Product Filing Review Handbook

Product Filing Review Handbook

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? 2012, 2016 National Association of Insurance Commissioners. All rights reserved.

ISBN: 978-1-59917-923-0

Printed in the United States of America

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TABLE OF CONTENTS

PRODUCT FILING REVIEW HANDBOOK

INTRODUCTION ..................................................................................................................................................................... 1 Overview ................................................................................................................................................................................. 1 Using the Handbook ................................................................................................................................................................ 1

Handbook Revisions................................................................................................................................................................ 1

CHAPTER ONE: A Brief History of Rate and Form Regulation ......................................................................................... 2 Early World History ................................................................................................................................................................ 2 Early U.S. History ................................................................................................................................................................... 2 Paul v. Virginia ....................................................................................................................................................................... 3 Antitrust Laws ......................................................................................................................................................................... 3 Munn v. Illinois........................................................................................................................................................................ 3 Life Insurance.......................................................................................................................................................................... 4 The Armstrong and Merritt Committee Investigations............................................................................................................ 4 Development of Rating Bureaus.............................................................................................................................................. 4 The Lockwood Committee Investigation ................................................................................................................................ 4 United States of America v. South-Eastern Underwriters Association.................................................................................... 5 McCarran-Ferguson Act .......................................................................................................................................................... 5 The All-Industry Bill ............................................................................................................................................................... 5 Insurance Lines........................................................................................................................................................................ 5 Consumer Influence................................................................................................................................................................. 6 Prospective Loss Cost.............................................................................................................................................................. 6 Notable State Uniformity Efforts in Recent Years .................................................................................................................. 6 Today....................................................................................................................................................................................... 7

CHAPTER TWO: The Filing Process ..................................................................................................................................... 8 The Filing ................................................................................................................................................................................ 8 The Filer .................................................................................................................................................................................. 9 The Reviewer ........................................................................................................................................................................ 10

CHAPTER THREE: The Basics of Property and Casualty Rate Regulation .................................................................... 11 Introduction ........................................................................................................................................................................... 11 Rating Laws........................................................................................................................................................................... 11 Rate Standards ....................................................................................................................................................................... 12

? 2012, 2016 National Association of Insurance Commissioners

Rate Justification and Supporting Data ................................................................................................................................. 12 Number of Years of Historical Data ...................................................................................................................................... 16 Segregation of Data ............................................................................................................................................................... 16 Data Adjustments .................................................................................................................................................................. 16 Premium Adjustments ........................................................................................................................................................... 16 Losses and LAE (perhaps just DCC) Adjustments................................................................................................................ 19 Catastrophe or Large Loss Provisions ................................................................................................................................... 23 Loss Adjustment Expenses .................................................................................................................................................... 23 Data Quality .......................................................................................................................................................................... 23 Rate Justification: Overall Rate Level ................................................................................................................................... 24 Contingency Provision .......................................................................................................................................................... 25 Credibility.............................................................................................................................................................................. 25 Calculation of Overall Rate Level Need: Methods................................................................................................................ 26 Rate Justification: Rating Factors.......................................................................................................................................... 27 Calculation of Deductible Rating Factors.............................................................................................................................. 29 Calculation of Increased Limit Factors.................................................................................................................................. 30 Credibility for Rating Factors................................................................................................................................................ 30 Interaction between Rating Variables (Multivariate Analysis) ............................................................................................. 30 Approval of Classification Systems ...................................................................................................................................... 30 Rating Tiers ........................................................................................................................................................................... 30 Rate Justification: New Products........................................................................................................................................... 31 Predictive Modeling .............................................................................................................................................................. 32 Advisory Organizations......................................................................................................................................................... 32 Workers' Compensation Special Rules ................................................................................................................................. 34 Premium Selection Decisions ................................................................................................................................................ 34 Installment Plans ................................................................................................................................................................... 35 Policy Fees ............................................................................................................................................................................ 35 Potential Questions to Ask Oneself as a Regulator ............................................................................................................... 35 Questions to Ask a Company ................................................................................................................................................ 36 Additional Ratemaking Information...................................................................................................................................... 36 Other Reading........................................................................................................................................................................ 36 Summary ............................................................................................................................................................................... 37 Chapter Three Glossary ......................................................................................................................................................... 37

? 2012, 2016 National Association of Insurance Commissioners

CHAPTER FOUR: The Basics of Life and Annuity Regulation ......................................................................................... 39 Introduction ........................................................................................................................................................................... 39 Laws and Regulations............................................................................................................................................................ 39 State Regulation of Life Insurance and Annuities ................................................................................................................. 39 Interstate Insurance Product Regulation Commission (IIPRC) ............................................................................................. 40 Cash Surrender Values and Paid-up Nonforfeiture Benefits ................................................................................................. 40 Credit Life and Disability Insurance...................................................................................................................................... 40

CHAPTER FIVE: The Basics of Health Rate Regulation.................................................................................................... 41 Introduction ........................................................................................................................................................................... 41 Rating Laws and Guidance Manuals ..................................................................................................................................... 41 Types of Health Insurance ..................................................................................................................................................... 41 Rate Standards and Justification............................................................................................................................................ 43 Disability Income Insurance .................................................................................................................................................. 45 Medicare Supplement Insurance ........................................................................................................................................... 45 Small Group Insurance .......................................................................................................................................................... 45 Long-Term Care Insurance.................................................................................................................................................... 45

CHAPTER SIX: The Federal Affordable Care Act (ACA) and Plan Management .......................................................... 47 Introduction and Key Term Definitions ................................................................................................................................ 47 History ................................................................................................................................................................................... 48 Categories of Regulatory Health Insurance Coverage Plans ................................................................................................. 49 Resources .............................................................................................................................................................................. 51 Marketplace Types and Responsibilities ............................................................................................................................... 55 Marketplace Requirements .................................................................................................................................................... 58 Review Standards .................................................................................................................................................................. 60 Forms, Rates and Plan Reviews Under the ACA .................................................................................................................. 61

CHAPTER SEVEN: Policy Form Filings .............................................................................................................................. 65 Public Policy and Policy Form Review ................................................................................................................................. 65 Standards for Policy Forms Review ...................................................................................................................................... 65 Speed to Market Imperatives ................................................................................................................................................. 66 Speed to Market in a Prior-Approval Environments ............................................................................................................. 67 Speed to Market in Non-Prior-Approval Environments ........................................................................................................ 69 The Result.............................................................................................................................................................................. 70 Process Flow.......................................................................................................................................................................... 70

? 2012, 2016 National Association of Insurance Commissioners

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