approval for such lower margins must be submitted.

c. A composite margin lower than otherwise considered appropriate for the stand-alone long-term care policy may be justified for long-term care benefits provided through a life policy or an annuity contract. Such lower composite margin, if utilized, shall be justified by appropriate actuarial demonstration addressing margins and volatility when considering the entirety of the product.

d. A greater margin may be appropriate in circumstances where the company has less credible experience to support its assumptions used to determine the premium rates.

5. A statement that the premium rate schedule:

a. Is not less than the premium rate schedule for existing similar policy forms also available from the insurer except for reasonable differences attributable to benefits, or

b. A comparison of the premium schedules for similar policy forms that are currently available from the insurer with an explanation of the differences; and

6. A statement that reserve requirements have been reviewed and considered. Support for this statement shall include:

a. Sufficient detail or sample calculations provided so as to have a complete depiction of the reserve amounts to be held; and

b. A statement that the difference between the gross premium and the net valuation premium for renewal years is sufficient to cover expected renewal expenses; or if such a statement cannot be made, a complete description of the situations where this does not occur. An aggregate distribution of anticipated issues may be used as long as the underlying gross premiums maintain a reasonably consistent relationship.

C. An actuarial memorandum shall be included that is signed by a member of the Academy of Actuaries and that addresses and supports each specific item required as part of the actuarial certification and provides at least the following:

1. An explanation of the review performed by the actuary prior to making the statements in subsections (B)(2) and (B)(3);

2. A complete description of pricing assumptions;

3. Sources and levels of margins incorporated into the gross premiums that are the basis for the statement in subsection (B)(1) of the actuarial certification and an explanation of the analysis and testing performed in determining the sufficiency of the margins. The actuary shall clearly describe deviations in margins between ages, sexes, plans or states. Deviations in margins required to be described are other than those produced utilizing generally accepted actuarial methods for smoothing and interpolating gross premium scales; and

4. A demonstration that the gross premiums include the minimum composite margin specified in subsection (B)(4).

D. In any review of the actuarial certification and actuarial memorandum, the Director may request review by an actuary with experience in long-term care pricing who is independent of the insurer. In the event the Director asks for additional information as a result of any review, the period in A.R.S. § 20-1691.08 does not include the period during which the insurer is preparing the requested information.

Ariz. Admin. Code § R20-6-1009

Adopted effective August 10, 1992 (Supp. 92-3). R20-6-1009 recodified from R4-14-1009 (Supp. 95-1). Section R20-6-1009 renumbered to R20-6-1012; new Section R20-6-1009made by final rulemaking at 10 A.A.R. 4661, effective January 3, 2005 (Supp. 04-4). Amended by final exempt rulemaking at 23 A.A.R. 1119, effective 11/10/2017.