Making the Most of Your RATE Filing Property & Casualty Actuarial Tammy Lara
Making the Most out of your Rate Filing Overview What’s new? What happens to my rate filing? What needs to be included in a rate filing? What does TDI look for in a rate filing? Regulation highlights
What’s New? “Separate insurers” –What changed? HB2449 was passed –Who is effected? County Mutual’s
What’s New? Minimum Financial Responsibility Limits –bodily injury liability 30,000 per person 60,000 per occurrence –property damage liability 25,000 (no change) –Effective 1/1/2011 SB 502 (2007)
What’s New? Data mining –Legislative mandate included in the 2009 Appropriations Act to conduct a review of insurance industry practices- data mining and pattern recognition practices and technologies personal automobile, residential property, health benefit plans Use in underwriting and setting rates –Report due December 31, 2010
What’s New? Actuarial corner –New section of TDI’s website –Compiled by the property & casualty actuarial staff to assist your actuarial staff Added post conference: http://www.tdi.state.tx.us/company/actuarial.html
What’s New? Interim SERFF procedures More than half of the correspondence from our actuarial staff is issued through SERFF –Key Facts: SERFF in Texas is a supplemental filing system and not the Department’s primary filing tracking system. The filing status in SERFF is not intended to be representative of the filing status in TDI’s tracking system. Rate only filings are acknowledged and closed in SERFF immediately by intake staff before forwarding to actuarial for review.
What’s New? Interim SERFF procedures –Key Facts (cont.): Rate filings are only reopened in SERFF if correspondence is necessary If correspondence from actuarial staff is issued in SERFF, the filing will have two disposition statements: Intake and Actuarial or Personal & Commercial Lines Division and Actuarial
What happens to my rate filing? Property and Casualty Intake Unit Policy Form Filing Workers’ Compensation Rate Filing Personal and Commercial Lines Division Property & Casualty Actuarial Division
What happens to my rate filing? Rate filing received by Intake Unit. Intake Unit sends acknowledgement letter to company and rate filing to P&C Actuarial. (Combined rate/form filings receive an acknowledgement from the form technician.) P&C Actuarial assigns filing to appropriate actuarial staff depending on the line of business. Staff reviews rate filing for compliance.
What happens to my rate filing? If the information included in the filing is considered insufficient or incomplete, staff communicates with the company to gain clarification on proposed changes or to obtain additional support. Note: While staff may have finished reviewing the filing, it is possible that future events (such as complaints) could cause staff to revisit the filing. Additionally, rating plans that violate the law can subject a company to enforcement action even if the actuaries don’t spot the violation initially.
What needs to be included in a rate filing? All rates, rating manuals, supplementary rating information, fees and additional information as required. Other filings: –Forms/endorsements – may be combined with “rates” –Underwriting guidelines – must be filed separately –Credit Models – must be filed separately
What needs to be included in a rate filing? Additional information includes: –Filing documents (transmittal, cover letter, etc.) –Filing description (Exhibit C, explanatory memo, etc.) –Other supporting Information “as appropriate to the filing” (Exhibits D, E, L, actuarial indications, support for new rating factors, support for use of credit information, support for the “15% rule”, etc.)
What does TDI look for in a Rate Filing? What? Why? How do the changes impact your policyholders?
What does TDI look for in a Rate Filing? What? -Description of proposed changes. Why? -Rationale for proposed changes. -Support: Historical premium/loss data, actuarial indications, loss ratio analysis, pure premium analysis, competitive analysis, etc. -Assumptions used in catastrophe models. -Information to understand loads based on the cost of reinsurance. -Pricing considerations due to changes in coverage provided.
What does TDI look for in a Rate Filing? How do the changes impact your policyholders? -Rate impact and rate change history. -Information on the “disruption” of rate changes and number of affected policyholders. -Present rates, proposed rates, percent changes, premium or policy count distribution.
What does TDI look for in a Rate Filing? Why does TDI keep asking me all these questions? -To understand what is being proposed, the rationale for the change and support for the change. -To ensure filings comply with statutes and rules. -To ensure changes in coverage have been considered in pricing. -To clarify rating rules and information on rate pages. -To understand the filing well enough to explain it to interested parties, including senior management, consumers, and legislators.
What does TDI look for in a Rate Filing? You might be the recipient of a question if… you file a rating element that we’re unfamiliar with. you file a new rating methodology. your territorial analysis consists entirely of the phrase “competitive considerations”. you file for a significant rate increase without actuarial support. OPIC has raised concerns about the filing.
Regulation Highlights Traffic Violations –TIC §1953.051 Prohibits use of “traffic violations” for Automobile Insurance may not: –(1) assign a rate consequence to a charge or conviction for a violation of Subtitle C, Title 7, Transportation Code; or –(2) otherwise cause premiums for automobile insurance to be increased because of a charge or conviction described by Subdivision (1). Personal, Commercial and miscellaneous vehicles
Regulation Highlights Fees –All policy fees, service fees, and other fees that are charged or collected by the insurer under §§4005.001 - 4005.003 or §550.001 of the Texas Insurance Code must be filed. –Income from these fees should be explicitly considered in rate indications. –Fee income should be included on Exhibit C
Regulation Highlights Exclusions for asbestos, lead, silica and punitive damages –Insurers must provide either a rate credit or actuarial justification for why a rate credit is not appropriate when coverage is reduced due to these exclusions. –credit for an optional exclusion should be commensurate with average benefit received by otherwise similar insureds whose policies do not have the exclusion.
Regulation Highlights “Refer to company” or “(a)” rates –Not permissible (under TIC Chapter 2251). –All rates must be filed before they are used. –Rating plans, such as “large risk” rating plans are allowed but must be filed.
Regulation Highlights Use of claims (Medical Malpractice) –§1901.0541 Regarding physician’s professional liability insurance –§1901.055 Regarding physician or health care provider policies
Regulation Highlights Use of claims (Residential Property) –These cannot be considered in rating (Discounts, Surcharges, Tiering, etc.): “Natural Cause” claims, “Zero paid” claims, and Certain properly remediated appliance related water claims –Surcharge programs cannot begin until the 2nd chargeable claim. –Properly remediated mold claims cannot be considered for underwriting. –Underwriting shall not be based solely on a single prior water damage claim. –For reference: –TIC Chapter 544 Subchapter H - TAC §21.1004 –TIC §551.107 - TAC §21.1007 –TIC Chapter 2006 Subchapter B
Q & A’s used: What is the generally acceptable range for schedule rating in Texas? +/-40%. Are transition plans encouraged? Yes, when implementing new rating plans that might otherwise result in large rate swings for individual policyholders, transition plans are encouraged to avoid market disruption. Can I use an applicant’s lack of prior insurance in determining the appropriate rate for private passenger auto? No. If the applicant has not been operating an uninsured motor vehicle in the state for more than 30 days (see TAC §5.401). Worker’s Compensation Relativities – can I make a new rate filing every month? No. An insurance company may not make a rate filing more frequently than once every 6 months. (TIC §2053.003) Where on the web can I find useful information my actuaries will appreciate? the new Actuarial Corner Can I rate by Zip code? Yes – but for personal auto and residential property, rate differences within a county must comply with TIC §2253.051 and TAC §5.9960. For personal auto, do I have to notify an applicant if my quote equals or exceeds the TAIPA premium? Yes (see TAC §5.401). Is there a restriction on the general expense assumption in my rate indications? Yes! TIC §2251.002 defines certain expenses, such as lobbying and damages in bad faith claims, as disallowed. Can I surcharge for one claim on a homeowners policy? No. Surcharges can only be applied with two or more claims.
Wrap up: Contact information William P. Hobby Jr., State Office Building 333 Guadalupe Street Austin, Texas Tower 1, 5 th Floor Property & Casualty Actuarial Division email: firstname.lastname@example.org phone: (512) 475-3017 fax: (512) 463-6122 Mail: P. O. Box 149104, MC 105-5F Austin, Texas 78714-9104