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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
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noncompetitive pursuant to KRS 304.13-041 and for which no such order is in
effect;
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;
"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;
"Expenses" are those portions of any rate attributable to acquisition, field
supervision, and collection expenses, general expenses, and premium taxes,
licenses, and fees;
"Profit" is the portion of any rate attributable to funds needed for growth,
contingencies, and return to stockholders;
"Pure premium" means the loss cost per unit of exposure excluding all loss
adjustment expenses;
"Classification system" or "classification" means the process of grouping risks
with similar risk characteristics so that differences in cost may be recognized;
"Developed losses" means losses (including loss adjustment expenses)
adjusted, using standard actuarial techniques, to their ultimate anticipated
value;
"Experience rating" means a rating procedure utilizing past insurance
experience of the individual policyholder to forecast future losses by measuring
the policyholders loss experience against the loss experience of policyholders
in the same classification to produce a prospective premium credit, debit, or
unity modification;
"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;
"Loss adjustment expenses" means the expenses incurred by the insurer in the
course of settling claims;
"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;
"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;
"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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