KRS 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 re adily 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 organiz ations 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 a rrangement 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 th an 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 i nsurers 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 t hose 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 p olicyholders 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, subscr ibers, 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 t hrough 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 im posed 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.