Section 6.06. Minimum documentation in support of rate filings.

 

(1)   Purpose. The purpose of this section is to establish the minimum supplementary rate information required to be submitted with rate filings to the commissioner. Statutes interpreted or implemented by this section are ss. 601.42 (1g) , 625.01 , 625.02 (3) , and 625.11 , Stats.

(2)   Scope. Except as provided in sub. (4) , any insurer or rate service organization which is subject to s. 625.13 (1) , Stats., and is filing rates for any kind or line of direct insurance in this state shall include, in that filing, the supplementary rate information required by sub. (5) or (6) .

(3)   Definitions.

(a) A "frequency trend factor" means any factor which adjusts the past number of paid or incurred claims to reflect more accurately the number of claims that can be expected to develop during the period the proposed rates will be used.

(b) A "loss adjustment factor" means any factor used to modify or adjust the actual losses paid or incurred during the period under examination or review.

(c) A "loss development factor" means any factor used either to adjust the reported amount of incurred losses to include incurred but not reported losses or to correct errors in the estimation of loss reserves for reported claims that have not been paid, or both.

(d) A "premium adjustment factor" means any factor used to modify or adjust the actual premiums earned during the period under examination or review.

(e) A "rate level factor" means any factor that adjusts prior earned premiums to the premiums that would have been earned if the present rates had been in effect throughout the period under examination or review.

(f) A "severity trend factor" means any factor which adjusts the past average claim amount to reflect more accurately the average claim amount that can be expected to develop during the period the proposed rates will be used.

(4)   Exemptions.

(a) Life and disability insurance as defined in s. Ins 6.75 (1) , disability insurance as defined in s. Ins 6.75 (2) (c) , title insurance as defined in s. Ins 6.75 (2) (h) , mortgage guaranty insurance as defined in s. Ins 6.75 (2) (i) , municipal bond insurance as defined in s. Ins 3.08 (3) (e) , and worker's compensation insurance as defined in s. Ins 6.75 (2) (k) are exempt from the provisions of this section.

(b) All companies licensed under ch. 612 , Stats. , are exempt from the provisions of this section.

(c) The commissioner may, upon written application, exempt an insurer from full or partial compliance with this rule.

(5)   Supplemental rate information. A rate filing and accompanying supplemental rate information shall be appropriately organized for the kind, class or line of business for which the filing is being made. Except as provided in sub. (6) , all rate filings shall include the following supplementary rate information:

(a)

1. At least 3 separate and consecutive years of both Wisconsin and aggregate of all states' experience showing:

a. Premiums earned;

b. Losses paid;

c. Separate reserves for reported but unpaid losses; and

d. Reserves for losses incurred but not reported.

2. If any of the information required by subd. 1. is omitted or less than 3 years' experience is provided, an explanation shall be submitted.

(b) An explanation of the rate-making procedures including a description of any statistical data and actuarial methods utilized; or a statement of facts and other detailed information which explain judgments used; or a statement as to how the rates of the filing company compare with those of the competition, providing detail where the rates are substantially higher or lower; or any combination.

(c) Explanation of the permissible or target loss ratio, including an explanation of how any investment income has been taken into account.

(d) When used, any premium adjustment factors and loss adjustment factors by year and an explanation of methods and judgments underlying each factor. Loss adjustment factors include but are not limited to loss development factors, frequency trend factors, and severity trend factors. Premium adjustment factors include but are not limited to rate level factors.

(6)   Other supplemental rate information. The commissioner may accept supplemental information other than that required by sub. (5) if the insurer or rate service organization can demonstrate to the commissioner that this information fully supports the rate filing and complies with s. 625.11 , Stats.

(7)   Use of rate service organization rates. A member of or subscriber to a rate service organization licensed under s. 625.32 , Stats., shall file supplementary rate information if its rates deviate from those filed on its behalf by the rate service organization. Such a filing shall be as required by subs. (5) and (6) .

(8)   Additional information. The commissioner may require additional rate filing information if the commissioner determines that the original filing does not explain the proposed rate. Such additional information shall be provided within 30 days of the request.

History: Cr. Register, March, 1988, No. 387 , eff. 4-1-88; am. (5) (a) 1. intro. and (9), Register, November, 1988, No. 395 , eff. 12-1-88; r. (9) and Appendix, Register, January, 1995, No. 469 , eff. 2-1-95; correction in (1) made under s. 13.93 (2m) (b) 7., Stats., Register, February, 2000, No. 530 .