Five Benefits of an Expert Review of Your Rate/Form Filings

Have you had a filing disapproved in Florida or New York?

Are you receiving multiple objection letters on your California filing identifying items that do not comply with state requirements?

Do you struggle with providing the required actuarial support in Washington?

You are not alone.

It is incredibly difficult for companies to keep up with each state’s requirements. Most companies do not submit enough filings or have the consistent communication with the Departments of Insurance (“DOI”s) to gain the expertise needed to handle certain states without consulting an expert.

If you work for a large insurance company, you may have a pre-filing meeting with the DOI to discuss your filing. This allows you to obtain some feedback on potential concerns that the DOI may have on the proposed rates and forms, but this is not a comprehensive review, and you may often run into DOI objections during the filing review process that could have been avoided with additional insight on the state’s requirements. Adding an expert review of filings prepared by your company is a “must have” to achieve timely approvals in key states.

Below we provide greater details on the benefits achieved through an expert review of your filings by an actuarial and insurance consulting firm with extensive state filings experience.

Benefit #1: Increase the likelihood of proposed rates and forms being approved

It is not unusual for companies to receive filing objections from state DOIs that request changes to the company’s proposed rates and forms. If a company does not have a full understanding of the options that will satisfy the DOI’s concerns, it may make undesired revisions to the product in response to an objection.

Our actuarial consultants worked recently on a management liability filing in California that used range for rates and rating factor. The DOI had concerns about the subjectivity of the ranges, which may lead a company to eliminate the ranges and use specific rates/factors. Our actuarial consultants were able to assist the company in providing a solution that kept the ranges and was acceptable to the California DOI.

Whether it is to ensure a company obtains its proposed rate change or to recommend changes to the company’s rating plan to achieve the company’s goals, a review by an actuarial consultant and an insurance product development expert can have a positive impact on a company’s bottom line.

Benefit #2: Ensure filing complies with DOI requirements

While each state has laws, often there are DOI positions and interpretations, which are not published, and companies learn about them after the filing and during the DOI’s review. Not knowing this type of information could negatively impact a company’s filing. For example, New York disapproves filings without the opportunity for the company to respond when filings are substantially out of compliance with state requirements. During 2021, the New York Department of Financial Services disapproved 19% of submitted filings and another 8% of filings were withdrawn. New York is not the only state that takes this approach.

The Florida Office of Insurance Regulation is often known for disapproving commercial lines form filings that are not compliant with the state requirements. For auto policies (both personal and commercial), New York has unique coverage requirements that must be reflected on the declarations page. Even if a company uses a bureau template, a state-specific version is generally needed to avoid a series of objections pertaining to the format and contents of the declarations page.

Having an expert review from an actuarial and insurance consulting firm with regulatory compliance services can help companies avoid the dreaded disapproval letter.

Benefit #3: Identify potential DOI objections

While obtaining filing approvals without any DOI objections is unlikely in some states, the ability to identify potential objections will allow companies to address concerns prior to submitting the filing. Not only does this reduce the number of objections received during the state filing review process, but it also provides companies the opportunity to address items that may lack the appropriate support or may raise additional questions from the DOI.

By having an expert review, the company can identify potential objections and either address them upfront or be prepared for them. Many companies are surprised when they receive objections on California filings questioning items that were previously approved in a prior filing and are not being revised in the current filing. For rate and rule filings, the California DOI requires a complete manual with each filing and will review the entire manual – not just the proposed changes.

Benefit #4: Improve relationship with the DOIs

Although DOIs will review each filing independently, the DOIs will remember companies that consistently submit filings not in compliance or lack appropriate support. For frequent violators, the DOIs may outright disapprove the filing without sending an objection letter. The DOIs share information within its various operational areas as well as with other DOIs. This information can often lead to a market conduct inquiry, especially if the concern is related to noncompliance or may have an impact on the consumer. When a company submits a complete and compliant filing, the return on investment may lead to a quicker review by the DOI.

With many of the DOIs experiencing staffing shortages, any assistance companies provide to reduce the time that the DOIs spend on reviewing filings will be appreciated by the state.

Benefit #5: Reduce the time to approval

When companies are submitting rate filings, the premium impact of the changes could be in the millions, so reducing the time to approval could have a significant impact on the company’s bottom line. In 2022, the average time to approval for California on a rate filing is 337 days (median: 264 days) and a new program filing is 207 days (median: 209 days).

When companies have their filings reviewed by actuarial consultants and state filings experts, it allows submission of a more compliant filing with the proper supporting information and may result in the filing being approved quicker.  Another benefit of engaging these experts is that they could help companies navigate filings through the DOI in the most efficient manner possible.

Need an expert review of your filings?

Perr&Knight is a leading provider of actuarial, product design and state filing services to insurers. Our actuarial consultants, product design consultants and state filings experts are very familiar with all the filing requirements in each state – especially the states where insurers struggle the most.

Please contact us if you need an expert filing review.

P&C Carriers: A Strategy for Entering the A&H Market

By Susan Cornett, FMLI, AIRC, CFE and James Vallee, FSA, MAAA

P&C insurance carriers recognize the opportunity to expand product lines and increase revenue by expanding into Accident & Health products. However, the differences between P&C and A&H product development are significant and what applies to P&C may not apply to A&H from a regulatory standpoint. Understanding those differences will allow P&C carriers to enter the A&H market with faster speed-to-market along with high-quality products.

During decades of providing insurance product development and actuarial support for insurance companies across the US, Perr&Knight has zeroed in on a low-risk A&H entry product for P&C: blanket accident policies.

Why develop a blanket accident policy?

Commercial entities, schools, universities, and other organizations often need supplemental blanket A&H policies to fill gaps in medical coverage to further support their staff or students. With fewer mandated benefits, these policies are the perfect starting place for P&C companies looking to break into the A&H market and provide additional coverage options to existing clients. Blanket Accident policies also fit nicely with General Liability policies and allow brokers/agents to offer comprehensive insurance protection from a single carrier.

Differences between P&C and A&H product development

Established P&C carriers may think they have the requisite experience to develop A&H coverages. However, a few significant differences between these two types of insurance product development are worth noting.

  • Rate support: Rate support requirements in A&H are different than P&C, usually requiring an actuarial memorandum describing the benefit in the rate structure as well as a signed certification attesting that the rates are reasonable in relation to benefits.
  • Forms and rates standards: On the P&C side, rates tend to receive more scrutiny. On the A&H side, regulators examine policy forms more closely. Though some states are outliers, we find this is a reliable trend.
  • Bureau forms: Many P&C carriers adopt ISO or other bureau forms as part of their P&C portfolio. For most lines, A&H doesn’t have this option. Most insurers rely upon proprietary forms.
  • Statistical reporting: Data reporting is important on the P&C side. But except for a few lines of business, statistical reporting requirements aren’t widespread on the A&H side. Besides ad hoc data calls, most supplemental A&H coverages don’t require such detailed stat reporting.
  • Rate certifications: Although a few states require certification of the rates or rate filings on the P&C side, some states require carriers to attest to their ability to meet target loss ratios for A&H lines.
  • Variable benefits: A&H policies typically rely on the use of variable language to allow inclusion or exclusion of benefits, terms and conditions. It’s not unusual for a blanket A&H policy to be 50+ pages because the benefits are included in the policy and not attached as optional endorsements. From an implementation perspective, this means programming one form with many options instead of 75 forms with no options — another way these policies diverge from P&C.
  • Verbiage differences: Terms and definitions vary between A&H and P&C. For example, P&C uses the phrase “loss costs” while A&H calls these “claim costs”. Unfamiliarity with terms could lead to filing errors.

Commonly asked questions

P&C carriers eager to enter A&H should know a few basic things before moving forward. Here are the most commonly asked questions from P&C insurers.

“Does our license cover A&H?” Short answer, maybe. P&C carriers may already have the ability to write A&H lines of business depending on what is included in their Certificate of Authority. Licensing requirements vary by state. Our licensing experts can help determine whether anything additional is needed. There are important differences in insurance product development and approvals, even for supplemental health policies, so P&C carriers should proceed with caution even if currently licensed to write the business.

“Can we offer blanket A&H on a non-admitted basis?” Simply, no. In the world of A&H, the concept of surplus lines is virtually non-existent. Companies may develop an A&H program thinking it will be available under surplus coverage guidelines, but state export lists rarely include any A&H coverage. The consequences for non-compliance can be steep and may jeopardize a company’s good reputation with state regulators.

“Can we ‘me too’ our A&H policy development?” Unlike P&C, “me too”-ing rating information from competitors’ existing programs is generally not acceptable. Different requirements for rate filing and support are a prime example of a P&C process that has no transferable correlation to A&H.

Start with blanket accident, then expand

After developing a blanket accident policy, companies can easily expand into other supplemental health lines. After getting your feet wet with blanket accident, product lines such as hospital indemnity, critical illness, disability income insurance, and gap medical generally follow the same product development process.

Work with experts

Developing a blanket accident policy may seem straightforward on the surface, but there are lots of opportunities to fall into little-known traps. Partnering with experienced insurance product development partners like Perr&Knight can save P&C carriers from wasting time and money on mistakes.

With our deep experience providing insurance product development and actuarial support services for carriers across both P&C and A&H lines, our professionals act as the “decoder ring” between the two. Working with knowledgeable professionals helps insurance companies step into a new world with greater confidence and ease.

Ready to test the A&H waters with a blanket accident policy? Contact Perr&Knight for help.

Guidelines for Filing Program Business

Insurance carriers have become more and more interested in writing “program” business over the recent years. In addition, many carriers only have a single carrier to work with, at least at the onset. Every carrier writing program business wants to have as much flexibility as possible to continue to add new programs and program administrators. Based on the experience of our actuarial consulting and state filings experts with various Departments of Insurance (“DOIs”) across the majority of lines, we describe below the most efficient way to set up nationwide filings and minimize the possibility of material compliance concerns.

What is program business?

According to the Target Markets Program Administrators Association, Program Business is defined as insurance products targeted to a niche market or class, generally representing a book of similar risks placed with one carrier. The administration of the program is done through Program Specialists, often referred to as program administrators or managing general agents (“MGAs”), who have developed expertise in that market or class. Although administrative responsibilities are negotiated between the Program Specialist and carrier, the responsibilities of the Program Specialist include underwriting selection, binding, issuing, billing, and oftentimes marketing, premium collections, data gathering, and claims management/loss control.

Bureau “Base” Program Filings

For the standard commercial lines, program business typically uses Insurance Services Office (“ISO”) or other rating bureaus for loss cost/rates, rules, and forms, but program business can be more than the standard commercial lines and can span across almost all Property & Casualty lines of business.

Some carriers choose to set up a “Base” program (usually for commercial lines) that any program administrator can use. For example, a Base program, such as commercial general liability, might adopt all the bureau loss costs, rules, and forms. There is no need to make a filing that is specific to a single program administrator or target market/class of business. This gives the program administrator the ability to start writing immediately rather than waiting for program filings to be prepared, submitted, and approved for their specific program.

According to our actuarial consulting experts, the Base program generally has rating flexibilities such as multi-tiering and a schedule rating plan, so the carrier can appropriately price the various markets and classes of business written by the carrier’s program administrators. If there are specific rates and forms that are required for a target market or class of business, the carrier will prepare and submit filings for these program-specific rates and forms. Generally, these are miscellaneous items that can be added on to the Base program and are simpler / quicker from a state filings standpoint compared to one with a complete program.

One of the drawbacks of the Base program filing approach is that changes have the potential to impact all program business. If a carrier is adopting an ISO loss cost change, one of their program administrators may not want to adopt the loss cost because of the impact on their specific niche market. Under this scenario, the carrier may file an exception in the Base program and carve out this specific market by having independent loss cost or rates for the impacted class of business. For the Base program approach, every time the carrier is filing a change to the Base program, they need to assess the impact on all their program business.

Program Business Filings

Rather than have all the program administrators use the same Base program filing, a carrier may elect to file each program separately. If a carrier chooses to also file a Base program, the program business filings are typically underneath the main Base program. This means that eligible risks are written in the program business filings and other risk are written in the Base program. The program business filings and the Base program filing are independent of each other in terms of bureau loss cost, rules, forms and company exceptions. When carriers have program business filings, they generally give the program business filing a special program name, like “Small Contractors Program”, with distinct eligibility guides to distinguish it from other programs the carrier may already have in place.

Under the program business filing approach, new program filings (rates, rules and forms) are needed for each new program administrator and it takes longer to get the program to market.  However, our actuarial consulting experts have stated that structuring it this way makes the process much cleaner for rate revisions and program changes as no program filing is connected in any way to another under the same line of business.

Having your program filings connected to the Base program, although it can be done, generally causes issues. First off, many DOIs do not permit references (or links) to another program which makes tracking of these “links”, and lack thereof, difficult from a compliance perspective. In addition, if you make a change to the Base program, it could impact all linked programs which could potentially result in the same drawback mentioned for Base program and the change may not be desired by all program administrators.

Concerns with overlapping programs

Based on the experience of our actuarial consulting experts, multiple states have issues with a single carrier having multiple programs under the same line of business that could potentially offer the same insured different premiums for the exact same coverage. Many times the argument is made that these “programs” are independently run by separate management teams, so there is no insurance offering to the same insured by the same individuals. This argument does not always work and is problematic in California along with some other states. In addition, there are some states, such as California, that take this one step further in that no program can overlap within an entire insurance group, not just the individual carrier. When writing multiple programs for the same line of business under a single carrier, there are typically a few ways to differentiate programs in order to not run into state filing issues, which include the below.

  1. Mutually exclusive underwriting guidelines

You are permitted to have multiples programs in all states if the underwriting guidelines are mutually exclusive, meaning no exposure overlaps between any approved program. For example, you could have a long haul trucking commercial auto program and a public auto commercial program, or from a personal lines standpoint, you could have one program that requires a usage-based insurance (“UBI”) device connected to the vehicle that tracks mileage, speed, breaking, etc. which impacts the driver’s premium and a regular program that does not have a UBI device requirement.

  1. Material mandatory coverage differences

Multiple programs with similar exposures may be allowed to the extent that the programs have material mandatory coverage differences.   For example, you could have an HO-5  (Comprehensive Form) homeowners program and an HO-3 (Special Form) homeowners program, since an HO-5 program is meant to be more expensive because the policy form is much broader than the HO-3 policy form.  Issues can arise if the HO-5 premium is lower than HO-3 for the same risk.  Additionally, if an applicant is eligible for both programs, the carrier must make both programs available to the applicant.

  1. Different Distribution channels

Carriers may use distribution channels to differentiate programs, which include commission-based programs written by independent or captive agents and direct programs, with no commission, which are often sold on the internet.

Multiple Carriers

If an insurance group has more than one admitted carrier, the same, or similar programs can be filed under each carrier with none of the above issues occurring, except in a few states, based on our state filings experience. As was mentioned above, there are some states that look at the entire insurance group, not just the carrier.

Workers Compensation Issues

This line of business is different than other lines. In most states, due to statutory or other requirements, carriers may only have one program and must offer the same rates to everyone for standard (guaranteed cost) business. Therefore, a carrier that might have multiple commercial auto programs under the same carrier, can only have one program for workers compensation. In some jurisdictions, carriers can file to enhance the bureau rating structure, vary the rates offered within their single program, and individually rate certain qualifying risks.

Do you need guidance on maximizing the number of programs you can write under a single carrier in your personal or commercial lines rating plans? Our actuarial consulting and state filings experts at Perr&Knight are here to help.

California PPA Rate Filing Moratorium: What Should Insurers Do?

As loss ratios for personal auto continue to climb in California, insurers are experiencing significant pressure to raise their rates. Frequencies have been increasing from the lows hit during the pandemic and severities trends are at levels not seen for decades – both of which are pushing loss costs above levels seen pre-pandemic. At the same time, the California Department of Insurance (“CDI”) has a rate filing moratorium on any increases for personal auto and has not approved any personal auto rate increase for over two years.

Many companies feel their hands are tied and there is nothing that can be done until the moratorium is lifted by the CDI. However, according to our actuarial consulting experts, there are several options available to insurers when it comes to addressing a needed rate change for personal auto in California.

Submitting a rate filing during the rate freeze

There is no debate that the pandemic has had an impact on personal auto. Behind the scenes, the CDI has been evaluating the most recent data available from insurers to determine the impact of the pandemic and how this should be addressed in personal auto rate filings. At this moment, the CDI has given no indication as to when they will complete their review. As a result, most companies are not spending the effort required to prepare and submit a rate increase filing for personal auto in California, which the CDI will just put on hold.

Over the last several years, the average time to approval for a rate filing in California has been steadily increasing and the problem has been made worse by a staffing shortage at the CDI. Prior to COVID-19, it took an average of 150 days to receive approval on rate increase filings for personal auto and homeowners – both of which are heavily regulated lines of business in California. Now, it is taking over 300 days to receive approval on rate filings for homeowners. Part of the reason for the lengthy review is that every rate filing for homeowners needs to be reviewed by upper management including the insurance commissioner. It is not unreasonable to anticipate the same treatment for personal auto. Which means if you submit a rate filing today, it might take a year to receive the approval. Any company that has adopted the “wait and see” approach and is taking no actions on their personal auto program will likely have subpar results in the next year and may be playing catch up for multiple years.

Several of the top 20 carriers have recently filed for rate increases on their California personal auto programs including the following companies: GEICO, Interinsurance Exchange of the Auto Club, Mercury, Progressive, Infinity and Wawanesa. The filings for these companies show strong support for a rate increase. Does this mean the CDI will start approving rate increases for personal auto soon?  Nobody really knows the timing on this – the insurance commissioner will likely err on the side of keeping the rates low for consumers. However, eventually the freeze on rate increases will be lifted and the companies that have already filed will be first in line to receive approvals on rate increases. If an insurer anticipates needing a rate increase for personal auto within the next year in California and has not started the rate filing process, it is time to get moving on this.

Filing for a variance

Most insurers have not submitted a rate increase filing because they do not have sufficient data to support an increase using the CDI ratemaking methodology. For companies that do not have credible data in the last 12-months, the CDI requires multiple years of data, which includes the period impacted by the pandemic. Furthermore, the premium and loss trend calculations required by the CDI require at least 12-quarters of data and will also be impacted by the pandemic. As a result, a rate filing for personal auto may need a variance on the loss and premium trend. Filings for variances must make public notice, so it is important to include this in the initial filing or there could be delays in the approval of the filing.

When preparing a rate filing, our actuarial consulting experts recommend that insurers review recent competitor rate filings, which have valuable information, including their request for variances. Several of the large carriers have submitted filings with fully credible data for the last 12 months. For companies that do not have credible data, the trend data in the competitor filings may be helpful – especially given the lag in receiving available industry data. Additionally, the CDI has a COVID-19 questionnaire that is required with every rate filing for the lines of business impacted by the pandemic. The responses to the questionnaire include insight from the filing company on the impact of COVID-19 on their business, which companies may find helpful in preparing their own rate filings. Also, a review of the objections in these filings along with the corresponding responses may assist a company in preparing a filing that more thoroughly addresses all the CDI’s concerns, which will in the end speed up the filing review process.

Waiving or not waiving the deemer

Nowadays, the CDI requests a waiver of the 60-day deemer on virtually all rate filings in order to have more time to review the filing. Insurers have accepted this as part of the rate filing review process and have historically waived the deemer. Companies do have a choice when it comes to waiving the deemer.  Most companies believe the filing will be disapproved without the waiver of the deemer, which is not true. If a company decides to not waive the deemer, the CDI’s only option is to issue a notice of hearing or let the filing be deemed approved. Since there is no chance that the CDI will let a rate filing be deemed approved, not waiving the deemer will result in a notice of hearing.

When the deemer has been waived on a filing, the insurer has the option to reactivate the demeer. Wawanesa has chosen to do this with their pending personal auto rate filing, which was submitted December 13, 2021. Since the CDI has a moratorium on rate increases for personal auto and was unable to complete their review of the rate filing before the deemer date, the CDI issued a notice of hearing for the Wawanesa filing on May 3, 2022 stating the following: “the Commissioner is currently still conducting his review of the Application and has not yet sufficient time to determine whether additional information is required or to determine whether the requested rate change is excessive, inadequate, and/or unfairly discriminatory.”  The CDI and Wawanesa have subsequently held scheduling conferences and an order has been drafted with the date for the evidentiary hearing.

Many insurers and our actuarial consulting team will be actively following the Wawanesa filing to see how it plays out. The hearing may force the CDI to review the filing and the supporting data within a certain timeframe and determine whether any rate increase is actuarially justified by the company.  Other insurers have chosen to waive the deemer on their rate filings and have continued discussions with the CDI with the hopes that the CDI will change its position at some point. Normally, the CDI and insurers want to avoid a hearing and work together to find a solution, which ultimately may have an insurer agreeing to a rate change lower than the filed amount. Depending on the outcome of the Wawanesa hearing, there may be more companies choosing the Wawanesa route and opting for a hearing with the CDI. That said, the CDI may also change its position at some point and start allowing rate increases for personal auto.

Class plan filings are an option

Although the CDI is not currently approving rate filings for personal auto, insurers are able to file and receive approval of revenue-neutral class plan changes. In a time where the rate level on an overall basis may be below target, insurers should be carefully reviewing their class plan and ensuring the rate adequacy is the same across all class risks. Otherwise, companies may see shifts in the mix business into classes that are less adequately priced resulting in a further deterioration of the overall loss ratio on the program. Additionally, insurers can update their auto physical damage model years and add the latest model year through a class plan filing. When submitting the model year filing, our actuarial consulting experts advise insurers to also include the annual symbol filing in the class plan filing.

Use an expert with years of California experience

Having an expert with years of experience preparing personal auto rate filings in California could improve the time to approval and potentially save a company a substantial amount of money.  Whether it is preparing the actual rate filing or performing a review of a rate filing prepared by the company, an expert can provide guidance that will increase the chance of having the most successful filing.

Perr&Knight is a leading provider of actuarial and state filing services to insurers in California. Our actuarial consulting team actively follows the California market and is very familiar with all the filing requirements in the state. We prepare and submit more California filings than any other company. Our actuarial consulting experience includes expert testimony on rating filings and providing guidance to industry associations.

Please contact us for any insurance filings support that is needed with your California insurance products.

A&H Insurance Advertising: Rules & Compliance Overview

Advertisements are an integral part of any A&H insurance marketing plan. Insurance companies must find ways to get and keep the attention of a prospective insured. Given that the average American sees more than 4,000 advertisements each day, insurance companies look for creative ways to attract prospective insureds. However, it’s not as simple as writing a clever ad. Insurance companies are subject to various levels of regulation and process requirements.

What is an advertisement?

An advertisement is any material that is published, printed, scripted, or displayed to a consumer. This includes, but is not limited to, postcards, electronic communications, billboards, radio or TV ads, and websites. It can also include sales talks and presentations for use by agents, brokers, producers, and solicitors.
Advertisement includes advertising material sent with a policy when the policy is delivered and material used in the solicitation of renewals and reinstatements. It also extends to the use of all media for communications to the general public, to the use of all media for communications to specific members of the general public, and to the use of all media for communications by agents, brokers, producers and solicitors. The definition of advertisement casts a wide net.

What rules apply?

Insurance advertisements are subject to federal, state, and in some cases, local statutes, regulations, and ordinances. At the federal level, insurance companies must review HIPAA marketing regulations and the CAN-SPAM Act.
The HIPAA regulation defines marketing materials as a communication about a product or service that encourages recipients of the communication to purchase or use the product or service. Applicability of the act depends on the recipient and the service or product in the communication.
CAN-SPAM sets the rules for commercial email, establishes requirements for commercial messages, and provides penalties for violations.
In addition to the federal requirements, most states have adopted some version of the NAIC’s Advertisements of Accident and Sickness Insurance Model Regulation. This regulation defines advertisements and sets forth requirements for content, control, and filing requirements. Most states require insurance companies to file Medicare Supplement and long-term care ads, but some states require that all advertisements be filed. At the local level, city and county ordinances control signage, such as those seen in traffic medians or attached to light poles.

Who controls advertisements?

Insurance companies have a duty to maintain control of their advertisements, whether those ads are created by a home office employee, a broker, or an independent agent. Insurance companies must have procedures in place to establish and maintain a system of control over the content, form, and method of dissemination of all of its advertisements.
According to our insurance support services experts, best practices include a formal advertising approval process, tracking, and record retention. States rely on insurance companies to self-monitor their advertising procedures and require a signed certification of compliance each year with the annual statement filing.
While A&H advertising requirements can be overwhelming, it’s also important to note that most states have adopted the same basic requirements with respect to content. It’s usually not necessary to create 51 versions of an ad, although there are almost always state variations.

Next steps

Whether the advertising campaign is one jurisdiction or fifty-one jurisdictions, insurance companies must understand requirements for content, filing, and distribution. Contact the insurance consultants at Perr&Knight to learn how we can provide insurance support services for advertising review and the development of processes and procedures to manage advertising.

South Dakota Springing Forward with Innovation Waiver

Set to take effect on July 1, 2021, Senate Bill 55 will allow a waiver on some requirements for regulated access to South Dakota’s insurance market to allow insurers to test innovative insurance products or services.
The changes are primarily for property & casualty. Currently, the Department is not granting waivers for life insurance, health insurance, workers’ compensation insurance, or title insurance. The full list can be found in Senate Bill 55.
To participate in this market, interested parties need to submit an application to the Director of Insurance with information specific to the testing and provide the information detailed in the bill. A $2000 non-refundable fee applies to the application but, at the discretion of the director, may be reduced or removed if the applicant holds a license.
The term “innovation” and other key phrases are defined in the Senate Bill to avoid any vagueness.
Other states with similar enactments include Utah, with its “regulatory sandbox” program, which also allows for certain laws or regulations to be waived, and Arizona. Arizona’s House Bill 2277 is similar to South Dakota’s but is specific to the health care market and caters to individual and small group markets.
The concept of the sandbox is to allow new and small businesses the opportunity to test new and innovative ideas without all the heavily enforced regulation.
As we are seeing more states allow for modern initiatives such as the innovation waiver and regulatory sandbox, this is a pretty clear indication that this is a step in the right direction for the future of the insurance world. This provides some relief for start-ups and small businesses that took a hit during the pandemic by allowing trial and error to test insurance products or services without as much regulatory restraint.
Interested in finding out more about our services? Please contact Perr & Knight for guidance and assistance on all your insurance needs including but not limited to state filing submissions and actuarial services.

You Better Watch Out, You Better Not Cry, State Filing Requirement Changes Are Already Here!

Authors: Neresa Torres, Jessica Witvoet, API, AIS, AINS, AIT, and Diane Karis,AINS, CPCU
At Perr&Knight, we submit thousands of product filings (rate, rule and form) a year to the various state Departments of Insurance (“DOIs”) – and 2020 has been no exception. In fact, in addition to our normal annual volume of insurance product filings, COVID-19 has increased the number of state filings for pandemic-related submissions.
Throughout the course of this year, we have noticed a few trends in how states’ DOIs are reviewing product filings. Since we handle a high volume of submissions across all jurisdictions and all lines of business, we are able to quickly identify variations from previous years.
Here’s what we have discovered. 

States are getting pickier about the rules

Though states have always clearly articulated their filing guidelines, in preceding years DOIs were more likely to excuse minor deviations and process those filings anyway. DOIs in the past may have been inclined to give some leeway. This year, however, many states are opting to exercise their right to issue an objection or reject a filing outright if every detail is not spot on. Small errors that may have been “no big deal” in the past are now grounds for review or disapproval.
For example, Idaho is now closely scrutinizing the status of the filing in the domicile state. In the past, a “pending” entry or concurrent submission of domicile state was acceptable. Now, it is required that the program being filed is approved by the domiciliary state prior to submitting the filing in Idaho. Unless there is a reasonable explanation as to why, the filing will be rejected or subject to a 7-day turnaround for correction. If the information is not included at all, the filing is often disapproved without any opportunity for correction. Kansas has become more finicky, too, requiring each rule filing to have an accompanying form, or an objection will be issued. Other states have implemented guidance tools and checklists to ensure compliance with changing rules and requirements. For example, Massachusetts has created a four-part instruction guide to cover what is required for a filing to be considered acceptable.
The point is: don’t rely on DOIs being as forgiving as they have been in previous years. Make sure all your filing details are correct and complete.

Objections, rejections, and time-to-approval are increasing

Insurers are not the only ones experiencing administrative delays due to the pandemic. Many state DOIs shifted to remote working scenarios as well, and this has impacted their ability to issue speedy approvals. In California, for example, commercial, homeowners’, and other personal policies are taking longer to receive approval than in years past. The number of “pending” approvals has also increased.
Closer scrutiny by state DOIs is resulting in a higher number of rejections for minor issues. On the bright side, turnaround times for re-submitting are also faster. In many instances, we have seen DOIs allow re-submission within 7 to 10 days.
If your filing is rejected, correct the problem immediately and resubmit right away. Sophisticated software solutions like Perr&Knight’s can help your teams keep a closer eye on filing status.

Other events impacting 2020

In addition to the disruptions caused by the pandemic, social unrest, and an election year, insurers are facing other challenges, such as recertification of the Terrorism Risk Insurance Act (TRIA), which requires all companies to update their language. Travel insurance products are also changing quickly as travel restrictions are lifted and added on a rolling basis worldwide.
This year’s regulatory requirements compel insurers to take a closer look at forms to make sure each meets the DOI’s current standards, which may have been updated recently.

Keeping track of the trends

2020 has been a year of surprise rejections for some insurance companies. It makes sense: companies only submitting a few filings per year – or who haven’t updated their product in recent years – lack the macro perspective to spot trends in DOI behavior.
When a rejection is received, it is important to determine as quickly as possible if the rejection is a unique occurrence or due to a change in a procedural requirement by the DOI. When submitting new filings, comparing against historical filings is no longer enough. Instead, it will be important to keep close track of current trends, as well as to look deeper into the DOI’s reasoning. This insight will help you avoid costly, time-consuming errors moving forward.
Internally, the Perr&Knight state filings department takes note of every rejection/objection we encounter and evaluates it to discover if it is part of a larger directional shift for that DOI, or simply a one-off. When we have questions about a particular DOI action, we contact the reviewer immediately and obtain a more thorough explanation. Because we handle such a high volume of nationwide filings, we remain in regular communication with every state DOI. These strong relationships enable us to obtain clarification on department actions that guide future filings on behalf of our clients.

Work with an experienced partner

Staying compliant today presents more of a challenge than it has in years past. Because the landscape is shifting quickly (as quickly as the insurance industry can shift), insurers are at higher risk of receiving rejections – especially those who submit a relatively low number of filings per year.
This is where working with an external insurance filings support partner can deliver a dramatic difference. Experienced state filings teams manage filings day-in and day-out. Their level of intimate knowledge of each transmittal requirement, variations between states, and regulatory expectations for each line of business can mean the difference between a smooth approvals process or being sent back to square one.
As 2020 draws to a close, the winds of change continue to shift. We expect more deviations from the status quo in the coming year. We’ll keep our clients posted on what we discover and how they can stay ahead of the game.

Questions about how to improve the efficiency of your rate filings? Our state filings experts can help.

Pioneering Insurance Automation

The automation of time-consuming manual processes has unlocked ever-increasing levels of efficiency for businesses across the insurance industry. At Perr&Knight, we have long recognized the value of offloading process-heavy tasks to machines in order to free up actuaries, agents, and filing teams to focus on tasks requiring human judgment.
Let’s take a look at how our own automation evolution has opened up greater efficiencies internally, as well as for our clients.

A Breakthrough in Automation:

Anyone who has been in the insurance industry a few decades shudders to think of the inefficient early process of obtaining publicly available insurance company filings from the Department of Insurance for competitive analysis.
Perr&Knight was the first in the industry to aggregate these filings on In the early days, we physically sent someone down to the state department of insurance (DOI) building, equipped with a scanner. The rep would spend all day buried in the stacks, scanning documents until the job was done. From there, the person would head back to our office and transfer the scanned PDFs to the Data Entry Department, then spend hours manually entering metadata into the database. The average number of documents that could be entered per day was capped at about thirty per person.
Around 2005-06, NAIC launched the System for Electronic Rates & Forms Filing (SERFF), which greatly reduced the number of paper filings requiring scanning. SERFF also standardized many formats, further streamlining the process by increasing the uniformity of filing requirements.
As DOIs posted publicly-available filings to their websites, we did less scanning and more and more downloading – itself an important time-saver. The new downloadable, standardized SERFF format enabled our Data Entry department to copy and paste data instead of manually typing it out, further increasing accuracy and speed.
The massive breakthrough in automation came in 2008, when we developed “The Auto-Indexer,” a PDF parsing software program that could read a PDF document and copy and paste the data from the PDF directly to our database.
Now, instead of entering the data, our human staff member was tasked only with auditing and validating that the data entered by the system was correct. Though all filings were reviewed by human eyes, the computer could automatically process straightforward filings as long as there were no errors. Complicated, high-priority filings received closer scrutiny from our staff.
With this advancement, productivity skyrocketed by 1,000%. We could now complete up to 300 rate filings per day per person, instead of a mere thirty. Expands the Scope of Automation

Perr&Knight’s shares a similar history, but took automation even further. When was launched in 2003, we would manually enter filings, objections, responses, and all correspondence into the system. Then we used similar parsing technology from the Auto Indexer to automate much of the data entry.
Further building on our process, Perr&Knight began talking with the NAIC, ultimately becoming the first vendor to integrate a new RESTful API developed by the NAIC into our software.
Not only did this drastically reduce the amount of uploading and manual labor required to enter data, but the updates were virtually instant. The API also gave us easy access to granular filing data. For example, forms and rules could now be broken out from the filings. As such, Perr&Knight was the first company with an automated, real-time forms library and rule library.
Our clients could now access and search DOI documents and company forms instantly from any web-enabled device. The fees our clients paid to license the software were offset by time savings and ease of searching and segmenting data from a single, cloud-based location.

The Future of Automation at Perr&Knight

In the coming years, we envision increased use of automation for two-way data exchange.
As of right now, using the SERFF API, we have the ability to extract data from the DOI websites, but the information flow is limited to one direction. With two-way integration, we’ll begin to automate the filing creation process. Imagine one-click Bureau adoption filings and auto-generated actuarial support for rate change filings.
Perr&Knight is continuing to develop software tools that will ultimately become a bridge between and an insurance company’s IT systems thus eliminating the need for manual handoff and reducing the chance of errors.
Working with rate filing teams, actuaries, and IT departments, we’re developing and brainstorming new software and systems that offload more time-consuming burdens to machines, so valuable human teams can direct their focus where it’s needed most.

Looking for ways your company can streamline state filings or other operational procedures? Our insurance technology experts are here to help.

Monitor Agent Licensing in Real Time with License Reporter

Maintaining current licensing information for insurance-producers is a crucial but time-consuming task. Many agencies are still tracking upcoming renewals and expirations on spreadsheets housed on internal servers or individual computers. This approach might work reasonably well, provided agents are licensed in a limited number of jurisdictions.
However, when more agents are added to the roster (or an agency expands their services into more territories, or the one person who has been tasked with monitoring renewals for the last decade leaves the organization), keeping track of the details can quickly devolve into a paperwork nightmare.
Perr&Knight has been offering renewals as part of our insurance licensing services for years. Our team submits, monitors and tracks producer licensing in all jurisdictions across all lines of business. Eight years ago, we developed software enabling us internally to track and monitor licensing status. We have recently released an updated version that our insurance licensing clients now have the ability to access via online portal.

Introducing the new License Reporter is Perr&Knight’s online license reporting solution for our current insurance licensing services clients. This web-based software permits clients to log in via any web-enabled device to check the status of recent, past, and upcoming renewals. While our licensing department team continues to manually manage the submission of forms to state Departments of Insurance (DOI) on behalf of insurance agents and agencies, enables our clients to access a transparent view of the various licensing processes.
Using, license and appointment data can be searched by a range of key criteria, including:

  • Agent Name
  • Agency Name
  • Agency & Affiliated Agents
  • State
  • Expiration Dates (date range)
  • Line of Authority
  • License Type

Increase transparency, reduce risk provides a new level of transparency into the insurance licensing and renewals timeline on a nationwide scale. By increasing insight into the licensing process, agencies establish more control, thus reducing the risk of information falling into a black hole or becoming trapped in administrative purgatory upon in-house staff turnover. was developed to increase efficiency for Perr&Knight’s insurance licensing services teams, but also provides the following valuable benefits for our clients:
Eliminate email back-and-forth Answer questions immediately by letting HR managers or licensing analysts view the current status of all submissions, 24/7, from any web-enabled device
Reduce the risk of accidental expiration – Ensure all agents are operating with current licenses
Become aware of upcoming renewals – Monitor upcoming renewals
Ensure correct jurisdictional licensing  – Confirm agents are properly licensed in all areas before expanding business into new territories
Access proof of current license – enables us to attach relevant documents, including a copy of the agent’s current license, or web verification from the state, saving space in the file cabinet and the time required to access a copy of the license, if necessary

Who should use Perr&Knight’s producer licensing and appointment services?

We manage licensing services for agencies of all sizes and scope. However, for certain agencies, our licensing services (including can be especially beneficial. These agencies include:

  • Insurance start-ups
  • Insurtech companies
  • Agencies with limited in-house support
  • Agencies operating in 5 or more states

Peace of mind managing license renewals

We developed to solve an important issue that drains valuable time and resources from insurance agencies. By offloading the licensing process onto Perr&Knight’s experienced producer licensing services team then monitoring progress via online portal, insurance agencies can make sure all agent licenses are up to date while freeing their internal teams from managing minutiae.

Is your agency staff getting buried by license renewals? Let our licensing department lighten your burden.

Why Stat Reporting Shouldn’t Be an Afterthought

Authors: Jason Hudson, Principal Director, Statistical Reporting Services, and Mark Nawrath, Principal Director, Account Management
When insurance companies prepare to implement new software for policy and claims administration, regulatory reporting of the data captured is an afterthought. What appear to be turnkey systems often turn out to require more retrofitting and configuration than initially expected to meet statistical reporting requirements, resulting in an increase in investment and a longer timeline to launch.
Here’s why it’s necessary to consider statistical reporting needs throughout the entire development and implementation process.

Powerful and flexible modern systems…they require more configuration

Legacy technology (early mainframe systems) demanded a ton of programming to account for every possible scenario required for policy and claims administration. Building the complex logic required to encode, transform and format data into compliant statistical plan formats was an assumed part of the implementation process.
However, when client server technology started to take off in the 1990s and 2000s, new client-server-based technology vendors decided not to invest in complex logic to comply with statistical reporting mandates. These new products were like warm Jell-O waiting to be molded: they had the ingredients to  perform policy and claims administration processing, but required heavy configuration and customization, not just to write insurance business (that is, all the transaction sets in a business life cycle—endorsement transactions, change renewals, cancellations, etc.), but to conform to the regulatory  mandates for statistical reporting. It was up to insurance companies to make sure they were covered.
In plain terms: many of today’s systems are set up for collecting information, but how they store data on the back end is not designed to meet statistical reporting requirements.

Set yourself up for stat reporting success

In the rush to get new products to market, insurance companies often get caught up in launching their new system (or product or policy) as quickly as possible. Today’s client-server-based systems are not less capable than previous systems, they’re just more malleable. In providing insurance companies with more flexibility, the vendors put the onus on the insurance companies to configure their systems to perform and ensure compliance. Unfortunately, companies tend to focus on business functions (product rating, forms, coverages, claims handling, etc.) and overlook the importance of collecting and formatting specific transaction sets and data points needed to meet regulatory standards. This is why it’s so crucial to consider statistical reporting requirements from the very outset of your new technology implementation. Here are some strategies that work:

  • Involve the right people from the start

Bringing statistical reporting compliance stakeholders to the table late in the game increases the odds of revealing functionality and data needs previously unaccounted in defining implementation specifications. Therefore, it’s important to have statistical reporting subject matter experts work together with experts in rating, underwriting and claims, early in the process to understand what products, coverages and claim events are contemplated and to define the transaction sets and data elements required. 

  • Account for configuration in your budget

Because of the heavy amount of programming required for legacy systems, it was very difficult to ascertain exactly how much was invested in programming for statistical reporting. These days, it’s easier to identify and quantify. Avoid sticker shock on the final project by earmarking a section of the budget for statistical reporting requirements definition, configuration and testing.

  • Clarify your specifications

Identify the statistical file generation processes you’re currently using to inform your needs for your new system. From there, generate a comprehensive list of specifications and make sure they are reviewed by the teams who will be responsible for statistical reporting. Statistical reporting subject matter experts and third-party reporting consultants can come in handy here, as they can make you aware of current industry best practices and other information “you don’t know that you don’t know.”

  • Produce usable test policy data

One part of the transition that is often overlooked is the availability of “production like test data”, essential to ensure completeness in the encoding/transformation process and often required in bureau electronic testing certifications. A number of statistical agents and rating bureaus require you to compare the captured and encoded statistical data (for risks, coverages, policy and claims transactions) to what is being produced on front-end for the insured. That means classifications of business, coverages being offered, rates and premium amounts must be a direct replica on the back end for statistical reporting process. Account for this in your roll-out plan and dedicate appropriate resources for it.

  • Don’t rely on your data warehouse for stat reporting

Data warehouse solutions are typically not architected to satisfy statistical reporting mandates (including rating, premium and claims detail at the line/subline/coverage/transaction level, policy and endorsement form data and onset/offset entries for regular and out of sequence endorsements). Rather than making your data warehouse too complex and robust, let your statistical reporting experts and programmers work with native data that comes from policy and claims administration systems.

Create a comprehensive game plan

Develop a proactive strategy to test how your system will issue policies and transactions once policies become enforced. Don’t make the mistake of testing front-end functionality without an end-to-end review of how those policies and claims get formulated in comparison to the statistical data that you will also be collecting on the back end.
Involving an outside insurance reporting and development consultant to guide you through the process can be especially valuable here. At Perr&Knight, we offer workshops as a part of our Statistical Reporting Solution service offering. These workshops involve all relevant stakeholders and cover key topics that will inform the game plan that guides you forward.
In these multi-day workshops, we discuss with your teams the interlacing of statistical reporting file creation and testing processes into your information technology objectives, the risks associated with delivering an improved statistical reporting capability, and the coordination of your team and third-party participants to schedule projects related to the implementation of an enhanced statistical reporting solution. The final deliverable to you is an evaluation of strengths, potential vulnerabilities, and a plan for moving ahead that includes clear roles and responsibilities, cost projections and duration estimates. Whether you decide to partner with us or not, you end up with impartial strategy for implementation that you can use as a roadmap.
Because statistical reporting is not seen as revenue-generating aspect of the business, it’s often overlooked during technology development. However, doing so only short-changes you on the back end of your project implementation, as teams scramble to retrofit new systems to meet statistical reporting mandates. Instead, keep statistical reporting requirements in mind straight from the start and save yourself the headache of having to go back and make costly corrections – or being fined for non-compliance.

Want to discuss how to make statistical reporting more manageable for your in-house staff? Our insurance technology experts can help.