NAC687B.121. Evaluation of expected loss ratio.

     1. For a long-term care insurance contract or certificate to which subsection 2 does not apply, the Commissioner shall deem the benefits reasonable in relation to premiums charged if the expected loss ratio is at least 60 percent, calculated in a manner which provides for the adequate reserving of the long-term care insurance risk. In evaluating the expected loss ratio, due consideration will be given to all relevant factors, including:

     (a) The statistical credibility of incurred claims experience and earned premiums;

     (b) The period for which rates are computed to provide coverage;

     (c) Experienced and projected trends;

     (d) The concentration of experience within early contract duration;

     (e) Expected claim fluctuation;

     (f) Experience refunds, adjustments or dividends;

     (g) Renewability features;

     (h) All appropriate expense factors;

     (i) Interest;

     (j) The experimental nature of the coverage;

     (k) Contract reserves;

     (l) The mix of business by risk classification; and

     (m) Product features such as long elimination periods, high deductibles and high maximum limits.

     2. For a policy of life insurance or a rider or endorsement to a policy of life insurance that contains accelerated benefits for long-term care, the Commissioner shall deem the benefits reasonable in relation to the premiums charged if:

     (a) The interest credited internally to determine cash value accumulations, including long-term care, are guaranteed not to be less than the minimum guaranteed interest rate for cash-value accumulations without long-term care set forth in the policy;

     (b) The portion of the policy that provides benefits for life insurance meets the nonforfeiture requirements of NRS 688A.290 to 688A.360, inclusive;

     (c) The policy meets the disclosure requirements of NAC 687B.0683, 687B.0684 and 687B.112;

     (d) Any policy illustration provided satisfies the requirements of NAC 686A.460 to 686A.479, inclusive; and

     (e) An actuarial memorandum is filed with, and approved by, the Commissioner that includes, without limitation:

          (1) A description of the basis on which the long-term care rates are determined;

          (2) A description of the basis for the reserves;

          (3) A summary of the type of policy, benefits, provisions for renewal, general marketing method and limits on ages of issuance;

          (4) A description and a table of each actuarial assumption used and, for expenses, the percent of premium dollars per policy and dollars per unit of benefits;

          (5) A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;

          (6) The estimated average annual premium per policy and the average issue age;

          (7) A statement which:

               (I) Must indicate whether underwriting is performed at the time of application;

               (II) If underwriting is performed at the time of application, must include a description of the type or types of underwriting used; and

               (III) If the policy is a policy of group long-term care insurance, must indicate whether the enrollee or any dependent will be underwritten and when such underwriting occurs; and

          (8) A description of the effect of the long-term care benefits on the required premiums, nonforfeiture values and reserves on the underlying policy of life insurance, both for active lives and those in long-term care claim status.

     3. For an annuity contract that pays for benefits for long-term care entirely by accessing the contract value, the Commissioner shall deem the benefits reasonable in relation to the premium charged if:

     (a) The interest credited internally to determine cash value accumulations, including long-term care, are guaranteed not to be less than the minimum guaranteed interest rate for cash-value accumulations without long-term care set forth in the contract;

     (b) The portion of the contract that provides benefits for long-term care meets the nonforfeiture requirements of NRS 688A.361 to 688A.369, inclusive;

     (c) The contract meets the disclosure requirements of NAC 687B.075 and 687B.112; and

     (d) An actuarial memorandum is filed with, and approved by, the Commissioner that includes, without limitation:

          (1) A description of the basis on which the long-term care rates are determined;

          (2) A description of the basis for the reserves;

          (3) A summary of the type of contract, benefits, provisions for renewal, general marketing method and limits on ages of issuance;

          (4) A description and a table of each actuarial assumption used and, for expenses, the percent of premium dollars per contract and dollars per unit of benefits;

          (5) A description and a table of the anticipated contract reserves and additional reserves to be held in each future year for active lives;

          (6) The estimated average annual premium per contract and the average issue age;

          (7) A statement which:

               (I) Must indicate whether underwriting is performed at the time of application; and

               (II) If underwriting is performed at the time of application, must include a description of the type or types of underwriting used; and

          (8) A description of the effect of the long-term care benefits on the required premiums, nonforfeiture values and reserves on the underlying annuity contract, both for active lives and those insureds who are receiving benefits for long-term care.

     4. Subsections 1 and 2 do not apply to a long-term care insurance contract or certificate if NAC 687B.059 or 687B.107 applies to the long-term care insurance contract or certificate.

     5. Subsection 3 applies to any annuity contract or rider or endorsement on an annuity contract which contains benefits for long-term care insurance and which was issued on or after October 1, 2008.

     (Added to NAC by Comm’r of Insurance, eff. 11-21-88; A 1-4-91; R121-07, 9-18-2008, eff. 10-1-2008; R028-10, 12-16-2010, eff. 10-1-2011)