Your guide to Perfect Insurance Rate Filings!
So you're an actuary or other insurance professional who needs to get those rate changes filed with the State Departments of Insurance. And you are under time constraints, so you want it to get approved by the state right away with few on no objection questions.
I have 15+ years of experience with just this scenario. My goal when making rate filings is to provide enough information to the State Departments of Insurance (DOI) that they approve it outright. No objections, no questions asked. If that isn't achievable, my back-up goal is to get the fewest number of objections possible and approval soon after submitting the answers. I am very successful with both of these goals by following the following steps:
(By the way, I've provided 5 of my 8 steps, with the hope that you'll contact me for the full article!! Please do so, I'd be happy to send it to you right away!)
- STEP 1: Quantify the Overall Change
It is very important to clearly calculate the rate change and put the change into context. Each relativity, factor, element, base rate, etc., that is undergoing a change should be shown along with the calculation that shows how the overall rate change is calculated. If you have to estimate or assume anything (such as, "the distribution of the state deductible changes is unknown, so a countrywide deductible distribution is being used"), be sure to include the information on the exhibit and in the actuarial memorandum.
- STEP 2: Provide a Rationale for all Changes
Step 2 involves the construction of a good actuarial memorandum. This memorandum should cover all elements of the line of business and clearly provide information on the rationale for all your proposed changes. A broad overview of the exhibits you have included in the filing should be provided to give the reader some orientation. The goal of the actuarial memorandum is to have the reader nodding to themselves as they finish reading it.
Your actuarial memorandum should cover:
- The state, line of business, proposed effective date, overall percent change
- A list of exhibits, with explanation if short (If explanations are longer, the description of the exhibit should be placed as a cover memo to the exhibit itself)
- An overview of the line of business
- A description of the elements of the line that are being reviewed and what changes are requested
- Rationale for all proposed changes
- Information from Step 5 below
- STEP 3: Use Standard Techniques/Exhibits
The state departments of insurance see a lot of filings everyday. With limited resources and time, many cannot afford to spend a lot of time trying to figure out what you've done. With this in mind, I recommend providing exhibits to the department(s) that are standard looking and use standard techniques for the most part. If you do something unusual or unique, you'll need to use Step 4's suggestions, and explain the method, its rationale, and the results of using it very clearly. If you are not sure what typical exhibits look like, there are a couple of ways to get your hands on good examples.
You can get typical exhibits:
- From me (just send me an email!)
- From past filings your company has made that were approved
- From the Insurance Department. Ask them to suggest a filing that had exhibits that they particularly liked and you can get a copy from them or from a filing copying service (such as Perr Knight)
- From actuarial textbooks/papers such as Foundations of Actuarial Science
STEP 4: CONTACT ME for step 4 content
- STEP 5: CONTACT ME for step 5 content
- STEP 6: Determine what the state requires and provide all required forms and exhibits
It is important to read the information many states have on their websites about what they required for a rate filing to be complete. In addition to the actuarial memorandum and exhibits discussed so far, the state usually requires a form or two filled out with the information, they are presumably most interested in. Since the goal is getting your filings approved quickly, you'll want to have all the forms completed with accurate information.
Some of the information requested on the forms is:
- Name of the company, NAIC code, address, phone number, contact person
- Effective date and change requested for this filing and the prior filing your company made for this line of business
- 5 calendar years of written premium, earned premium, paid losses, outstanding losses, policy counts, and claim counts
- A breakdown of the requested change and rate level indications
- A breakdown of your expenses and investment income
State requirements can be found on the state insurance departments' websites. A list of them all can be found here. I can also help you with the requirements, just contact me anytime.
- STEP 7: Number your exhibits and Label all terms consistently
Go through your exhibits and memos and be sure they are numbered consistently. Actuarial rate level indications follow the business protocol of having the supporting information for an exhibit follow that exhibit in the line up. For example, if you have trended, developed loss and loss adjustment expense on Exhibit A, the trend might be developed in Exhibit D, the development might be developed in Exhibit E, and the loss adjustment expense factors may be developed on Exhibit F.
When you go through the exhibits, look for consistency in other things too:
- The terms you use should be the same. If you call numbers "Reserves" on one page and "Outstanding" on another, you may cause unnecessary confusion
- The exhibits refer to the right other exhibit and they are named consistently. The titles should match the titles in the Actuarial Memorandum
- The font, formatting, and number size are the same throughout
- Cite sources of company financial data and industry data clearly
- STEP 8: CONTACT ME for step 8 content
Please contact me to get a complete copy of this article. I'd be happy to explain how I can help you get your filings approved, even in more challenging states of Florida, New York, Washington, Texas, and California.
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