Section 2644.7 - Loss and Premium Trend(a) "Loss trend" and "premium trend" is the process by which forces not reflected in historical loss and premium data are expected to affect losses and premiums in the rating period.(b) Trend factors shall be based on the exponential curve of best fit. Companies shall file the most recent 8, 12, 16, 20, and 24 quarters of rolling calendar year data excluding catastrophes. The premium and loss trend factors shall be developed using the insurer's most actuarially sound company-specific rolling calendar year data excluding catastrophes, for the most recent 8, 12, 16, 20, or 24 quarters. The insurer shall file its rate change application using the single data period that it determines to be the most actuarially sound. The Commissioner may require the use of an alternative data period if the Commissioner determines that use of the alternative is the most actuarially sound. Frequency trend shall be calculated as reported or closed claims divided by exposures. Severity trend shall be calculated on paid losses divided by closed claims or total paid losses, including partial payments in previous calendar years, on closed claims divided by closed claims. The insurer shall submit the frequency and severity calculations on all bases, and shall demonstrate that its selection is the most actuarially sound. Premium trend factors shall be developed using company-specific premium per exposure data.(c) Where the trend factor within a given line significantly varies by subline, by policy limits, by region of the state, or by coverage, separate trend factors shall be calculated in accordance with that evidence.(d) For homeowners multiple peril and private passenger automobile liability and physical damage, the standard for full credibility for loss trend shall be 6000 total claims over the same number of quarters as used in subsection (b) for each form for homeowners and for each coverage for private passenger automobile. Partial credibility shall be the square root of the ratio of the actual number of claims divided by the full credibility standard. For private passenger automobile other than motorcycle, the complement of credibility for loss trend shall be calculated using the latest available California Fast Track paid loss, closed claim count and earned exposure data, The complement shall be based on the exponential curve of best fit to the most recent rolling calendar year data for the same number of quarters as used in subsection (b). For uninsured and underinsured motorist bodily injury and medical payments coverages, the complement shall use the California Fast Track bodily injury data. For uninsured and underinsured motorist property damage coverages, the complement shall use the California Fast Track property damage data. The Commissioner may modify the result of the calculation from California Fast Track data to take into account factors not reflected in the historical data, pursuant to section 2646.3.(e) For lines of business other than homeowners multiple peril and private passenger automobile liability and physical damage, the standard for full credibility for loss trend shall be determined using the most actuarially sound method. For lines of business other than private passenger automobile liability and physical damage, the standard for the complement of credibility for loss trend shall be determined using the most actuarially sound method.Cal. Code Regs. Tit. 10, § 2644.7
1. New section filed 8-13-91 as an emergency; operative 8-13-91 (Register 92, No. 3). A Certificate of Compliance must be transmitted to OAL 12-11-91 or emergency language will be repealed by operation of law on the following day.
2. Repealed by operation of Government Code section 11346.1(g) (Register 92, No. 15).
3. New section refiled 2-14-92 as an emergency; operative 2-14-92 (Register 92, No. 15). A Certificate of Compliance must be transmittted to OAL 6-15-92 or emergency language will be repealed by operation of law on the following day.
4. Repealed by operation of Government Code section 11346.1(g) and new section filed 3-15-95; operative 3-15-95. Submitted to OAL for printing only pursuant to Government Code section 11343(a)(1) (Register 95, No. 11).
5. Amendment of section heading and section filed 1-3-2007; operative 4-3-2007. Submitted to OAL for printing only pursuant to Government Code section 11340.9(g) (Register 2007, No. 1).
6. Amendment filed 5-16-2008; operative 5-16-2008. Submitted to OAL for printing only pursuant to Government Code section 11340.9(g) (Register 2008, No. 20). Note: Authority cited: Sections 1861.01 and 1861.05, Insurance Code; and 20th Century v. Garamendi, 8 Cal.4th 216 (1994). Reference: Sections 1861.01 and 1861.05, Insurance Code; and Calfarm Insurance Company v. Deukmejian (1989) 48 Cal.3d 805.
1. New section filed 8-13-91 as an emergency; operative 8-13-91 (Register 92, No. 3). A Certificate of Compliance must be transmitted to OAL 12-11-91 or emergency language will be repealed by operation of law on the following day.
2. Repealed by operation of Government Code section 11346.1(g) (Register 92, No. 15).
3. New section refiled 2-14-92 as an emergency; operative 2-14-92 (Register 92, No. 15). A Certificate of Compliance must be transmittted to OAL 6-15-92 or emergency language will be repealed by operation of law on the following day.
4. Repealed by operation of Government Code section 11346.1(g) and new section filed 3-15-95; operative 3-15-95. Submitted to OAL for printing only pursuant to Government Code section 11343(a)(1) (Register 95, No. 11).
5. Amendment of section heading and section filed 1-3-2007; operative 4-3-2007. Submitted to OAL for printing only pursuant to Government Code section 11340.9(g) (Register 2007, No. 1).
6. Amendment filed 5-16-2008; operative 5-16-2008. Submitted to OAL for printing only pursuant to Government Code section 11340.9(g) (Register 2008, No. 20).