In the Insurance Commissioner’s recent decision, pure premium rate changes of (a) 0.2 percent applicable as of policy inception and (b) 4.9 percent applicable as of Jan. 1, 2003 were approved with respect to new and renewal policies with anniversary rating dates on or after Jan. 1, 2002 and before Jan. 1, 2003.
Insurance Code Section 11737(f), as added by AB 749, provides, “Notwithstanding any other provision of law, an insurer may increase rates on policies with inception dates prior to Jan. 1, 2003, in an amount no greater than the pure premium rate increase approved by the Commissioner reflecting the cost of the change in benefit levels authorized by the act adding this subdivision.” In the Decision, the Commissioner also authorized the use of ratio tables with respect to insurer rate changes applicable to in-force 2002 policies that were based on the approved changes in pure premium rates. (A ratio table reflects the average effects of a rate change by policy effective date assuming a uniform distribution of exposure throughout the policy term.)
For those insurers electing to increase rates on policies with 2002 anniversary rating dates in an amount equal to the pure premium rate increases approved by the Commissioner, the attached ratio table can be used to compute the additional premium. This ratio table can be used only for non-seasonal risks and if an insurer has adopted rate changes applicable to 2002 policies consistent with the pure premium rate changes (0.2 percent as of policy inception and an additional 4.9 percent as of Jan. 1, 2003) recently approved by the Commissioner.
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