Section 33-29-19. Rate modification on individual accident and sickness policies providing for optional loss ratio guarantee

   (a) This Code section shall apply only to the filing of rate modifications for individual accident and sickness policies which provide for an optional loss ratio guarantee.

(b) As used in this Code section, the term:

   (1) "Expected loss ratio" in an experience period means the ratio of: (A) the sum of expected claims in the experience period for each year of issue, based on the corresponding loss ratio standards as recited in accordance with paragraph (1) of subsection (d) of this Code section, to (B) the earned premium in the experience period.

   (2) "Loss ratio" means the ratio of incurred claims to earned premium.

(c) Rate modification on individual accident and sickness policies which provide for an optional loss ratio guarantee must be filed with the Commissioner prior to implementation.

(d) At the time of filing new premium rates on any previously approved form for individual accident and sickness insurance policies which provide for an optional loss ratio guarantee, the benefits provided by the policies shall be deemed reasonable as to the premium charged so long as the insurer complies with the terms of a loss ratio guarantee filed with the Commissioner. The loss ratio guarantee shall be in writing and shall include at least the following:

   (1) A recitation of the loss ratio standards included in the original actuarial memorandum filed with the policy form at the time of the initial approval of the policy form. Such loss ratio standards must be given for each of the first ten years after issue;

   (2) A guarantee that the actual loss ratios in this state for each experience period will meet or exceed the expected loss ratio in the experience period. If the annual earned premium volume in this state under a policy form is less than $1 million, the loss ratio guarantee shall be based on the actual loss ratio for the aggregate of states having less than $1 million of earned premium for the policy form. If such aggregate annual earned premium is less than $1 million, the experience period shall be extended until the end of the calendar year in which $1 million of earned premium is attained;

   (3) A guarantee that the actual loss ratio results for each calendar year the rates are in effect shall be independently audited during the second quarter of the following year at the expense of the insurer. The audited results shall be reported to the Commissioner no later than the date for filing the applicable accident and sickness policy experience exhibit. The Commissioner may disapprove the audit for reasonable cause;

   (4) A guarantee that affected policyholders in this state shall be issued a refund proportional to premiums paid in an amount such that when added to incurred claims will bring the actual loss ratio up to the expected loss ratio in the experience period. If aggregate loss ratios are used, the total amount refunded in this state shall equal the dollar amount necessary to achieve the loss ratio standards multiplied by the total premium earned in this state on the policy form and divided by the total premiums earned in all aggregated states on the policy form. The refund shall be made to all policyholders insured under the applicable policy form as of the last day of the applicable experience period and whose individual refund would equal $10.00 or more. The refund shall include interest at the maximum interest rate permitted by law in the valuation of whole life insurance issued on the last date of the applicable experience period calculated from the last day of the applicable experience period until the date of payment, which shall be during the third quarter of the following year; and

   (5) A guarantee that refunds of less than $10.00 shall be aggregated by the insurer and paid to the Insurance Department.

Code 1981, § 33-29-19, enacted by Ga. L. 1992, p. 1648, § 1; Ga. L. 1993, p. 91, § 33.