304.13-011 Definitions for subtitle.
As used in this subtitle, unless the context requires otherwise:
(1) A "market" is the interaction between buyers and sellers consisting of a product
market component and a geographic market component. A product market
component consists of identical or readily substitutable products including but not
limited to consideration of coverage, policy terms, rate classifications, and
underwriting. A geographic market component is a geographical area in which
buyers have a reasonable degree of access to insurance sales outlets. Determination
of a geographic market component shall consider existing market patterns;
(2) "Supplementary rating information" includes any manual or plan of rates,
classification, rating schedule, minimum premium, policy fees, rating rules, or any
other similar information needed to determine the applicable rate or premium. This
shall include underwriting rules, but only to the extent necessary to determine the
rate or premium that will be applicable to a risk should the insurer decide to provide
coverage. This does not include guidelines that relate to the selection of those risks
that are acceptable to an insurer;
(3) "Supporting information" is the experience and judgment of the filer and the
experience or data of other insurers or organizations relied on by the filer, the
interpretation of any other data relied on by the filer, descriptions of methods used
in making the rates, and any other information required to be filed by the
commissioner;
(4) "Personal risks" means homeowners, tenants, private passenger nonfleet
automobiles, mobile homes, and other property and casualty insurance for personal,
family, or household needs;
(5) "Commercial risks" are any kinds of risks that are not personal risks;
(6) "Joint underwriting" is a voluntary arrangement established to provide insurance
coverage for a risk pursuant to which two (2) or more insurers jointly contract with
the insured at a price and under policy terms agreed on between the insurers;
(7) A "pool" is a voluntary arrangement, other than by a contract of reinsurance,
established on a general and continuing basis pursuant to which two (2) or more
insurers participate in the sharing of risks on a predetermined basis. A pool may
operate through an association, syndicate or other pooling agreement;
(8) A "residual market mechanism" is an agreement, either voluntary or mandated by
law, involving participation by insurers in the equitable apportionment among them
of insurance that may be afforded applicants who are unable to obtain insurance
through ordinary methods;
(9) An "advisory organization" is any entity, including its affiliates or subsidiaries,
which either has two (2) or more member insurers or is controlled either directly or
indirectly by two (2) or more insurers and which assists insurers in ratemaking
related activities. Two (2) or more insurers having a common ownership or
operating in this state under common management or control constitute a single
insurer for purposes of this definition;
(10) A "competitive market" is a market that has not been found to be noncompetitive
pursuant to KRS 304.13-041 and for which no such order is in effect;
(11) A "noncompetitive market" is a market for which there is an order in effect pursuant
to KRS 304.13-041 that a reasonable degree of competition does not exist;
(12) "Trending" is any procedure for projecting developed losses to the average date of
loss, or premiums or exposures to the average date of writing, for the period during
which the policies are to be effective;
(13) "Expenses" are those portions of any rate attributable to acquisition, field
supervision, and collection expenses, general expenses, and premium taxes,
licenses, and fees;
(14) "Profit" is the portion of any rate attributable to funds needed for growth,
contingencies, and return to stockholders;
(15) "Pure premium" means the loss cost per unit of exposure excluding all loss
adjustment expenses;
(16) "Classification system" or "classification" means the process of grouping risks with
similar risk characteristics so that differences in cost may be recognized;
(17) "Developed losses" means losses (including loss adjustment expenses) adjusted,
using standard actuarial techniques, to their ultimate anticipated value;
(18) "Experience rating" means a rating procedure utilizing past insurance experience of
the individual policyholder to forecast future losses by measuring the policyholder’s
loss experience against the loss experience of policyholders in the same
classification to produce a prospective premium credit, debit, or unity modification;
(19) "Form provider" means a person who prepares, files, and distributes policy contract
forms and endorsements and consults with members, subscribers, customers, or
others relative to their use and application, but is not an advisory organization as
defined in this subtitle;
(20) "Loss adjustment expenses" means the expenses incurred by the insurer in the
course of settling claims;
(21) "Prospective loss costs" means that 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 or output from simulation models and loss adjustment
expenses adjusted through development to their ultimate value and projected
through trending to a future point in time. Loss costs, derived in part or entirely
upon output form simulation models, must be approved by the commissioner before
they become effective;
(22) "Rate" means the expected value of the future cost of insurance per exposure unit
which accounts for the treatment of losses, expenses, and profit prior to any
application of individual risk variations based on loss or expense considerations, but
does not include minimum premium;
(23) "Special assessments" means guaranty fund assessments, residual market
mechanism assessments, and other similar assessments which are included in
ratemaking. Special assessments shall not be considered as either expenses or
losses. Additional charges collected by the insurer and returned to a governmental
agency on behalf of an insured are not special assessments. Examples of these
additional charges include, but are not limited to, the special fund charge for
workers’ compensation imposed by KRS Chapter 342, local government premium
tax imposed by KRS 91A.080, and the Department of Revenue surcharge imposed
by KRS Chapter 136; and
(24) "Statistical agent" means an entity that has been licensed by the commissioner to
collect statistics from insurers and provide reports developed from these statistics to
the commissioner for the purpose of fulfilling the statistical reporting obligations of
those insurers under this chapter.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1114, effective July 15, 2010. -Amended 2005 Ky. Acts ch. 85, sec. 679, effective June 20, 2005. -- Amended 2000
Ky. Acts ch. 380, sec. 1, effective July 14, 2000. -- Created 1982 Ky. Acts ch. 278,
sec. 1, effective July 15, 1982.
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