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Legislative Audit Division Audit and Rate Review.

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Presentation on theme: "Legislative Audit Division Audit and Rate Review."— Presentation transcript:

1 Legislative Audit Division Audit and Rate Review

2 Audit Legislative audit of state fund. The legislative auditor shall annually conduct or have conducted a financial and compliance audit of the state fund, including its operations relating to claims for injuries resulting from accidents that occurred before July 1, The audit must include evaluations of the claims reservation process, the amounts reserved, and the current report of the state fund's actuary. The evaluations may be conducted by persons appointed under Audit and evaluation costs are an expense of and must be paid by the state fund and must be allocated between those claims for injuries resulting from accidents that occurred before July 1, 1990, and those claims for injuries resulting from accidents that occur on or after that date.

3 Audit  The Legislative Audit Division conducts an annual financial and compliance audit of Montana State Fund.  The Audit includes an evaluation of reserves.  The Audit Report is public information and is reviewed annually by the Legislative Audit Committee upon completion.

4 Rate Review Authority of legislative auditor with respect to state fund. The legislative auditor shall review rates established by the board to determine if the rates are excessive, inadequate, or unfairly discriminatory. Each year, the legislative auditor shall: (1) examine the state fund beginning no sooner than October 1 following the end of the fiscal year; and (2) report the findings of the examination and rate review to the governor, the legislature, and the board of directors of the state fund.

5 Rate Review  The Legislative Audit Division is responsible for annually reviewing the rates established by the Montana State Fund Board of Directors.  The Legislative Audit Division contracts with an independent actuary to perform the review  The standard of review is to determine if rates are not “excessive, inadequate, or unfairly discriminatory”- is the same standard applied to the private sector in

6 Audit Legislative audit of state fund. The legislative auditor shall annually conduct or have conducted a financial and compliance audit of the state fund, including its operations relating to claims for injuries resulting from accidents that occurred before July 1, The audit must include evaluations of the claims reservation process, the amounts reserved, and the current report of the state fund's actuary. The evaluations may be conducted by persons appointed under Audit and evaluation costs are an expense of and must be paid by the state fund and must be allocated between those claims for injuries resulting from accidents that occurred before July 1, 1990, and those claims for injuries resulting from accidents that occur on or after that date.

7 Section , MCA Rates in a competitive market are not excessive. Rates in a noncompetitive market are excessive if they are likely to produce a long-run profit that is unreasonably high in relation to services rendered. A rate may not be determined to be inadequate unless: (a)it is clearly insufficient to sustain projected losses and expenses; (b)the rate is unreasonably low and the use of the rate by the insurer has had or, if continued, will tend to create a monopoly in the market; or (c)funds equal to the full, ultimate cost of anticipated losses and loss adjustment expenses are not produced when prospective loss costs are applied to anticipated payrolls. Unfair discrimination exists if, after allowing for practical limitations, price differentials fail to reflect equitably the differences in expected losses and expenses. A rate is not unfairly discriminatory because different premiums result for policyholders with different loss exposures or expense levels.


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