Michigan Laws 500.705 – Disability income claim reserves; maximum interest rate; morbidity standards specified in rules; exception; group disability income claim reserves; duration from date of disablement 2 years or more bu
Current as of: 2023 | Check for updates
|
Other versions
(1) The maximum interest rate for claim reserves related to disability income is that rate specified in section 733.
(2) Minimum standards with respect to morbidity are those specified in rules promulgated pursuant to this chapter except that, at the option of the insurer, for claims with a duration from date of disablement of less than 2 years, reserves may be based upon the insurer’s experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.
Terms Used In Michigan Laws 500.705
- Commissioner: means the director. See Michigan Laws 500.102
- Date of disablement: means the earliest date the insured is considered as being disabled under the definition of disability in the health insurance policy or certificate based on a doctor's evaluation or other evidence. See Michigan Laws 500.701
- Elimination period: means a specified number of days, weeks, or months starting at the beginning of each period of loss, during which benefits under a health insurance policy or certificate are not payable. See Michigan Laws 500.701
- Insurer: means an individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds organization, fraternal benefit society, or other legal entity, engaged or attempting to engage in the business of making insurance or surety contracts. See Michigan Laws 500.106
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Rate: means the cost of insurance per payroll before adjustment for an individual insured's size, exposure, or loss experience. See Michigan Laws 500.2402
- Reserve: means all items of benefit liability, whether in the nature of incurred claim liability or in the nature of contract liability relating to future periods of coverage, and whether the liability is accrued or unaccrued. See Michigan Laws 500.701
(3) For group disability income claims with a duration from date of disablement of 2 years or more but less than 5 years, reserves may, with the approval of the commissioner, be based on the insurer’s experience for which the insurer maintains underwriting and claim administration control. The request for approval of a plan of modification to the reserve basis shall include all of the following:
(a) An analysis of the credibility of the experience.
(b) A description of how all of the insurer’s experience is proposed to be used in setting reserves.
(c) A description and quantification of the margins to be included.
(d) A summary of the financial impact that the proposed plan of modification would have had on the insurer’s last filed annual statement.
(e) A copy of the approval of the proposed plan of modification by the commissioner.
(f) Any other information considered necessary by the commissioner.
(4) For health insurance policies and certificates with an elimination period, the duration of disablement shall be measured as dating from the time that benefits would have begun to accrue if there had not been an elimination period.