Actuarial Consulting Archives - Page 6 of 6

Our Commitment to a Strong Company Culture

A corporate culture is comprised of the values that characterize the company and guide how employees behave. Every company has a culture. However, if management doesn’t actively develop and support a particular culture, one will nonetheless develop—and it might not be the culture that management wants.
On the other hand, a strong, well-defined corporate culture has many benefits. It defines the company’s identity, sets and maintains direction for employees, attracts and retains better talent, and adds to brand identity and company reputation.

Bringing our mission to life

In 2016, Perr&Knight decided to focus on our company culture to ensure it was consistent with our mission statement and reflected who we are as a company. We formed a committee with members who represented not just executives and management but also a cross-section of the employees at our actuarial and insurance operations consulting firm. Because our team of actuarial, regulatory compliance and insurance operations consultants occupy offices across the country, it was important to include people who represented a cross-section of locations, departments, and tenure with Perr&Knight. We made sure to include individuals who have been with the company for years, as well as newer employees with fresh perspectives.
The committee started by defining what we wanted our company culture to be. We had many discussions about what employees value and what our clients value. Our initial brainstorming sessions revealed that everyone’s perspective was a bit different. We worked diligently to sharpen ideas and fine-tune language to create a series of cohesive statements about the firm that apply across the board.
We ultimately landed on six values that represent the core of our culture: Employee Development, Excellent Work Product, Innovation, Integrity, Respect for Each Other, and Superior Customer Experience.
We then translated these values into behaviors. For each value, we developed a list of collective behaviors we would encourage our employees to exhibit which exemplified our values. The behaviors are expressed as “we” statements. For example, to demonstrate our value of Superior Customer Experience:

“We make it easy to do business with us”
“We recognize that communication is critical”
“We value long term relationships with clients”

Ultimately, we came up with a handful of behavior statements for each value, which we published on our website.

Resistance and concerns

As with any significant organizational change, there was some trepidation about how we would implement these ideas, even within our committee. Would we be forcing a foreign new culture on our staff? Would we become so diligent that we would devolve into micro-management? Our team of actuarial and insurance operations consultants brings decades of professional experience to Perr&Knight; they wanted to ensure we were not asking them to disregard their proven strategies and start from scratch.
None of this was our intention, but it was helpful to be aware of staff concerns. We were careful to emphasize that our goal is to encourage behavior that is consistent with our company values, not force new conduct on employees.

Promoting our culture

One of our main initiatives now relates to promoting the culture, both internally and externally. We’ve used several methods to promote our culture. We started a corporate culture newsletter that is published quarterly. Each issue is centered around a “featured value,” in which we print responses from our employees to questions related to our behaviors like, “How do you stay current with what’s going on in the insurance industry?” (Excellent Work Product) or, “When you’re leading a discussion, how do you ensure everyone feels comfortable expressing their views?” (Respect for Each Other). We publish a list of staff promotions in our newsletter to celebrate the successes and accomplishments of our peers. We share pictures and stories that our employees have submitted regarding what they do outside of work, to show our support for a healthy work/life balance.
We also implemented an employee recognition program where staff members are encouraged to send emails to one another, thanking or recognizing them for a valuable contribution. Not only are staff members sending emails across departments, but managers are employing recognition emails as a valuable management tool. At the end of each month, we publish these feel-good emails to demonstrate our pride in, and gratitude to, our staff.

Reflecting our culture in our operations

Our committee’s other current main initiative is to ensure that our company’s policies and procedures encourage employees to act consistently with our values and behaviors. We started by evaluating our performance review process in conjunction with our HR department which led to a pretty significant overhaul of our process. We moved to an online system, which will allow for more frequent feedback, and changed the criteria on which employees are evaluated to better align with our culture.
We’re just about ready to publish revised hiring procedures that ensure we communicate the culture to candidates and evaluate them for their fit with our culture. And, we are just now beginning to assess our manager training and onboarding procedures at our insurance operations and actuarial consulting firm.

Positive feedback so far

While it’s too early to determine whether our focus on culture is having the expected benefits of increased employee retention, increased productivity/profit, and improved brand reputation, we have already seen some benefits. We’ve received positive feedback from candidates and new employees about our commitment to a strong culture. We’ve heard that employees really enjoy the quarterly newsletter, and participation in our Employee Recognition program is high.
We believe that a well-defined culture has made it easier for our managers to lead and make decisions because a clearly articulated foundation of values and behaviors directly informs and influences decision making. A strong company culture also makes it easier for employees to do their jobs because it lets them know their managers will support actions and decisions that are consistent with our values and behaviors.

Top 4 Considerations for Building a Robust Commercial Lines Rating Plan

by Wendy Thompson

Compared to personal lines, commercial lines risks have larger policy premiums, more complicated coverage, and higher limits. Commercial lines risks are also less homogeneous than personal lines risks. Consequently, individual underwriting is often used and there is a greater need for flexibility in pricing these risks.
That said, with some exceptions, commercial lines rates are subject to filing and Department of Insurance (“DOI”) acknowledgment or approval. For this reason, it is advantageous for the commercial lines insurer to incorporate rating flexibility in their commercial lines rate manuals.
Here we will examine the top four considerations for building a flexible and robust commercial lines rating plan.

Schedule Rating/Individual Risk Premium Modification (“IRPM”)

Schedule Rating/IRPM Plans are one of the most common means of achieving greater flexibility in commercial lines filings. Further, they are allowed in almost all states. The range of flexibility that can be achieved through schedule rating varies by jurisdiction. While many states allow overall schedule rating debits and credits of +/-25%, many other states allow a larger overall debit and/or credit. That said, some states impose different levels of flexibility for each individual characteristic while some states have other requirements (for example, eligibility criteria). A review of your Schedule Rating/IRPM Plan can help ensure that you are achieving maximum rating flexibility via this highly accepted rating tool.

Tiering

Another way to achieve flexibility in a commercial filing is to include tiering. Tiering refers to rating manuals that contain more than one set of rates to address different pricing levels associated with different levels or tiers of risk. Tiering is more common with Standard commercial lines (e.g. Commercial Auto, Commercial Property, General Liability, etc.) than with Specialty lines (e.g. D&O and Excess Liability). There are two types of tiering:

Intra-company tiering –A single company includes multiple tiers within a single program (e.g. Preferred, Standard, Non-Standard, etc.). Depending on various criteria, a risk might be assigned to a tier with a lower or higher rate.

Inter-company tiering –An insurer group uses different affiliated underwriting companies to accommodate the above-referenced tier structure.

Tiering is allowed in all states for most Standard commercial lines with some exceptions. While generally accepted for most Standard commercial lines, states differ regarding the filing of applicable underwriting criteria and some even limit the characteristics that can be considered.

Ranges of rates or rating factors

While tiering is more commonly applied to Standard commercial lines, ranges (sometimes referred to as guide (a) rating) are more common with Specialty commercial lines. With ranges of rates or ratings factors, an underwriter chooses a rate or rating factor from the filed range. While many states allow ranges, some states strictly prohibit ranges and others allow with certain limitations or additional requirements.

Individual Risk Rating

Individual Risk Rating, also known as (a) rating and/or Refer to Company rating, refers to those instances where manual rates are not used to determine a risk’s premium. Instead, underwriting judgment is used to evaluate the unique characteristics of the risk and to determine the final premium. This may also include a review of a risk’s historical experience.
Individual Risk Rating is used in both Standard and Specialty commercial lines. For Standard commercial lines, Individual Risk Rating may only apply to a particular segment of the business whereas it may be used more extensively for Specialty commercial lines. The acceptability of Individual Risk Rating varies by state with some states prohibiting the practice, and others allowing it. However, even for those that allow it, there are additional requirements that may apply by state such as individual risk submission filings, reporting requirements, disclosure requirements, etc.
While there are many tools available that allow for a flexible and robust rating plan, a thorough and thoughtful review of your new or existing rating plan can ensure that you achieve the greatest flexibility while minimizing compliance issues and DOI objections that may result in delays, reduced flexibility, and/or inconsistencies in your plan across various jurisdictions.
Partnering with an actuarial services firm that is familiar with DOI regulations and positions on the above-referenced rating tools can help you optimize the flexibility of your commercial lines rating plan. This flexibility will allow you to more accurately price your product and will allow you to maximize competitiveness while being mindful of the various requirements associated with each pricing tool.

Are you achieving maximum flexibility on your current or new commercial lines insurance product? Our expert actuarial consulting and regulatory compliance teams can help.

25 Years and Still Going Strong

by Scott Knight

It’s hard to believe that 25 years have gone by since Tim Perr and Scott Knight began Perr&Knight in the luxurious executive suite of Tim’s converted garage office. Tim was an experienced actuary who decided to hang his own shingle and Scott was a part-time sales guy/admin assistant/ babysitter to Tim’s infant son Nick and dog walker to the Perr’s puppy pug, Sybil.
Though everyone wore a lot of hats in those days, Tim and Scott had a tireless passion to help insurance companies become more efficient and effective. We’re still at it today.

It’s always been about the clients

Everything we have done as an insurance consulting company has been about better serving our clients. In those early days, we would travel all over the country—from New York to Chicago, Texas, Florida, and nearly every state in between—meeting with insurance companies and helping them navigate the rigorous regulatory requirements and other operational challenges that vary dramatically by state. As a consulting firm, we have remained by our clients’ sides as they continue to adapt to a changing playing field, and this close-up view of their needs and challenges has helped us develop tools to better serve them. We owe much of our success to our long list of dedicated clients, some of whom have been with us since day one.
“There’s no better compliment than to value our service so highly that companies have continued to engage us over decades. Individuals who have changed jobs throughout the industry have continued to reach out to us over the course of their careers,” says Tim. “We want to explicitly thank our clients because we could never have achieved our current level of success without them.”

Thoughtful company culture brings out the best in our teams

Everyone at Perr&Knight brings their own strengths and experience to the table, and it’s our goal to help every member of the team do their best work. Under the guidance of Judy Perr, Perr&Knight’s Chief Administration Officer (and Tim’s wife), we have continued to adapt our internal operations to meet the needs of our staff. As an actuary herself, Judy deeply understands the hinderances—both minor and major—that can inhibit actuarial and insurance consulting staff from performing at their peak. She applies this unique perspective in her role, ensuring that we evolve as a company to help our teams provide better support to our clients, and also feel supported themselves.
With 100+ employees in five nationwide offices, promoting a uniform company culture ensures that all our employees are on the same page. Three years ago, we assembled a corporate culture committee whose task was to articulate our shared company values. We put lots of energy into making sure that all locations and departments were represented, and that all employees are offered the chance to sit on the committee and offer ideas. This dynamic system adapts to changing times, so we are set up to respond to the needs and realities of an evolving workplace. Not only does this help us better serve our clients, we believe it also helps us attract the best talent.

Where to next?

As we move forward into the next 25 years of Perr&Knight (and beyond), we’ll continue to keep our focus squarely on the future. In an industry that sometimes seems to move at a snail’s pace, we believe in looking at what companies should be doing—and then developing the insurance support services that can help them get there.
By perpetually looking forward, we have added useful services like regulatory compliance consulting, product design consulting and technology consulting, and developed industry-leading products such as Statefilings.com. Many of these ideas were originally launched to help us be more efficient as a consulting firm, then we realized how valuable these innovations could be as services for our clients.
So, what’s just over the horizon for the insurance industry? Tim Perr believes advancements in technology can absorb many of the industry’s most time-intensive tasks and help actuaries apply their expertise in more efficient ways. He recalls, “When I started as an actuarial consultant, I spent half of my time keying data into Lotus 1-2-3 that had originally been entered via typewriter. Today’s machine learning and AI advancements will allow actuaries to focus on things human beings do well—like using their judgment and applying their knowledge from other areas—instead of occupying valuable time with things that machines do well, like running numbers.”
Another issue that will play an increasingly important role in the future: the evaluation of risk and protection regarding companies’ digital assets. We predict that growth in insurance premiums will become more and more tied to the growth of cyber assets rather than physical assets as they are now. Rather than insuring buildings, insurance companies will need to expand their ability to insure data and other property stored digitally. “The cyber world is just like the material world,” Tim explains. “When companies put their property out into the cyber world—like data storage, apps, IP, and even their reputations—it all needs to be insured.”

Cheers to our past—and here’s to the future!

We’re proud of the company we’ve created, the corporate reputation we’ve built, and the career successes our staff has achieved. We’re grateful to everyone who has contributed their insight and expertise and to the clients whom we have watched grow over time.
“When we started out in 1994, we were a couple of young, bright-eyed insurance consultants in our early thirties and we were meeting with insurance executives who were in their 50s and 60s,” recalls Scott. “Now 25 years later, we’re the older, wiser insurance consultants, meeting with insurance execs who are ten and twenty years our junior. But we’re as energetic as ever and all our years in this business have given us insight and experience that continue to fuel our momentum. We’ve got no plans to slow down any time soon.”

5 Ways Pricing Actuaries Can Benefit from a Best Practices Review

by Adrienne Lewis

Credentialed actuaries adhere to a high standard of practice, so their work is necessarily going to be thoughtful and thorough. However, working only with an in-house team might insulate you from what is happening elsewhere in the industry. You might be falling behind in terms of competition and growth. But how can you really know? This is where the best practices review can be your company’s secret weapon.
Usually performed by an unbiased third party, a best practices review compares your practices to other companies and generally accepted actuarial methods to ensure that you are meeting or exceeding a high standard of practice. Close scrutiny helps to determine that you’re not missing key segments in your ratemaking. In short, it makes sure your business is keeping up.
However, that is just the broad look at the benefit. There are many more detailed ways that a best practices review can give your company a boost. Here are five specific ways your pricing actuaries could benefit from a review by an outside actuarial support partner.

Alleviate the time burden.

Reviewing your rate level indication processes ahead of time can relieve your actuarial teams of some of the pressure that accompanies a rate filing. Every state has specific requirements or considerations that are unique to that jurisdiction. If your company submits a filing with indications that don’t meet muster with that state’s department of insurance, you’ll have to go back and make revisions—which could delay your filing or require you to scramble to collect the appropriate information. Undertaking a best practices review before a major filing helps you stay on schedule.

Rank priorities to determine what will bring the most benefit.

Indications are also a significant part of internal decision making. Understanding how your processes stack up can help you determine the appropriate priorities to focus on in order to achieve your projected growth or other business goals. By determining how your actuarial methods compare to the indications from other companies and the industry as a whole, you can prioritize process enhancements or other aspects of your pricing methodology. You might discover that your teams are not performing an industry-leading procedure in some instances, but this might not be critical for overall business strategy. Knowing what to devote time and resources to can save you from wasting both.

Determine how your company measures up against competitors.

Beyond comparing your methodology and results to actuarial standards, a best practices review can also provide insight that you might not be privy to otherwise. While your reviewing partner might not be able to share specifics, they can alert you if some of the ways your pricing is out of the ordinary for the industry, or if you are overlooking things that other companies are including.

Build confidence in short-term and long-term growth.

Recognizing and determining how to respond to a particular finding is helpful for your business. With limited exceptions, every company has concerns about credibility. With indications, the data may say one thing, but how will you interpret it or react to it? A heavy reliance on your own data could lead to internal overreaction. A best practices review will compare your methodologies to other companies to make sure your decisions are not based on a myopic perspective.

Validating what you’re doing right.

A best practices review is not just about identifying weakness; it can also surface all the ways your company is ahead of the curve. You’ll see your own role in pioneering industry change. An objective, third-party assessment by a credentialed actuarial support team will equip you with valuable intelligence about all the ways you’re doing things right.
An actuarial best practices review is like getting a regular physical exam for your business. It’s not something you need to do often, but it’s smart to check in regularly to make sure everything is okay. When you take a closer look, you’ll find areas for improvement and create benchmarks against which to measure future gains. We recommend conducting an actuarial best practices review every five years or so. Like with everything in insurance, it’s better to know for sure than to be surprised.
Also, best practices reviews can help all aspects of your business, not just indications. Once you complete the review for your company’s rate indications, consider doing the same with your reserving methods, product development, internal operations, and other departments. When the entire cycle is complete, it will be a good time to check in on rate indications again.

Curious about how your rate level indications compare to the rest of the industry? A best practices review from Perr&Knight can help you find out. Contact us today to discuss our actuarial support offerings.

Entering the Workers Compensation Line of Business: What You Need to Know

by Michelle Freitag

Workers Compensation (“WC”) filing activity is increasing as more and more insurance companies and InsurTech providers roll out WC products to round out their insurance product offerings. However, many of these companies possess only a limited understanding of the scope of what is involved in WC insurance product development. In the rush to market, they overlook important requirements that negatively impact the state filings process and stall their product’s release.
Before your company proceeds full steam ahead with your WC product, here are some important considerations to keep in mind.

Multiple rating bureaus and their products

Before an insurance company can begin writing WC they must affiliate with the appropriate rating bureau. The National Council on Compensation Insurance, Inc. (“NCCI”) is the designated statistical agent and rating bureau in 37 jurisdictions. The remaining 14 jurisdictions have either licensed an independent state-specific rating bureau or provide workers compensation through a monopolistic state fund. Companies will need to affiliate with the appropriate rating bureau before filing their product with a state.
Your team must be aware of the product offerings of the various bureaus in order to ensure you file everything you need. In most jurisdictions, the WC core product is already filed on your behalf and you are tasked with providing specific supplemental information. However, the amount of supplementation varies by state. It’s important to know exactly what information you’ll be responsible for submitting. For example, schedule rating is allowed in Connecticut and is filed on the company’s behalf by NCCI in that state. NCCI is also the rating bureau in Illinois and Illinois allows for schedule rating, but it’s not filed on the company’s behalf by NCCI. So, if a Company wants to use schedule rating in Illinois, they must specifically file a schedule rating plan.

Creating a countrywide product is complicated

Many insurance companies think that they can develop a product that meets the requirements for a handful of states, then simply expand coverage to include other states. When it comes to WC, state filings just aren’t that simple. With so many state nuances that require careful navigation, it’s virtually impossible to create a countrywide product that will satisfy every jurisdiction.
Some jurisdictions have required mandatory offerings (ex. risk control services and small deductibles) that may or may not need to be filed with the state. Some states don’t allow schedule rating for WC. Others require drug-free workplace program credits. Mistakenly thinking you can use the same product features everywhere will slow down your state filings process.
Bringing a product to market is never as easy as it seems, particularly when it comes to WC. Unforeseen delays and close regulatory scrutiny are simply par for the course. Perr&Knight has assisted numerous clients in getting their WC products to market. We are knowledgeable about each state’s requirements, limitations and restrictions. For more information about how we can help you achieve successful and streamlined Workers’ Compensation insurance product development, contact our offices today.

California Personal Auto Filings: Avoiding the Pitfalls

by Dee Dee Mays

Any companies with a personal auto program in California who haven’t submitted a rate or class plan filing within the last couple of years may be in for a surprise when they submit their next filing.
Personal auto filings have been coming under increased scrutiny by the California Department of Insurance (“the Department”) as the state has taken a stricter view of the existing personal auto regulations. This is likely in part due to the pressure from Consumer Groups to ensure that the premiums charged to consumers are fair and are not excessive.
Most notably, ProPublica published a report stating that poor and minority communities face significantly higher premiums than their counterparts in more affluent neighborhoods. Although the validity of the results has been questioned, the ProPublica report has brought this issue to the forefront, which has caused the Department to take a closer look at zip code rating. Other Consumer Groups have also raised concerns about other items in personal auto filings. All of this combined with the Department’s internal review has resulted in changes that will have a material impact on personal auto filings in California. Many companies are learning this the hard way by submitting California auto filings without taking into consideration the latest changes made by the Department.

Unfamiliarity with Changes Can Result in Undesirable Revisions

If your company is not aware of the latest requirements for California auto filings, you may be required to make significant, unexpected changes during the filing review process. These could include costly revisions such as reducing rate levels below proposed rate levels; reducing existing fees used with the program; revising rates charged by zip code without consideration of the competitor information; revising class plan factors to be consistent with the Department’s request; or paying for a consumer group’s intervention on the filing.
In order to make sure that possible changes required during the filing review will be in your company’s best interest, companies should review the pros and cons that could result from submitting a filing.

Consumer Group Intervention

A review of California rate change filings shows that many companies file rate changes of +6.9%. This is due to the regulation stating that the commissioner must hold a rate hearing upon timely request by a Consumer Group for a rate change that exceeds +7% in a personal lines filing. However, filing a rate change less than +7% will not prevent a consumer group from intervening in the filing if they think the proposed rates are excessive or unfairly discriminatory, even if the filing is for a proposed rate decrease. Also, the commissioner at his discretion can decide that a rate hearing is necessary for any rate change including ones below +6.9%. That said, the Department does its best to mediate between all parties involved in the filing so that a rate hearing can be avoided. For rate increase filings at or above the +7% threshold, the Department and the Consumer Group must be satisfied with the support for the proposed rate change to avoid a rate hearing.
The following link contains a list by year of the filings that have been intervened on by consumer groups, along with the cost that was paid by the insurance company.

Beware of the Recent Change in the Filing Review Process

One of the biggest changes that has occurred is with the Frequency and Severity Band assignments by zip code. Even if you are not proposing changes to these class plan factors, the Department will require a review of them, which is likely to result in needed changes. This review will need to be done strictly in accordance with regulations, including the requirements for use of an alternative dataset for any zip codes that lack credibility. Companies should also be aware that the Department has been relying more heavily on the indications from the sequential analysis and the proposed factors need to be consistent with the indications for all class plan factors, including class plan factors where the company may not have been intending to propose any changes.
Companies should also take note of the following items regarding the review of rate filings:

All rate changes must be within the range of allowable changes for each coverage;
Calendar year or calendar quarter data derived from the development triangles should be consistent with the corresponding data in the trend exhibits or it will be questioned by the Department; and
Fee amounts charged to policyholders may need to be supported based on underlying expenses even if no changes are proposed, particularly if the fees are high.

The above are just some of the most important items when it comes to a California personal auto rate and class plan filing. As always, it is important to stay abreast of the latest changes in the California auto filings review process.

What You Don’t Know Might Hurt You

In complex jurisdictions like California, it’s smart to partner with experts who can provide insurance filing support that helps you carefully navigate the regulatory environment. For example, the Department regulations have been amended to reflect the new 21% federal corporate income tax rate, effectively lowering the maximum allowable rates for all P&C lines subject to Proposition 103. Excessive rates may not remain in effect under California regulations. If your company needs to take a rate decrease, you should be filing one. The Department does annual reviews of the financial results of all companies by line of business and has required companies to submit filings supporting that their filed rates are not excessive.
To assist you with personal auto programs and avoid the pitfalls of filing in California, work with experienced consulting actuaries who have a complete understanding of the Department’s latest positions and whose insurance filings support service includes an active dialog with the Department. Look for partners who have assisted other insurance companies in achieving the best possible results on filings that have been intervened on by consumers groups.

Knowing what to expect in California can put you ahead of the game. Perr&Knight can help.

How to Get Commercial Lines Rates Approved in Highly Regulated States (CA, FL, NY, TX, WA)

by Michael Covert

For insurance companies with nationwide products, getting your commercial lines rates approved in heavily regulated states can lead to frustration, confusion and wasted resources. There’s a reason certain states have earned their reputation for being difficult: their requirements are complex and thorough.
This article outlines the most important steps you should take when tackling submissions in highly regulated states to obtain speedy approvals–so you can get on with your business.

Know Your Filing Requirements

Each state has specific requirements that must accompany your filing. Understanding what is and is not required for each state and line of business is key to a timely approval. Carefully examine state filing requirements like return on equity exhibits (which support expenses and profit load), actuarial memorandums, making sure any forms with rate impact have corresponding rates in your manual, understanding the allowable rating flexibilities if any, and how they differ by state, etc. For example, in Florida, many commercial lines rate filings are considered “informational” and don’t require support to be filed, just maintained internally.

Actuarial Transmittals

California, Florida, New York, and Texas require specific transmittals. Every state Department of Insurance expects the filer to fully understand all requirements before submission. Some common transmittals for these states are the California Prior Approval Rate Applications, New York’s Rate Filing Sequence Checklist, the Texas Exhibit L and related actuarial transmittals, and the Florida Rate Level Indications Workbook, Actuarial Memorandum and Actuarial Opinion requirements (only for lines of business where Florida filings are not informational).
Filling out these exhibits is generally very difficult for someone without extensive filing experience. Completing these documents incorrectly can lead to numerous Department questions or disapproval. In worst case scenarios, poor or incomplete submissions can upset Department staff, possibly making it more difficult to receive approval in the future.

Actuarial Support Required

The actuarial support required for your filing depends on whether your proposed program is new or a revision. If support is not supplied in the way the specific Department requires, your filing will likely be disapproved and have to be resubmitted. This can add to cost, slow down your timeline and make it more difficult to get approval after resubmission.
Detailed actuarial support/data is generally required for filing revisions with rate level impact. For new programs, detailed competitor support using approved filings in the specific state is often required. Using filings from other states as competitive support will usually not be acceptable.

Responding to Department Objections

When it comes to state filings, it’s best to know your state requirements inside and out, since it is likely you will receive multiple filing questions before approval. Each Department asks different types of questions and each Department is looking for specific responses based on the type of submission. Don’t back yourself into a corner by responding incorrectly or supplying too little (or too much) information during the interrogatory process.
Departments of Insurance are savvy. Reviewing state filings is what they do, day in and day out. The challenge you face is that Departments have very specific requirements and it is difficult to determine the specific details necessary to satisfy their unique stipulations. This is where working with professional insurance support service providers can be a huge help.
When managing filings in highly regulated states, insurance industry experience is invaluable. Many of the clients we help involve situations where the company has submitted a filing incorrectly in one of the above states and requires assistance sorting out the resulting obstacles. Usually, the company’s support data was insufficient or their actuarial transmittals were filled out incorrectly. Completing your filing incorrectly without realizing it ultimately complicates things as you may not know which aspect of your filing needs to be adjusted. It then becomes a difficult puzzle to solve which variables require correction. Each of these steps impedes the process, burning through time and resources.
Outsourcing to insurance experts who have deep experience in the most difficult states, as well as relationships with regulators at the Department of Insurance, streamlines the process and saves you from a costly and lengthy correction and resubmission process. Experts make sure you go through the process methodically, checking and double checking the necessary support before you submit. This will save time and money on the back end, helping to achieve speed to market.

7 Pitfalls to Avoid in Providing Accident & Health Product Rate Filing Support

by Crystal London

Going through the process of a nationwide rate filing, or even filing in just a handful of states, can be a complex and lengthy process. Addressing the specific requirements of all 50 states plus DC, and provinces can get overwhelming, especially with new product filings. Each state has different filings requirements, and sometimes the differences between states are dramatic. No matter what, your end goal is profoundly important: to avoid objections, disapprovals, or the need to withdraw your filing. Ensuring that things are done properly from the get-go will make the process more streamlined in the long run.
In our decades of providing insurance state filings service for companies in all jurisdictions that write all lines of business, we’ve seen many of the common mistakes that result in lost time and wasted resources. These pitfalls can be avoided–if you know what to look for and how to take action.

Pitfall: Not knowing all state regulations and statutes

This is the single most common trap we see in state filings. Understanding the specific requirements for each state is a complicated and cumbersome process. But there’s more to it. In order to make sure your filings proceed smoothly, you also need to be aware of what we call “drawer regulations”–the unwritten rules reviewers may follow but aren’t written into the state statute. Knowing the written as well as unwritten requirements can reduce the chance of your filing being kicked back. Working with a knowledgeable actuary or state filings unit can help significantly when it comes to knowing these regulations.

Pitfall: Not knowing each state’s minimum permissible loss ratio requirements

Each state has different minimum permissible loss ratio requirements, which in turn affect rates. First and foremost, these loss ratios vary by group versus individual coverage. Individual minimum permissible loss ratio requirements are often based on NAIC individual loss ratio guidelines, however, not all states follow this guideline. Furthermore, some states extend the NAIC guideline to group coverage, while other states have their own requirements. Loss ratios can also vary by type of coverage and renewability clause, as well as invoking low or high average premium adjustments. Your rates will be different in those states based on those specific regulations. Be sure to equip yourself with these important pieces of information prior to filing to make sure you provide for the correct loss ratio for the type of policy you’re writing in a particular state.

Pitfall: Not knowing which supporting documents should accompany your filing

As we have stated before, it’s smart to file exactly the supporting documents that your state requires–and nothing more. Some states require that you submit transmittals, checklists, rating examples, underwriting guidelines and/or experience rating guidelines. Some states also have specific requirements for components that need to be included in the Actuarial Memorandum. It is also recommended to restrict the information you provide to only what is necessary to reduce the number of objections and questions; otherwise, you risk opening Pandora’s box.

Pitfall: Not taking into account time it takes to address objections

While all state filings may receive objections, limiting your number of objections not only preserves your company’s reputation with the reviewer, it reduces the amount of time required to respond, thus keeping you on schedule. In certain states like Florida, the department of insurance tries to turn around a review in 30 to 45 days. If that time period is close to expiring and you can’t respond quickly enough to the objections you receive, you risk disapproval or needing to withdraw your filing altogether.

Pitfall: Prioritizing speed-to-market over due process

Most of our clients want to offer products with the goal of launching them in as many states as possible, as quickly as possible. Due to our experience as an insurance state filing service partner, we know which states are file and use versus prior approval. Certain states allow you to begin marketing your product the moment you hit “submit” on your filing. Others require that you receive full approval before you can market your plan. Knowing the correct state standards can save you from serious infractions.

Pitfall: Lacking an end-goal for the product

It’s always a good idea to make all stakeholders sign off on your entire product, from forms to rates, in the planning phase before you get to your actual state filings. If you want a particular product to have variability, your rates need to coincide to reflect those variations. If you don’t outline these details going into the initial filing, inserting those components after the filing process has begun may require re-filing. This can be costly, time-consuming and frustrating for your entire team.

Pitfall: Inconsistency between rate manuals and forms

Inconsistency is a surefire way to elicit questions and objections from the reviewer. When we provide insurance state filings service to our clients, we always work closely with the product design unit and forms department to make sure that rate manuals are consistent with forms. This is especially important when a product’s allowed benefits vary from state to state and impact rates. Double check all relevant documents to make sure everything matches.
State filings are a complicated process that requires close attention to detail. A seemingly minor oversight can have a huge impact down the line. It’s always a good idea to partner with state filings experts who can help you manage your filings and make sure all your ducks are in a row before you begin.

If you have questions about how your filings process can be improved, contact Perr&Knight and we can discuss ways to streamline your operations.

Eight Tips to Maintain Adequate Carrier Rates

by Dee Dee Mays

As featured in Carrier Management:
Adequate rate maintenance is the cornerstone of an insurance carrier’s profitability, solvency, and overall business health. Since there is a clear and traceable relationship between policy premiums and claims payments, the end result goes straight to a carrier’s bottom line. Maintaining appropriate rates is about more than just being able to pay out on claims. It’s about structuring an insurance business to meet future growth goals. The danger is that, without careful monitoring, indications of inadequate rate might not show up immediately, but can have disastrous consequences in the future when the damage has been done and it is already too late.
Read the full article on Carrier Management.

Predictive Analytics: Why You Should Care

by Denise Farnan

Insurance companies have long based their estimates and decisions on analyzing data to help predict future events. However, with increasingly available data and faster processing power, more sophisticated algorithms designed expressly for the insurance industry can be used to augment their data analytics. By applying machine learning and modeling algorithms to historical data patterns, insurance companies now have a more powerful tool set to anticipate future outcomes with greater accuracy than ever before.
The results of predictive analytics for insurance can yield immediate improvements across your entire operation. Whether you are just starting to apply predictive analytics or you are already using it for multiple areas of your business, predictive analytics can help you:

Remain competitive in the marketplace.

More and more insurance companies are adopting predictive analytics to increase profitability and gain an advantage over competitors. Smart companies are already harnessing predictive analytics tools to select risks and price accurately. Therefore, the gap continues to widen between companies who are maximizing their data usage and those who are being left behind.

Make data-driven decisions more quickly.

By advancing your analytic capabilities through the use of sophisticated algorithms, you are using current technology to its fullest capability. This enables your team to base conclusions on accurate and reliable analytics and accelerate data-driven decision making.

Become more proactive.

Traditional data monitoring methods require a tremendous amount of time to uncover patterns and take necessary corrective steps. Even while working at maximum speed, your teams are still reacting to issues as they arise. Once in place, predictive analytics enables your team to anticipate issues and make decisions before they become full-blown problems. Monitoring of predictive models allows for proactive action as your business changes.

Create more accurate pricing and underwriting structures.

This is where most companies are already using predictive analytics: to better segment their business and develop more accurate pricing. Rely on predictive analytics to a greater degree, and ensure that your company is charging the correct price relative to risk. By running quality data run through a reliable predictive analytic model, you are giving underwriters a tool to better select desired risks and achieve greater precision in discretionary pricing.

Detect fraud faster.

Appropriately developed algorithms can highlight anomalies in data, increasing the speed in which your claims department can reveal fraud incidents. This reduces the number of fraudulent payouts and immediately improves your bottom line.

How to get the most from your analytics model

Models can never replace the expertise of an experienced underwriter but they make the job more efficient and improve results. However, the biggest mistake we see insurance companies make is not soliciting upfront input and feedback from the end users – the underwriters and agents who will be expected to use these models. If developed correctly, predictive analytic models can become invaluable tools that enable teams to do their jobs faster and more accurately. Involve your end users in meetings with your predictive analytics development team to ensure that the model captures and interprets the data which will be most helpful to your organization.

The importance of maintaining data quality

Analytics are only as reliable as the quality of data they capture. Because effective predictive analytics models use very detailed policy and claim information, be sure to work with a company who has expertise in the insurance field and understands the significance of certain anomalies. When you evaluate your data capture in detail, you can improve your data quality moving forward.
The power of predictive analytics for insurance is not limited to the pricing and handling of the insurance product. Once the correct tools are in place, predictive analytics can improve many other internal and ancillary aspects of your insurance company’s business. Finance departments can apply predictive analytics to collection strategies. Human resources departments use analytics to narrow down a range of potential candidates, selecting those with desirable characteristics that will best support the company. Marketing departments can use predictive analytics to gauge the effectiveness of communications, increasing marketing ROI. The applications of predictive analytics for insurance can extend as far as the questions you ask about how to advance your business.
If you would like to enhance your insurance business and develop more powerful models for pricing, reserving, underwriting and/or internal operations, contact us at (888) 201-5123 Ext 3. Our predictive modeling experts can help you develop solutions that apply analytics to boost your company’s performance.