DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES  
INSURANCE BUREAU  
LOSS RATIOS APPLICABLE TO INDIVIDUAL OR FAMILY EXPENSE COVERAGE  
(By authority conferred on the commissioner of insurance by sections 210 and 2242 of Act No.  
218 of the Public Acts of 1956, as amended, being SS500.210 and 500.2242 of the Michigan  
Compiled Laws)  
R 500.801 Applicability.  
Rule 1. These rules apply to individual policies of disability insurance as defined in section 3400  
of the act and family expense insurance policies as defined in section 3620 of the act. These rules  
do not apply to credit accident and health policies as defined in section 3 of Act No. 173 of the  
Public Acts of 1958, being S550.603 of the Michigan Compiled Laws, or a policy of insurance  
with an annual premium of $7.50 or less. Where a policy covers a contingency for a period of  
coverage less than a year, the premium for that period is considered the annual premium.  
History: 1979 AC.  
R 500.802 Definitions.  
Rule 2. (1) "Act" means Act No. 218 of the Public Acts of 1956, as amended, being SS500.100  
to 500.8302 of the Michigan Compiled Laws.  
(2) "Anticipated loss ratio" means the ratio at the time of policy filing, or at a time of subsequent  
rate revisions, of the present value of all expected future benefits, excluding dividends, to the  
present value of all future premiums, less dividends, based on a credible premium volume over a  
reasonable period of time with proper weight given to trends and other relevant factors. Statistical  
data relating to expected future benefits shall be obtained from policies of insurance sold or to be  
sold in this state when available.  
(3) "Collectively renewable insurance" means all insurance which is made available on an  
individual basis under mass enrollment procedures to groups of persons under a plan sponsored by  
an employer, an association or a union or affiliated associations or unions or a group of individuals  
supplying materials to a central point of collection or handling a common product or commodity,  
under which the insurer has agreed that renewal will not be refused, subject to any specified age  
limit, while the insured remains a member of the group specified in the agreement unless the  
insurer simultaneously refuses renewal to all other policies in the same group, or all policies  
bearing the same form number.  
(4) "Guaranteed renewable insurance" means all individual insurance which grants an insured  
the right to continue the policy in force by the timely payment of premiums until at least age 50,  
or in the case of a policy issued after age 44, for at least 5 years from the date of issue of the policy,  
during which period the insurer has no right to make unilaterally any change in any provision of  
the policy while the policy is in force, except that the insurer may make changes in premium rates  
by classes.  
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(5) "Individual accident insurance" means all insurance which covers such losses as are due to  
accident only.  
(6) "Noncancellable insurance" or "noncancellable and guaranteed renewable insurance" means  
all insurance which gives the insured the right to continue the insurance in force by the timely  
payment of premiums set forth in the policy until at least age 50, or in the case of a policy issued  
after age 44, for at least 5 years from its date of issue, during which period the insurer has no right  
to make unilaterally any change in any provision of the policy while it is in force.  
(7) "Nonrenewable for stated reasons only insurance" means all individual insurance which limits  
the insurer's right of nonrenewal to stated reasons other than deterioration of health.  
(8) "Optionally renewable insurance: means all individual insurance which allows the insurer  
unhampered right of nonrenewal.  
(9) "Rated by age insurance" means all individual insurance where the issue age is 65 years or  
more.  
History: 1979 AC.  
R 500.803 Benefits unreasonable in relation to premiums.  
Rule 3. (1) The policy or rate filings shall include an actuarial certification that the benefits  
provided are reasonable in relation to the premium charged and shall show the anticipated loss  
ratio. The benefits provided are presumed unreasonable in relation to the premiums charged if the  
anticipated loss ratio does not equal or exceed the following standards:  
(a) Sixty-five percent for rated by age insurance.  
(b) Sixty percent for collectively renewable insurance or optionally renewable insurance.  
(c) Fifty-five percent for guaranteed renewable insurance or nonrenewable for stated reasons only  
insurance.  
(d) Fifty percent for noncancellable insurance, noncancellable and guaranteed renewable  
insurance or individual accident insurance.  
(e) Fifty-five percent for all other insurance.  
(2) The presumption of unreasonableness which exists where anticipated loss ratios are lower  
than those indicated in subrule (1) may be rebutted pursuant to the provisions of R 500.805.  
History: 1979 AC.  
R 500.804 Actuarial certification.  
Rule 4. The actuarial certification shall include a description of the gross premiums, the  
anticipated loss ratios and certification that, to the best of the actuary's knowledge and belief, the  
benefits provided are reasonable in relation to the premiums charged. The information used to  
support the certification should include the following and shall be available on request:  
(a) The specific formula and assumptions used in calculating gross premiums.  
(b) The expected claim costs.  
(c) Identification of morbidity and mortality tables or experience studies used, sufficient  
explanation for evaluation of their validity, including copies of such tables if they are not currently  
published.  
(d) The experience of the insurer on similar coverages or on the same policy if the policy is in  
effect on the date these rules take effect.  
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(e) The applicability of the filing to in-force business on substantially similar forms.  
(f) Lapse rate experience.  
History: 1979 AC.  
R 500.805 Withdrawal and withholding of approval.  
Rule 5. (1) Approval is withdrawn on September 30, 1974, from policies of individual insurance  
which bear an approval date prior to the effective date of these rules, where the anticipated loss  
ratio percentage of such insurance policies does not satisfy requirements stated in R 500.804 or  
where the anticipated loss ratio percentage of such insurance policies satisfies the requirement  
stated in R 500.804 but the loss ratio experience indicates to the insurance bureau that the minimum  
anticipated loss ratio required by R 500.804 will not be achieved.  
(2) Approval will not be granted for new policies of individual insurance which are submitted to  
the insurance bureau for approval after the effective date of these rules where the anticipated loss  
ratio percentage of the policies is not at least equal to the minimum loss ratio percentage stated in  
R 500.804.  
(3) Approval shall be withdrawn from such policies of insurance which are submitted to the  
insurance bureau for approval after the effective date of these rules where experience data show  
the insurance does not appear capable of developing the anticipated loss ratio projected in the  
actuarial certification filed.  
(4) Approval shall not be withdrawn or withheld where it has been demonstrated to the  
satisfaction of the insurance bureau that the benefits of the insurance are reasonable in relation to  
the premiums charged even though the anticipated loss ratio for the insurance does not equal the  
minimum loss ratio percentage stated in R 500.804. The insurance bureau's decision to withdraw  
or withhold approval may be contested pursuant to the administrative procedures act, Act No. 306  
of the Public Acts of 1969, as amended, being SS24.201 to 24.328 of the Michigan Compiled  
Laws.  
History: 1979 AC.  
R 500.806 Identification of policies.  
Rule 6. To record whether or not approval has been withdrawn by these rules each insurer shall  
identify for the insurance bureau before September 30, 1974, all policies of individual insurance  
which have been previously approved by the insurance bureau and which meet the standards set  
forth in R 500.804 and shall furnish the bureau with an actuarial certification and experience data  
for all such policies. Experience data shall relate to policies of insurance in force in this state when  
possible.  
History: 1979 AC.  
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