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2.55.502    INDIVIDUAL LOSS SENSITIVE DIVIDEND DISTRIBUTION PLAN

(1) Upon declaration of a dividend by the State Fund board of directors (board) as of the end of any fiscal year, but in no event prior to July 1, 1998, the following factors and procedures shall be utilized to determine the entitlement of a State Fund policyholder to an individual loss sensitive dividend. The dividend shall be declared as an amount not to exceed the approved dividend amount, to aid distribution of the declared dividend among policyholders through the table of dividend factors.

(2) Distribution of dividends to individual policyholders shall be based on a table of dividend factors as approved by the board, subject to the certification by the State Fund independent consulting actuary pursuant to (4) . The table of dividend factors shall be constructed with one axis based on increments of policyholder premium size in the dividend year and the other axis based on increments of policyholder loss ratios from the dividend year.

(3) Dividend factors shall be based on an actuarial determination of policyholders' proportionate contribution to the operating results of the State Fund during the dividend year. The proportionate contribution of the policyholder shall be determined by taking into consideration factors such as, but not limited to, the following: incurred losses, loss development, credibility of incurred loss ratios, provision for excess losses, loss adjustment expenses, other expenses including differences in expense levels by premium segment, rate adequacy by premium segment, actuarially determined insurance charges, and future investment income on premiums paid.

(4) The independent actuary shall certify that the approved table of dividend factors, to include the increments of policyholder premium size and loss ratios, is consistent with (3) and generally accepted actuarial principles.

(5) To be eligible for a dividend a policyholder must have six continuous months of coverage with the State Fund in the policy period that is new or renewed within the dividend year.

(6) Individual retrospectively rated and optional deductible policies shall not be eligible for a dividend declared by the board under this rule. This section applies to policies with policy effective dates after December 31, 2006.

(7) The board may set a minimum amount below which a dividend shall not be payable to an individual policyholder.

(8) A dividend will be issued as a warrant to a policyholder, unless (8) (a) through (8) (c) exist. The dividend will be applied to the account, unless an exception is made by the board of directors for a warrant to be issued, if the following situations exist:

(a) the current policy is pending forced cancellation for nonpayment of premium;

(b) a canceled policy with an existing debt owed the State Fund; or

(c) the dividend amount is above the minimum amount established pursuant to (7) but below an amount as established by the board.

(9) If a dispute under the policy arising from the dividend year exists and remains unresolved at the time the dividend is declared, the dividend amount will be withheld and not applied to the account or a warrant issued until such time as outstanding issues with the State Fund are resolved.

(10) The State Fund has a security interest in all dividends to secure payment to the State Fund of any and all amounts owed to the State Fund by the policyholder, regardless of the policy years in relation to which the policyholder owes the State Fund, or to which the State Fund declares a dividend.

History: 39-71-2315, 39-71-2323, MCA; IMP, 39-71-2323, MCA; NEW, 1998 MAR p. 1273, Eff. 5/15/98; AMD, 1998 MAR p. 3268, Eff. 12/18/98; AMD, 2000 MAR p. 1033, Eff. 4/28/00; AMD, 2002 MAR p. 164, Eff. 2/1/02; AMD, 2006 MAR p. 3065, Eff. 12/22/06.

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