Ohio Miscellaneous Regulatory Material DEPARTMENT OF INSURANCE BULLETINS Bulletin 91-1 Prospective loss costs filing procedures	Effective Date January 8, 1991

This bulletin specifies the framework under which rating bureaus and participating insurers in rating bureaus will operate in a loss cost system in the State of Ohio. Under this system, rating bureaus will no longer develop or file final rates but instead will develop and file, for review or approval, advisory prospective loss costs and supporting actuarial 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. Rating bureaus 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 rating bureaus or their participating insurers to immediately refile rates previously implemented. Any participating insurer of a rating bureau is authorized to continue to use all rates and deviations reviewed or approved for its use until disapproved, or the insurer makes its own filing to change its rates, either by making an independent filing or by filing a Loss Cost Filing Adoption Form adopting the rating bureau's prospective loss costs, or modification thereof.

DEFINITIONS

A) "Expenses" means that portion of a rate attributable to acquisition, field supervision, collection expenses, general expenses, taxes, licenses, and fees.

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

C) "Developed losses" means losses (including loss adjustment expenses) adjusted, using standard actuarial techniques, to eliminate the effect of differences between current payment or reserve estimates and those needed to provide actual ultimate loss (including loss adjustment expense) payments.

D) "Loss trending" means any procedure for projecting developed losses to the average date of loss for the period during which the policies are to be effective.

E) "Participating insurers" means a member or a subscriber to a rating bureau. It also includes any insurer which files by reference a loss cost filing made by a rating bureau.

F) "Prospective loss costs" are the 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.

G) "Supplementary rating information" includes any manual or plan of rates, classification, rating schedule, minimum premium, policy fee, rating rule, rate-related underwriting rule, experience rating plan, statistical plan and any other similar information needed to determine the applicable rate in effect or to be in effect.

SECTION I: RATES/LOSS COSTS

A) Rating Bureau Action

Rating bureaus will no longer develop or file final rates that contain provisions for expenses (other than loss adjustment expenses) and profit. Instead, for all lines, rating bureaus will develop and file for review or approval with the Ohio Department of Insurance in accordance with ORC 3935.04 or 3937.03, a Loss Cost Filing containing advisory prospective loss costs and supporting actuarial and statistical data.

Loss Cost Filings will contain the advisory prospective loss costs and the underlying loss data and other supporting actuarial information for any calculations or assumptions underlying those loss costs.

After a Loss Cost Filing has been filed with the Insurance Department and reviewed or approved, the rating bureau will provide its members or subscribers with a copy of the Filing.

The rating bureau may print and distribute manuals of prospective loss costs as well as rules and other supplementary rating information described in Section IIA.

With the initial prospective Loss Cost Filing, rating bureaus will no longer develop or file any minimum premiums.

B) Insurer Action

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

If a participating insurer of a rating bureau decides to use the prospective loss costs in the Loss Cost Filing in support of its own filing, the insurer shall make a filing for review or approval using the Loss Cost Filing Adoption Form. The insurer's rates are the combination of the prospective loss costs and the loss cost adjustments contained in the Loss Cost Filing Adoption Form.

Insurers may file modifications of the prospective loss costs in the reviewed or approved Loss Cost Filing based on their own anticipated experience. Supporting documentation will be required for any modifications (upwards or downwards) of the prospective loss costs in the approved Loss Cost Filing. Also, supporting information will be required if an insurer has significant Ohio written premium or if a significant change is being made in rate levels.

Insurers may vary expense loads by individual classification, grouping, or subline of insurance. Insurers may use variable or fixed expense loads or a combination of these to establish their expense loadings.

If an insurer wishes to use minimum premiums, it must file the minimum premiums it proposes to use.

The insurer may request to have its loss costs adjustments remain on file and reference all prospective Loss Cost Filings. Upon receipt of subsequent approved rating bureau's Loss Cost Filings, the insurer's rates are the combination of the prospective loss costs and the loss cost adjustments contained in the Loss Cost Filing Adoption Form on file with the Insurance Department, and will be effective on the effective date of the prospective loss costs. The insurer need not file anything further with the Insurance Department.

If an insurer that has filed to have its loss cost adjustments remain on file with the Insurance Department intends to delay, modify, or not adopt a particular rating bureau's Loss Cost Filing, the insurer must make an appropriate filing with the Insurance Department.

The insurer's filed loss cost adjustments will remain in effect until disapproved or the insurer withdraws them or files for review or approval of a revised Loss Cost Filing Adoption form.

Insurers may file such other information which the company deems relevant and shall provide such other information as may be requested by the Insurance Department.

To the extent that an insurer's final rates are determined solely by applying its loss cost adjustment, as presented in the Loss Cost Filing Adoption Form, to the prospective loss costs contained in a rating bureau's Loss Cost Filing and printed in the rating bureau's rating manual, the insurer need not develop or file final rate pages with the Insurance Commissioner. If an insurer chooses to print and distribute final rate pages, based upon the application of its filed loss costs, the insurer will need to file those pages with the Department. If the rating bureau does not print the loss costs in its manual, the insurer must submit its rates to the Department.

For Future Loss Cost Filings filed by the rating bureaus:

If the participating insurer HAS filed to have its loss cost adjustments applicable to subsequent Loss Cost Filings, and a new Loss Cost Filing is filed and

If. . . .	Then. . . .
1. the insurer decides to use the revision of the prospective loss costs and effective data as filed ...........................	1. the insurer does NOT file anything with the Insurance Department. Rates are the combination of the prospective loss costs and the on-file loss cost adjustments and become effective on the effective date of the Loss Cost Filing.
2. the insurer decides to use the prospective loss costs as filed BUT with a different effective date ............................	2. the insurer must notify the Insurance Department of its effective date before the effective date of the Loss Cost Filing.
3. the insurer decides to use the revision of the prospective loss costs, but wishes to change its loss cost adjustments ...........	3. the insurer must file for review or approval a revised Loss Cost Filing Adoption Form before the effective date of the Loss Cost Filing.
4. the insurer decides NOT to revise its rates using the prospective loss costs ......................	4. the insurer must notify the Insurance Department before the effective date of the Loss Cost Filing.

If an insurer has NOT elected to have its filed loss cost adjustments applicable to future loss cost filings, and a new Loss Cost Filing is reviewed or approved, and

If. . . .	Then. . . .
1. the insurer decides to use the prospective loss costs to revise its rates .......................	1. the insurer must file a Loss Cost Filing Adoption Form for review or approval including its effective date.
2. the insurer decides NOT to use the revision ....................	2. the insurer does not file anything with the Insurance Department.

SECTION II: SUPPLEMENTARY RATING INFORMATION

A) Rating Bureau Action

Rating bureaus file with the Insurance Department, for review or approval, filings containing a revision of rules 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 limits factors, classification relativities or similar factors but excludes minimum premiums.

These filings are made by the rating bureau on behalf of those insurers that have authorized the rating bureau to file rules, relativities and supplementary rating information on their behalf.

Rating bureaus may print and distribute manuals of rules and supplementary rating information excluding minimum premiums.

B) Insurer Action

If an insurer has authorized a rating bureau to file on its behalf, and a new filing of rules, relativities and supplementary rating information is filed

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 rating bureau's effective date. An Application to Deviate from Bureau Filings (Form 1A) must be submitted for filings made under Section 3935.07 ORC.
3. the insurer decides not to use the revision ....................	3. the insurer must notify the Insurance Department before the rating bureau's effective date. An Application to Deviate from Bureau Filings (Form 1A) must be submitted for filings made under Section 3935.07 ORC.
4. the insurer decides to use the revision with modifications .....	4. the insurer must file the modification with the Insurance Department, for approval, specifying the basis for the modification and the insurer's proposed effective date if different than the effective date filed by the rating bureau. An application to Deviate from Bureau Filings (Form 1A) must be submitted for filings made under Section 3935.07 ORC.

C) Insurers who reference file rule and supplementary rating information (not a member/subscriber) must also comply with Section B except an Application to Deviate from Bureau Filings (Form 1A) does not need to be submitted.

George Fabe
Director of Insurance

CROSS REFERENCE 3935.04; 3937.03; 3935.07

DATE NEW 1991

SUBJECT CATEGORY 010 - All/unspecified lines
360 - Filing and reporting requirements
560 - Finance and investments
760 - Premium rates / rating organizations

DEFINITIONS Expenses; Rate; Developed losses; Loss trending;
Participating insurers; Prospective loss costs; Supplementary rating
information

INDEX
Rating systems and Prospective loss costs and Filing requirements
Rating organizations and Prospective loss costs and Filing requirements
Insurers and Rating organizations and Filing requirements
Reference filings and Rating organizations and Filing requirements
Independent filings and Rating systems and Insurers
Forms (documents) and Rating organizations and Reference filings
Manuals and Rating organizations and Prospective loss costs
Premium rates and Insurers and Filing requirements