(a) The Insurance Commissioner shall disapprove a form filed under § 23-79-109, or withdraw a previous approval, only if the form:
(1) Violates or does not comply with state law;
(2) Contains or incorporates by reference, when the incorporation is otherwise permissible, an inconsistent, ambiguous, or misleading clause, or an exception and a condition that deceptively affect the risk purported to be assumed in the general coverage of the contract;
(3) Has a title, heading, or other indication of its provisions that is misleading; or
(4) Is printed or otherwise reproduced in such a manner that makes a provision of the form substantially illegible or not easily legible to persons of normal vision.
(b)
(1) The commissioner shall disapprove a premium rate filed with an individual accident and health contract if the commissioner finds that the rate is not actuarially sound, is excessive, is inadequate, or is unfairly discriminatory.
(2) A rate is actuarially sound if it is:
(A) Supported by an actuarial analysis made by a member of the American Academy of Actuaries; and
(B) Based on generally accepted actuarial principles and methodologies that show the rate to be reasonable.
(3) An insurer's submission of an actuarially sound rate shall not foreclose the commissioner from relying upon a contrary opinion made by a member of the American Academy of Actuaries who utilized generally accepted actuarial principles and methodologies to contest the rate filed by the insurer.
(4) A rate is excessive if it is likely to produce a profit that is unreasonably high in relation to past and prospective loss experience for the form which the filing affects or if expenses are unreasonably high in relation to services given.
(5) A rate is not unfairly discriminatory if:
(A) It shows equitably the differences in expected losses and expenses; or
(B) Different premiums result for policyholders with like loss exposures but different expense factors or with like expense factors but different loss exposures, if the rates show the differences with reasonable accuracy.
(6) A rate is inadequate if the investment income attributable to the rate fails to satisfy projected losses and expenses for the form which the filing affects.
(c)
(1) A rate on a particular policy form is approved when filed with the commissioner if the insurer has filed a loss ratio guarantee with the commissioner and complied with the terms of the loss ratio guarantee.
(2) A benefit is reasonable in relation to the premium so long as the insurer complies with the terms of the loss ratio guarantee.
(3)
(A) The loss ratio guarantee shall be in writing, signed by an officer of the insurer, and contain at least the following:
(i) A recitation of the anticipated target loss ratio standards contained in the original actuarial memorandum filed with the policy form when it was originally approved;
(ii) A guarantee that if the new rate takes effect, the loss ratios in this state for the experience period in which the new rate takes effect and for each experience period thereafter until a new rate is filed shall meet or exceed the loss ratio standards referred to in subdivision (c)(3)(A)(i) of this section; and
(iii) A statement or guarantee that affected policyholders in this state shall be issued a proportional refund based on premium earned of the amount necessary to bring the total loss ratio up to the loss ratio standards referred to in subdivision (c)(3)(A)(i) of this section.
(B) If nationwide loss ratios are used, then the total amount refunded in this state shall equal the dollar amount necessary to achieve the loss ratio standards multiplied by the total premium earned in this state on the policy form and divided by the total premium earned in a state on the policy form.
(C) The refund shall be made to a policyholder in this state who is insured under the applicable policy form on the last day of the experience period and whose refund would equal ten dollars ($10.00) or more.
(D) The refund shall include interest from the end of the experience period until the date of payment.
(E) The payment of the refund shall be made during the third quarter of the year following the experience period for which a refund is determined to be due.
(F) Refunds of less than ten dollars ($10.00) shall be aggregated by the insurer and paid to the State Insurance Department.
(4)
(A) If the annual earned premium volume in this state under a policy form is less than one million dollars ($1,000,000) and therefore not actuarially credible, the loss ratio guarantee shall be based on the nationwide loss ratio for the policy form.
(B) If the total earned premium in this state is less than one million dollars ($1,000,000), the experience period shall be extended until the end of the calendar year in which one million dollars ($1,000,000) of earned premium is attained.
(5)
(A) An insurer shall submit a guarantee that the loss ratio in this state or nationally, if applicable, for the year at issue shall be independently audited at the insurer's expense.
(B) An audit shall be made in the second quarter of the year following the end of the experience period and the audited results reported to the commissioner at or before the date for filing the policy experience exhibit.
(6) As used in this section:
(A)
(i) “Experience period” means the period for a given rate filing for which a loss ratio guarantee is made beginning on the first day of the calendar year during which the rate first takes effect and ending on the last day of the calendar year during which the insurer earns one million dollars ($1,000,000) in premium on the form in this state or if the annual premium earned on the form in Arkansas is less than one million dollars ($1,000,000) nationally.
(ii) Successive experience periods shall be determined beginning on the first day following the end of the preceding experience period; and
(B) “Loss ratio” means the ratio of incurred claims to earned premium by number of years of policy duration for the combined durations.
(7)
(A) An insurer whose rates on a policy form are approved according to a loss ratio guarantee shall provide a notice to an affected policyholder that advises that rates may be increased more than one (1) time a year.
(B) The notice shall be delivered to a new policyholder with policies subject to the loss ratio guarantee at or before the time of delivery of the policy.
(d) This section does not require an insurer to provide the notice required by this section on more than one (1) occasion to a policyholder while the policyholder is insured under the guaranteed form.