1. Welcome! Residual Market Audit Services NJ AIRE
Compliance Audit Program
Jack O’Keefe

2. Automobile Insurance Plan Service Organization
AIPSO

3. AIPSO is…
A management organization and service provider for the residual market with a home office in Johnston, RI
A non-profit organization
A national organization of about 400 employees
An organization with 10 regional offices located throughout the country

4. AIPSO’s Mission
AIPSO’s mission is to provide high quality services for the automobile insurance residual market at the lowest possible cost.

5. “Who is Residual Market Audit Services” (RMAS)‘
11 Members of our RMAS staff
1 – Certified Internal Auditor (CIA)
1 – CIA candidate
8 – pursuing INS or CPCU designations
1 – 30+ years of Claims Experience
30 – Independent Consultants

6. What Does RMAS Do?
Provide on-site audits of companies for automobile insurance market mechanisms.
CAIP NJSAIP MAIPF
NJCAIP CALC MJUA

7. Purpose of RMAS
To support Board of Directors (Governing Boards) in their management of Residual Market Automobile Programs

8. Purpose of Audits
Audits are a management tool to ensure companies are handling and reporting policies and claims in compliance with a mechanism’s plan of operations.

9. Objective of NJAIRE Audits
To ensure that companies are submitting complete and accurate data to the NJAIRE.
Compliance - Data reported meets specifications in the Plan of Operations.
Operational – Company’s internal controls are effective in processing and identifying NJAIRE business.

10. Audit Process Stage 1: Planning Company Selection
Communication with ISO
Call Forms
Statement of Compliance
Concerns with Companies

11. Audit Process Stage 1: Planning (con’t)
c. Engagement Letter – Includes request for data
All private passenger BI claims
All reportable claims
All other claims
d. Company contact information received

12. Audit Process Stage 1: Planning (con’t) Receipt of company data
Verification of data to call forms
Complete sample selections
h. Confirmation Letter

13. Audit Process Stage 2: Fieldwork Opening meeting
b. Obtain internal procedures for reviewing data submissions
c. File review
Determination Forms

16. Audit Process
Stage 2: Fieldwork
File review
Work-papers

17. Audit Process
Stage 2: Fieldwork
Fieldwork summary
Closing meeting

18. Audit Process Stage 3: Reporting 1. Draft Report 2. Company’s Response
3. Final Report

19. 2003 - 2007 Audits (54 Companies Reviewed)
Reportable Claims
Total claims reviewed – 2,667
Number of claims over reported – 400 or 15%
Dollar amount over reported - $8,018,078

20. 2003 - 2007 Audits Reasons for Over Reporting:
Claimant or Insured Incorrect Threshold
Unverified Claimant Threshold
These two reasons account for 52% of reporting errors

21. Additional Reasons for Over Reporting
Economic Loss Payment Included
Claimant had pierced the threshold
Claimant was not a NJ Resident
Claim Occurred outside of NJ
Expense Payments Included in Reporting
Insured Vehicle was Commercial

22. Reporting Errors Incorrect Territory Codes
Settlement Reported in an Incorrect Quarter or Year
Over Reporting of the Dollar Amount

23. 2003 – 2007 Audits (54 Companies Reviewed)
All Bodily Injury Claims:
Total claims reviewed – 4,593
Number of claims under reported – 175 or 3.8%
Dollar amount under reported - $1,641,298
Number of claims over reported as BI claims or 4.8%

24. Reasons for Under Reporting
Claimant had a Zero Dollar Threshold
Insured had a Verbal Threshold
Unverified Claimant Threshold

25. Reporting Errors Non Bodily Injury Paid Claims
Bodily Injury Claims with No Payment
Incorrect Territory Codes
File not Settled in Reporting Year
Settlement reported in Incorrect Quarter
Incorrect Insured Threshold
Commercial Bodily Injury Claims Paid

26. TIPS Plant your corn early
“Easy Sleazy” in the third race at Monmouth Park
Don’t say “Hi Jack” if you see me at the airport

27. NJAIRE Claim Handling TIPS
Claims handlers should be familiar with the NJAIRE procedure manual – NJAIRE.org
Know the requirements for verification of the claimant’s threshold (Pgs 31 –32 of the procedure manual)
Use the NJAIRE recommended Claim Determination Form
Check the final determination after claim is settled and before it is submitted to IT

28. QUESTIONS?
What? Huh?
What does it all mean?

29. Thank you! Residual Market Audit Services NJAIRE
Compliance Audit Program
Jack O’Keefe