INSURANCE

DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF INSURANCE

Minimum Standards for Specified Disease and Critical Illness Coverages

Loss Ratio Standards

Adopted Amendments: N.J.A.C. 11:4-53.6 and 11:4-53 Appendix Exhibit A

Proposed: October 1, 2001 at 33 N.J.R. 3425(a)

Adopted: December 6, 2001 by Donald Bryan, Acting Commissioner, Department of Banking and Insurance.

Filed: December 6, 2001 as R. 2002 d.7,

Authority: N.J.S.A. 17:1-8.1, 17:1-15e, 17B:26-1h, 17B:26-45, 17B:30-1 et seq. and 17B:27-49.

Expiration Date: November 30, 2005.

Summary of Public Comments and Agency Responses:

The Department received four comments from American Family Life Assurance Company of Columbus (AFLAC), Bankers Life and Casualty Company, UNUM Provident Corporation and its subsidiary Colonial Life & Accident Insurance Company, and the Professional Firefighters Association of New Jersey.

COMMENT: Three of the commenters expressed their support for the Department's proposal to lower the loss ratio standards for individual specified disease and critical illness policies from 65 percent to 60 percent. The commenters stated that the lower loss ratio will be more consistent with that of other states, and will provide a viable and competitive market for insurers offering these products to New Jersey consumers.

RESPONSE: The Department appreciates the commenters' support.

COMMENT: One commenter stated that N.J.A.C. 11:4-53 generally is too restrictive regarding benefit requirements and limitations, making it extremely difficult for insurers to provide a reasonably priced product that meets the needs of the customer.

The commenter further stated that it believed that the proposed 60 percent loss ratio requirement for individual policies is too high for a limited benefit, low premium policy such as specified disease, and that other similar products are only subject to a 55 percent loss ratio requirement in New Jersey. The commenter added that the 75 percent loss ratio requirement for group policies is too high.

RESPONSE: The commenter's first comment regarding the restrictiveness of Department's specified disease and critical illness coverage rules generally is beyond the scope of these amendments dealing solely with loss ratio requirements. Moreover, the Department addressed all comments regarding the specified disease and critical illness coverage rules at the time it adopted N.J.A.C. 11:4-53. These comments and responses appeared in the October 1, 2001 New Jersey Register at 33 N.J.R. 3454(c).

The Department reiterates its position concerning loss ratio requirements as expressed in its response to the comments on that issue appearing in the adoption notice in the October 1, 2001 New Jersey Register at 33 N.J.R. 3454(c). While the Department emphasizes its consumer protection role in the sale of specified disease coverage, it does not believe that a slight reduction in the individual loss ratio requirement (that is, from 65 percent to 60 percent) would diminish that protection. Moreover, a slightly lower loss ratio would be more consistent with loss ratios of other states with comparable regulatory frameworks, and would improve insurers' ability to offer these products to New Jersey consumers.

A Federal standards analysis is not required because these adopted amendments are not subject to any Federal standards of requirements.

Full text of the adoption follows: