The following words and terms, when used in this chapter, have
the following meanings unless the context clearly indicates otherwise.
(1) Account--The aggregate credit life insurance or
credit accident and health coverage for a single class of business
written through a single creditor, or written through more than one
creditor under common control or ownership, by the insurer, whether
coverage is written on a group or individual policy basis.
(2) Actual earned premium--The total of all premiums
earned at the premium rates actually charged and in force during the
experience period.
(3) Approved deviation by case--A premium rate or premium
rate schedule adjusted in accordance with the deviation procedures
set out in Division 6 of this subchapter (relating to Deviation Procedures).
(4) Automatic deviation--A premium rate that is filed
pursuant to Insurance Code §1153.105.
(5) Average number of life years--The average of the
number of group certificates or individual policies in force each
month during the experience period (without regard to multiple coverage)
times the number of years in the experience period.
(6) Case--Either a "single account case" or a "multiple
account case" as follows:
(A) Single account case--An account that is at least
25% credible or, at the option of the insurer, any higher percentage
as determined by the credibility table set out in §3.5603 of
this title (relating to Credibility Table). An insurer exercising
this option must in writing notify, and obtain written approval of
the commissioner, of the credibility factor it will use to define
a "single account case." Once the commissioner is so notified, the
credibility factor will remain in effect for the insurer until a different
election has been filed in writing by the insurer and approved by
the commissioner.
(B) Multiple account case--A combination of all the
insurer's accounts of the same class of business with experience in
this state, excluding all single account cases of the insurer defined
in subparagraph (A) of this paragraph, or with the approval of the
commissioner; "multiple account case" also means two or more accounts
of the insurer, having like underwriting characteristics which are
combined by the insurer for premium rating purposes, excluding all
"single account cases" as defined in subparagraph (A) of this paragraph
and other "multiple account cases" defined previously.
(7) Class of business--A class of business listed as
follows:
(A) Class A--Commercial banks, savings and loan associations
and mortgage companies;
(B) Class B--Finance companies and small loan companies;
(C) Class C--Credit unions;
(D) Class D--Production credit associations (agriculture
and horticulture P.C.A.s);
(E) Class E--Dealers (including auto and truck, other
dealers, and retail stores); and
(F) Class F--Other than subparagraphs (A) - (E) of
this paragraph.
(8) Closed-end transactions--Credit transactions other
than "open-end transactions" as defined in this section.
(9) Credibility factor--The degree to which the past
experience of a case can be expected to occur in the future. The credibility
factor is based either on the average number of life years or the
incurred claim count during the experience period as shown in the
credibility table set out in §3.5603 of this title. The insurer
must notify the commissioner in writing, and obtain written approval
of the commissioner, about which of the two methods it will use in
measuring credibility. Once the commissioner is so notified, the method
will remain in effect for the insurer until a change has been filed
with and approved by the commissioner.
(10) Credit disability--Credit Accident and Health.
(11) Earned premium at presumptive premium rate--Premium
earned during the experience period at the presumptive premium rate
set forth in §3.5206 of this title (relating to Presumptive Premium
Rates). If the rate for a case is not the presumptive premium rate,
premium earned at the presumptive premium rate must be determined
in accordance with the conversion method set forth in Form CI-EP-L
or Form CI-EP-DIS, as appropriate, provided by the department for
that purpose, and set out in an attachment by the insurer to its deviation
request form. The forms can be obtained from the Texas Department
of Insurance, Life and Health Division, Filings Intake, MC-LH-LHL,
P.O. Box 12030, Austin, Texas 78711-2030. The forms can also be obtained
from the department's internet website at www.tdi.texas.gov/forms.
(12) Experience--The earned premiums and incurred claims
for a single or multiple account case. Experience will be the most
recent experience in this state for a class of business, and may include
the experience of the case while with a prior insurer to the extent
necessary to achieve credibility.
(13) Experience period--The period of time for which
experience is reported, but not for period longer than three years.
(14) Incurred claim count--The number of claims incurred
for the case during the experience period. This means the total number
of claims reported during the experience period (whether paid or in
the process of payment) plus any incurred but not reported at the
end of the experience period less the number of claims incurred but
not reported at the beginning of the experience period. If a debtor
has been issued more than one certificate for the same plan of insurance,
only one claim is counted. If a debtor receives disability benefits,
only the initial claim payment for that period of disability is counted.
(15) Incurred claims--The liability resulting from
the happening of the contingency insured against whether paid, reported,
not reported or resisted on accounting dates, valued by date of occurrence
and, without reduction for reinsurance, at amounts, excluding claims
expenses, sufficient to discharge the company from all liability and
is equal to claims paid minus unreported claims beginning of period
plus unreported claims end of period minus claim reserve beginning
of period plus claim reserve end of period.
(16) Open-end transactions or revolving accounts--Transactions
in which credit is extended by a creditor under an agreement whereby:
(A) the creditor reasonably contemplates repeated transactions;
(B) the creditor may impose a finance charge from time
to time on an outstanding unpaid balance; and
(C) the amount of credit that may be extended to the
debtor during the term of the plan (up to any limit set by the creditor)
is generally made available to the extent that any outstanding balance
is repaid.
(17) Presumptive premium rate--The rate established
by the commissioner and set out in §3.5206 of this title.
(18) Pro rata method--A method used in determining
premium refunds based on the assumption that premiums are earned in
equal increments over the term of the policy. The premium refunds
are calculated by multiplying the original gross premium by a factor
determined by the formula t/n, in which t is the number of months
remaining from its evaluation date to the end of the loan and n is
the number of months in the original term.
(19) Rule of anticipation (aka the single premium method)--A
method used in determining premium refunds in which the unearned premium
is equal to the gross single premium for the remaining term and remaining
benefits.
(20) Sum of the digits method, aka rule of 78 method--A
method used in determining premium refunds in which an unearned premium
factor is calculated by dividing the sum of the original number of
monthly payments by the sum of the remaining number of monthly payments.
The premium refunds are calculated by multiplying the original gross
premium by a factor determined by the formula (t * (t+1)/(n * (n+1),
in which t is the number of months remaining from its evaluation date
to the end of the loan and n is the number of months in the original
term.
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