Personal Auto Insurers; Rate Filing Reforms; Informational Notice [43 Pa.B. 4292]
[Saturday, July 27, 2013]The Insurance Department (Department), Office of Insurance Product Regulation, is streamlining the process by which it reviews and approves filings for personal auto rate changes. This effects the supporting requirements for the top 20 insurers of personal auto, as measured by premium volume market share, as well as all other insurers providing personal auto coverage when filing proposed rate changes.
Effective immediately, the Department's review process of these rate filings will entail the following:
• For routine personal auto rate filings of the top 20 insurers, and for all personal auto rate filings of other insurers, the Department will no longer make the data demands it has in the past. With these filings, the Department will conduct a review to fulfill its statutory obligation of prior review and approval of rate changes to ensure they are not excessive, inadequate or unfairly discriminatory. Any filing has to satisfy four broad categories: rates must be fully disclosed; they must be compliant with Commonwealth law; they must fully disclose all disruptions on all insureds (the variance on distributions); and they must provide adequate support for the proposed changes.
o ''Adequate support'' means the techniques and data used to develop and justify a change, not just the change itself—the standard elements and techniques insurers develop, use and file across the country.
o Insurers should give particular attention to demonstrating that distributions are arrived at consistently across all territories.
• ''Routine'' filings of the top 20 insurers shall be those with annual increases at or below 5% in the aggregate (including all decreases) and not greater than 25% on distributions to any individual policy in addition to the aggregate increase. For top 20 insurers making filings that exceed these levels, the Department will now request the following data as part of the supporting justification. The new streamlined ''data request'' is the following:
1. A summary exhibit of the proposed changes, both in dollars and as a percent of change. Provide this information on an ''All Limits'' or ''All Deductible'' basis. This information must detail the proposed changes separately by:
A.) Company or program.
B.) All companies or programs combined.
C.) Territory.
D.) Statewide.
E.) Coverage.
F.) Liability coverages combined.
G.) Physical damage coverages combined.
H.) All coverages combined.
The response should include an exhibit of the current and proposed base rates and percent of change, by coverage, territory and company (and/or program).
2. Frequency distributions (histograms) showing both the percentage change impact and the dollar change impact of the proposed changes on the policyholders, by company. Companies should also report the maximum dollar and percentage increases any insured would receive as a result of the changes contained in the filing.
3. A rate history, expressed both in dollars and as a percent, which includes the dates and amounts of each rate and rule change spanning the 6 most recent accident years through the current rate level. This history must detail the changes on an ''All Limits'' or ''All Deductibles'' basis separately by:
A.) Company or program, or both.
B.) All companies or all programs combined, or both.
C.) Coverage.
D.) All coverages combined.
4. An exhibit of the following Pennsylvania premium and exposure data for each of the 5 most recent accident years separately by company (and/or program) and coverage (that is, bodily injury, property damage, first party benefits, uninsured motorists, underinsured motorists, comprehensive and collision):
A.) Earned car years.
B.) Earned premiums at collected rate level.
C.) Earned premiums at current rate level.
D.) Percent of premium earned on an annual policy.
E.) Percent of premium earned on a semiannual policy.
F.) Percent of premium earned on other than an annual or semiannual policy.
Items (A)—(F) should be shown for ''All Limits'' or ''All Deductibles.''
Data should be consistent for rate-making purposes with the experience periods used in the filing to derive the rate change indications.
5. An exhibit of the following expense and expense related items separately by company (and/or program) and coverage separately for each of the 3 most recent calendar years:
A.) Direct written premiums.
B.) Direct earned premiums.
C.) Direct commission and brokerage.
D.) Direct general expenses.
E.) Direct other acquisition, field supervision and collection expenses.
F.) Taxes, licenses and fees.
G.) Incurred losses, excluding IBNR.
H.) Paid losses.
I.) Direct paid unallocated loss adjustment expenses.
J.) Direct paid allocated loss adjustment expenses.
K.) Direct incurred allocated loss adjustment expenses, excluding IBNR.
Items (A) and (B) should be submitted on both a Pennsylvania basis and a Countrywide basis.
Items (C) and (F) should be submitted on a Pennsylvania basis only. All other items may be submitted on either a Pennsylvania basis or Countrywide basis, or both.
6. An exhibit of the following loss development data for the 5 most recent accident years separately by coverage (that is, bodily injury, property damage, first party benefits, uninsured motorists, underinsured motorists, comprehensive and collision):
A.) Earned exposures.
B.) Cumulative reported claims.
C.) Cumulative claims closed with payment.
D.) Cumulative claims closed without payment.
E.) Cumulative paid losses (excluding loss adjustment expense).
F.) Cumulative paid allocated loss adjustment expense.
G.) Incurred losses on a case, formula or reported basis (that is, excluding IBNR or bulk reserves and loss adjustment expenses, or both).
H.) Incurred allocated loss adjustment expenses on a case, formula or reported basis (that is, excluding IBNR or bulk reserves, or both).
Data should be consistent for rate-making purposes with the experience periods used in the filing to derive the rate change indications. Items (B)—(H) should show development or emergence at subsequent annual stages of reporting, or both. Items (E)—(H) should be provided on an ''All Limits'' basis.
7. As discussed in the ''Statement of Principles Regarding Property and Casualty Loss and Loss Adjustment Expense Reserves'' promulgated by the Casualty Actuarial Society, discuss any considerations that may have had a substantive impact on the loss development data. Also, discuss any considerations that may have a substantive impact on future loss development and how the data should be adjusted to reflect expected future conditions.
8. As discussed in the ''Statement of Principles Regarding Property and Casualty Insurance Ratemaking'' promulgated by the Casualty Actuarial Society, discuss any considerations that may have had a substantive impact on any of the data contained in the filing (or provided in response to this data request), on the analysis and on the proposed changes. Also, discuss any considerations that may have a substantive impact in the future on any of the data contained in the filing (or provided in response to this data request); on the analysis and on the proposed changes and how the data should be adjusted to reflect expected future conditions.
For example, has the company changed or does it expect to change its commission schedules during the period spanning the underlying experience through the time the proposed rates will be in effect? If so, the company should include a copy of the old and new commission schedules and an explanation of the changes.
Examples of other important changes could include, but not necessarily be limited to, the following: change in average vehicle age; change in average driver age; and change in average number of years of experience.
The new ''data request'' requirement will be available on the Department's web site at www.insurance.pa.gov. Questions regarding these changes can be directed to the Director of the Property and Casualty Bureau, Mark Lersch, mlersch@pa.gov.
MICHAEL F. CONSEDINE,
Insurance Commissioner[Pa.B. Doc. No. 13-1417. Filed for public inspection July 26, 2013, 9:00 a.m.]
