These documents are not legal documents but are placed here for reference purposes only. For a legal copy please contact the department.

Vermont Loss Cost Bulletin

Bulletin
Friday, June 29, 1990
Insurance Bulletin # 99

BULLETIN #99

JUNE 29, 1990

VERMONT LOSS COST BULLETIN

Section 1: Rate Service Organization and Insurer Filing Procedures

This document specifies the framework under which Rate Service Organizations and participating insurers in Rate Service Organizations will operate under loss cost filing procedures. Under this system, a Rate Service Organization will no longer develop or file final rates but instead will develop and file advisory prospective loss costs, supporting actuarial information and statistical data.

Each insurer must individually determine and file the rates it will use as a result of its own independent company decision-making process. Rate service organizations will continue to develop and file rules, relativities and supplementary rating information on behalf of their participating insurers.

Nothing in these procedures shall be construed to require rate service organizations or their participating insurers to immediately refile rates previously implemented. Any participating insurer of rate service organizations is authorized to continue to use all rates and deviations filed for its use until disapproved, or it files to replace its rates.

Section 2: Definitions

(A) “Rate Service Organization” means an organization licensed pursuant to Title 8 Section 4690.

(B) “Expenses” means that portion of a rate attributable to acquisition, field supervision and collection expenses, general expenses, and taxes, licenses and fees.

(C) “Prospective loss costs” is that portion of a rate that does not include provisions for expenses (other than loss adjustment expenses) or profit, and are based on historical aggregate losses and loss adjustment expenses adjusted through development to their ultimate value and projected through trending to a future point in time.

(D) “Rate” means the cost per unit of exposure, whether expressed as a single number or as a prospective loss cost and an adjustment to account for the treatment of expenses, profit and variations in loss experience, prior to any application of individual risk variations based upon loss or expenses considerations, and does not include minimum premiums.

(E) “Supplementary rating information” has the same meaning as defined in Title 8 Section 4683(17).

(F) “Supporting information” has the same meaning as defined in Title 8 Section 4683(18).

Section 3: Rates/Loss Costs

(A) Rate Service Organization Action

Rate Service Organizations will file with the Insurance Department filings containing a revision of loss costs, rules, or supplementary rating information. These filings may include policy-writing rules, rating plans, classification codes and descriptions, territory codes and descriptions and rules which include factors or relativities or similar factors but excludes minimum premiums and other rates.

Rate Service Organizations will file supplementary rating information, rules and relativities on behalf of those insurers that have authorized the Rate Service Organization to make such filings. They may also print and distribute loss costs, manuals of rules and supplementary rating information excluding minimum premiums.

Loss Cost Filings will contain the advisory prospective loss costs, underlying loss data, other supporting information, and assumptions underlying those loss costs. The Rate Service Organization will provide its participating insurers with a copy of the Prospective Loss Cost Filing.

Special Note: These “use and file” procedures will be used for all filings described in this section, except for submissions in a “noncompetitive market” (as defined in Title 8, Section 4683(10)) where these filings will be made in advance for approval.

(B) Insurer Action

Each insurer must individually determine the final rates it will file and the effective date of any rate changes. This will be the result of the independent company decision-making process unique to each insurer.

If an insurer decides to use the prospective loss costs in a Rate Service Organization Loss Cost Filing in support of its own filing, it should make a filing using the Reference Filing Adoption Forms attached to this Bulletin. The insurer’s rates must be the combination of the prospective loss costs and the loss cost adjustments contained in the Reference Filing Adoption Form.

The insurer may request to have its loss cost adjustments remain on file and apply to all subsequent prospective Loss Costs filings. Upon receipt of a subsequent Rate Service Organization loss cost filing, the insurer’s rates will be the combination of the prospective loss costs and the loss cost adjustments contained in the insurer’s Reference Filing Adoption Form on file with the Insurance Department.

The insurer’s filed loss cost adjustments and/or rates will remain in effect until the insurer withdraws them, files new loss cost adjustments and/or rates, or the loss cost adjustments and/or rates are disapproved.

If the insurer has requested to have its loss costs adjustments remain on file and apply to all subsequent prospective Loss Costs Filings; and,

If…

Then…

1. the insurer decides to use the revisions and effective date as filed…

1. the insurer does not file anything with the Insurance Department.

2. the insurer decides to use the revisions as filed but with a different effective date…

2. the insurer must notify the Insurance Department of its effective date before the Rate Service Organization’s effective date.

3. the insurer decides to use the revision of the prospective loss costs, but wishes to change its loss costs adjustments…

3. the insurer must file a revised Reference Filing Adoption Form.

4. the insurer decides not to revise its rates using the prospective loss costs…

4. the insurer must file with the Insurance Department a letter advising that it will not be using the prospective loss costs.

5. if the insurer wishes to use minimum premiums…

5. it must file the minimum premiums. It may continue to use minimum premiums

If an insurer has not elected to allow its loss cost adjustments to remain on file, applicable to future prospective loss costs reference filings, and a new loss costs reference filing is filed, and

if…

then…

1. the insurer decides to use the prospective loss costs to revise its rates…

1. the insurer must file a revised Reference Filing Adoption Form including its effective date.

2. the insurer decides not to use the revisions…

2. the insurer does not file anything with the Insurance Department.

Notes: (a) These “use and file” procedures will be used for all filings

described in this section, except for submissions in a “non-

competitive market” (as defined in Title 8, Section 4683(10))

where these filings will be made in advance for approval.

(b) All filings are subject to Vermont’s Microfiche Regulation

and must be accompanied by a filing fee of $20.00.

(c) To the extent that the insurer’s rates are determined solely by

applying its loss costs adjustments to the prospective loss costs

contained in the Rate Service Organization’s filing, and the

insurer does not develop and print rate pages, the insurer shall

not be required to file its final rates with the Insurance Department.

If the insurer decides to develop and print final rates for its own

use by applying loss cost adjustments to the Rate Service

Organization’s prospective loss costs, then it shall also file the

rate pages with the Insurance Department.

Section 4: Rules, Relativities and Supplementary Rating Information

A. Rate Service Organization Action

Rate service organizations will continue to file revisions of rules, relativities and supplementary rating information. This includes policy-writing rules, rating plans, classification codes and descriptions, territory codes and descriptions and rules which include factors or relativities such as increased limit factors, classification relativities or similar factors but not to include minimum premiums.

Rate Service Organizations will make filings on behalf of those insurers that have authorized the rate service organization to file rules, relativities and supplementary rating information on their behalf.

B. Insurer Action

If an insurer has authorized a rate service organization to file rules, relativities and supplementary information on its behalf and

If…

Then…

1. the insurer decides to use the revisions and effective date as filed…

1. the insurer does not file anything with the Insurance Department.

2. the insurer decides to use the revisions as filed but with a different effective date…

2. the insurer must notify the Insurance Department not later than 15 days after the Rate Service Organization’s effective date by filing a letter and attaching a manual-size page specifying this action and giving the effective date selected by the insurer.

3. the insurer decides not to use the revision…

3. the insurer must notify the Insurance Department not later than 15 days after the Rate Service Organization’s effective date by filing a letter and attaching a manual-size page specifying this action and clearly identifying the rules and/or supplementary rate information the insurer is continuing to use.

4. the insurer decides to use the revision with modification…

4. the insurer must file the modifications with the Insurance Department no later than 15 days after the Rate Service Organization’s effective date clearly identifying the modification being made and attach a manual-size exception page showing the specific change.

Notes: (a) These “use and file” procedures will be used for all filings

described in this section, except for submissions in a “noncom-

petitive market” (as defined in Title 8, Section 4683(10)), where

these filings will be made in advance for approval.

(b) All filings are subject to Vermont’s Microfiche Regulation and

must be accompanied by a filing fee of $20.00.

Date:__________________

INSURER RATE FILING

ADOPTION OF RATE SERVICE ORGANIZATION

PROSPECTIVE LOSS COSTS

REFERENCE FILING ADOPTION FORM

 

1. INSURER NAME ___________________________________________________

ADDRESS ___________________________________________________

___________________________________________________

___________________________________________________

___________________________________________________

 

PERSON RESPONSIBLE FOR FILING _________________________________

TITLE__________________________________TELEPHONE #_______________

 

2. INSURER NAIC # ___________________________________________________

3. LINE OF INSURANCE _____________________________________________

4. RATE SERVICE ORGANIZATION _____________________________________

5. RATE SERVICE ORGANIZATION REFERENCE FILING #_______________

 

6. The above insurer hereby declares that it is a member, subscriber or service

purchaser of the named rate service organization for this line of insurance.

The insurer hereby files to be deemed to have independently submitted as its

own filing the prospective loss costs in the captioned Reference Filing.

 

The insurer’s rates will be the combination of the prospective loss costs and

the loss costs multipliers and, if utilized, the expense constants specified in

the attachments.

 

7. PROPOSED RATE LEVEL CHANGE______%  EFFECTIVE DATE_________

 

8. PRIOR RATE LEVEL CHANGE _______%  EFFECTIVE DATE___________

 

9. ATTACH “SUMMARY OF SUPPORTING INFORMATION FORM”

(Use a separate Summary for each insurer-selected loss cost multiplier.)

 

10. CHECK ONE OF THE FOLLOWING:

 

_____ The insurer hereby files to have its loss cost multipliers and, if

utilized, expense constants be applicable to future revisions of the

rate service organization’s prospective loss costs for this line of

insurance. The insurer’s rates will be the combination of the rate

service organization’s prospective loss costs and the insurer’s loss

cost multipliers and, if utilized, expense constants specified in the

attachments. The rates will apply to policies written on or after the

effective date of the rate service organization’s prospective loss costs.

This authorization is effective until disapproved by the Commissioner,

or amended or withdrawn by the insurer.

 

_____ The insurer hereby files to have its loss cost multipliers and, if

utilized, expense constants be applicable only to the above Rate

Service Organization Reference Filing.

 

 

 

 

Insurer Name:___________________________

Date:_________________

NAIC Number: _________________________

 

INSURER RATE FILING

ADOPTION OF RATE SERVICE ORGANIZATION PROSPECTIVE LOSS COSTS SUMMARY OF SUPPORTING INFORMATION FORM

 

CALCULATION OF COMPANY LOSS COST MULTIPLIER

 

1. Line, Subline, Coverage, Territory, Class, etc. combination to which this

page applies:

 

_______________________________________________________________________

 

2. Loss Cost Modification:

 

A. The insurer hereby files to adopt the prospective loss costs in the

captioned referenced filing:

 

____ Without modification. (factor = 1.000)

 

____ With the following modification(s). (Cite the nature and

percent of the modification, and attach supporting data

and/or rationale for the modification.)

 

________________________________________________________________

________________________________________________________________

 

B. Loss Cost Modification Expressed as a Factor: ______________________

(See examples below.)

 

NOTE: IF EXPENSE CONSTANTS ARE UTILIZED, ATTACH

“EXPENSE CONSTANT SUPPLEMENT” OR OTHER

SUPPORTING INFORMATION. DO NOT COMPLETE

ITEMS 3-7 BELOW.

 

3. Development of Expected Loss Ratio. (Attach exhibit detailing insurer

expense data and/or other supporting information.)

 

                                                           Selected Provisions

 

A. Total Production Expense ________________%

B. General Expense ________________%

C. Taxes, Licenses & Fees ________________%

D. Underwriting Profit & Contingencies ________________%

E. Other (explain) ________________%

F. TOTAL ________________%

 

4A. Expected Loss Ratio: ELR=100% - 3F = ________________%

4B. ELR in decimal form = _______________

5. Company Formula Loss Cost Multiplier: (2B / 4B) = _______________

6. Company Selected Loss Cost Multiplier = _______________

Explain any differences between 5 and 6:

______________________________________________________________________

______________________________________________________________________

7. Rate level change for the coverages to which this

page applies _______________%

 

 

Example 1: Loss Cost modification factor: If your company’s loss cost modification is –10%, a factor of .90(1.000 - .100) should be used.

 

Example 2: Loss Cost modification factor: If your company’s loss cost modification is +15%, a factor of 1.15 (1.000 + .150) should be used.

 

 

3. Development of Expected Loss Ratio. (Attach exhibit detailing insurer

expense data and/or other supporting information.)

 

                                                                  Selected Provisions

                                                               Overall  Variable  Fixed

Fixed

A. Total Production Expense _______ ________ ______

B. General Expense _______ ________ ______

C. Taxes, Licenses & Fees _______ ________ ______

D. Underwriting Profit & Contingencies _______ ________ ______

E. Other (explain) _______ ________ ______

F. TOTAL _______ ________ ______

 

4.A. Expected Loss Ratio: ELR=100% - Overall 3F = ____________

B. ELR expressed in decimal form = ____________

C. Variable Expected Loss Ratio

VELR = 100% - Variable 3 F = ________

D. VELR in decimal form = ________

 

5. Formula Expense Constant:

[(1.00 – 4B) / (1.00 – 4D)] x Average Underlying Loss Cost = _______

 

Formula Variable Loss Cost Multiplier: (2B / 4D) = _______

 

6. Selected Expense Constant = _______

 

Selected Variable Loss Cost Multiplier = _______

 

7. Explain any differences between 5 and 6:

 

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

 

8. Rate level change for the coverages to which this page applies ________