31.14.02.05

.05 Loss Ratio.

A. This regulation applies to all long-term care insurance policies or certificates except those covered under Regulations .04, .06, and, .06-1 of this chapter.

B. Minimum Loss Ratios.

(1) Benefits under long-term care insurance policies shall be deemed reasonable in relation to premiums if the expected loss ratio is at least 60 percent, calculated in a manner which provides for adequate reserving of the long-term care insurance risk.

(2) In evaluating the expected loss ratio described in §B(1) of this regulation, due consideration shall be given to all relevant factors, including:

(a) Statistical credibility of incurred claims experience and earned premiums;

(b) The period for which rates are computed to provide coverage;

(c) Experienced and projected trends;

(d) Concentration of experience within early policy duration;

(e) Expected claim fluctuation;

(f) Experience refunds, adjustments, or dividends;

(g) Renewability features;

(h) All appropriate expense factors;

(i) Interest;

(j) Experimental nature of the coverage;

(k) Policy reserves;

(l) Mix of business by risk classification; and

(m) Product features such as long elimination periods, high deductibles, and high maximum limits.

C. Life Insurance Policies that Accelerate Benefits for Long-Term Care.

(1) Section B of this regulation does not apply to life insurance policies that accelerate benefits for long-term care.

(2) A life insurance policy that funds long-term care benefits entirely by accelerating the death benefit is considered to provide reasonable benefits in relation to premiums paid, if all of the following requirements are met:

(a) The interest credited internally to determine cash value accumulations, including long-term care, if any, are guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long-term care set forth in the policy;

(b) The portion of the policy that provides life insurance benefits meets the nonforfeiture requirements of Insurance Article, Title 16, Subtitle 3, Annotated Code of Maryland;

(c) The policy meets the disclosure requirements of Insurance Article, §§18-108 and 18-117, Annotated Code of Maryland;

(d) Any policy illustration used for the policy meets the applicable requirements of COMAR 31.09.09; and

(e) An actuarial memorandum is filed with the Commissioner that includes:

(i) A description of the basis on which the long-term care rates were determined;

(ii) A description of the basis for the reserves;

(iii) A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;

(iv) A description and a table of each actuarial assumption used;

(v) A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;

(vi) The estimated average annual premium per policy and the average issue age;

(vii) A statement as to whether underwriting is performed at the time of application; and

(viii) A description of the effect of the long-term care policy provision on the required premiums, nonforfeiture values, and reserves on the underlying life insurance policy, both for active lives and those in long-term care claim status.

(3) For the expense assumptions under §C(2)(e)(iv) of this regulation, an insurer shall include the percent of premium dollars per policy and the dollars per unit of benefits, if any.

(4) The statement required by §C(2)(e)(vii) of this regulation shall indicate whether underwriting is used. If underwriting is used, the statement shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting. If coverage is under a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs.