How to Navigate Licensing for Insurance Startups

Navigating the world of insurance licensing can be daunting, especially for insurance startups. A non-negotiable foundation for compliant and successful insurance operations involves obtaining and maintaining proper licenses. This article outlines the complexities of insurance licensing and provides insights from our team of experienced compliance professionals to help your startup thrive.

Maintaining current licenses is more than a formality – it safeguards your business

Soliciting, negotiating, or selling insurance products requires proper licensing to operate legally. Without the appropriate licenses in place, you risk facing penalties, fines, reputational harm, and legal consequences.

Insurance is heavily regulated, and licensing requirements differ significantly by jurisdiction. To operate legally and expand your market reach across state lines, you must secure and uphold the appropriate insurance licenses. This not only ensures compliance with varying state regulations but also reduces your risk, safeguards your reputation, and fosters trust with your customers. 

Maintain good standing and facilitate growth 

All carriers require individuals and entities that solicit, negotiate, or sell insurance on their behalf to maintain active licenses. Failing to maintain appropriate and active licenses may result in losing valuable agency appointments with a carrier. This limits the range of products your entity can offer and may jeopardize future growth opportunities and possibly your entity’s financial status.

Licensing criteria frequently includes background verifications, educational requirements, and additional qualifications. Verifying that your entity and those who solicit, negotiate, or possess the appropriate active licenses assures your customers that they are interacting with competent, ethical experts who understand the nuances of numerous insurance requirements. A strong reputation can lead to increased client trust, referrals, and business growth – all crucial for a startup’s success.

Time-consuming, detail-heavy 

Monitoring and maintaining licenses and appointments can be time-consuming, particularly if your business operates across multiple states. This effort is magnified when managing licenses for multiple producers. The sheer scope of the administrative load often leads to license and appointment gaps, which leads to compliance risks.

Entities that initially manage licensing renewals through calendar reminders and Microsoft Excel spreadsheets can run into problems as their workforce grows and business evolves. Expanding workloads, knowledge gaps, and the risk of critical information loss due to staff turnover make maintaining accurate and up-to-date licenses challenging. Simple desktop tools quickly become insufficient to track renewals accurately.

The value of outsourcing to experts

Perr&Knight has developed a suite of licensing and appointment services born out of decades of supporting entities across the country. Our insurance licensing department is staffed by experts who understand the state-by-state nuances and is supported by License Reporter, an encrypted, innovative online database, available 24/7.

The onboarding process is easy for our clients. We work closely with the appropriate client contacts to collect all the necessary information for current producer licenses, providing the appropriate forms. We collect these forms and then enter the data into License Reporter.

Working with Perr&Knight and using License Reporter streamlines the licensing process. We provide detailed progress reports showing renewal statuses to assure all stakeholders. The insurance compliance professionals in our licensing department also oversee employment changes when agents leave or new staff members join the team, ensuring a smooth transition for new staffers with no disruptions.

In addition to day-to-day licensing management, we also focus on identifying potential roadblocks that could affect agent licensing down the line. This proactive approach helps you avoid future issues by ensuring all licenses are current and your agents have the appropriate licenses to sell the policies your business offers. 

In a regulation-heavy sector like insurance, businesses operating across state lines face a patchwork of varying licensing standards that can quickly become overwhelming. The cost of non-compliance is steep, from tarnished reputations to significant financial setbacks. Perr&Knight’s experienced insurance compliance consultants can help your entity stay on the right side of the law so you can focus on better serving your clients and scale your business with confidence.

Contact Perr&Knight today to learn more about our insurance licensing services.

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.

How to Navigate California Personal Auto Rate Increases

Personal auto writers in California have been abuzz with news of the recent rate increase approved for Allstate Northbrook Indemnity Company. This is the first rate increase approved by the California Department of Insurance (“CDI”) on any type of personal auto program since April 2020. There are many filings still pending. Here are insights on common questions our insurance filings support team hears from insurers:

How did Allstate get their filing approved so quickly?

That is the $165 million dollar question. The Allstate filing was submitted on June 30, 2022, well after many other filings that remain pending. Consumer Watchdog sent a letter to Commissioner Lara urging him to reject the filing, but does not appear to have submitted a formal petition to intervene. In October 2021, the Commissioner mentioned Allstate as one of three companies that needed to provide additional COVID-19 refunds to their policyholders. At this time, there is no publicly available information indicating that Allstate has issued any additional refunds subsequent to Commissioner Lara’s letter.

Allstate provided the following information on refunds to date in their approved filing:

In the final correspondence on the approved filing, that was submitted on the day before the filing was approved, Allstate confirmed that the next rate filing for their program in California would include the removal of their remaining affinity group rating program. This affinity group is for Specialized Professionals. Allstate’s approved manual includes a 4% discount for policies where the “named insured/applicant or spouse is a degreed professional in one of the following occupational groups: Education or Library Science, Science, Engineering, or Information Technology.” This “two-tiered system” was one of the concerns mentioned in the Consumer Watchdog letter.

Is it true that an increase greater than 6.9% requires a public hearing?

No. This is a common misconception. In fact, any filing can result in a public hearing, if a consumer group petitions to intervene and the Commissioner grants their request for a hearing. California Insurance Code 1861.05(c) includes the following [if] “the proposed rate adjustment exceeds 7% of the then applicable rate for personal lines or 15% for commercial lines … the commissioner must hold a hearing upon a timely request. “ In practice, consumer groups petition to intervene on filings with changes lower than 7% as well as higher.

There are currently 51 rate increase filings pending with the CDI. Of those, 5 have proposed increases of more than 7%.The oldest pending filing was submitted in October 2019.

If I have a rate change pending, can I revise it to propose a higher rate change?

Yes. This is similar to submitting a new filing and will result in the new change being added to a future public notice list, usually within two to three weeks after the change is submitted. The filing cannot be approved any earlier than the 46th day after public notice, which gives a consumer time to petition to intervene on the filing. Progressive initially submitted their filing for a 6.9% rate increase on January 7, 2022. This change appeared on the January 21, 2022 public notice list. Progressive amended their filing on September 30, 2022 to propose a 19.3% increase.   his change appeared on the October 14, 2022 public notice list. After no correspondence from the CDI since Progressive submitted the letter to waive the deemer date on March 9, 2022, the CDI issued an objection letter on November 3, 2022 with an November 18, 2022 due date.

What usually happens if a consumer chooses to intervene on a filing?

Hearings are fairly rare, even after a consumer group petitions to intervene. Typically, the CDI will allow the consumer group to be involved in the filing review process and provide their feedback on the filed change. The CDI will hold one or more meetings with the insurance company and the consumer group to discuss the support for the changes and encourage the insurance company and the consumer group to come to agreement on a change and avoid the hearing process. The consumer group will then submit their invoice for their costs that, if approved by the CDI, are paid by the insurance company.  The amount of compensation paid to intervenors from 2003 to 2020 is available at

This shows the following amounts paid in 2020:

What happened with the Wawanesa personal auto rate increase filing?

As we mentioned in an earlier blog post on the moratorium, Wawanesa Insurance Company chose to reactivate the deemer on their filing, thus triggering a hearing. Our insurance filings support experts have recently learned from a representative of the CDI that “The Hearing for this matter was taken off calendar and a stipulated settlement agreement is being reviewed.”

What should my company do if we need a rate increase in California?

We have provided some additional ideas in our earlier blog. For example, consider accompanying class plan and rule revisions to improve segmentation and underwriting and to alleviate common concerns from the CDI. Regardless of how you proceed, having an insurance filings support 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. There are many hot-button topics that may come up during a review of the filing.  An expert can make you aware of these to reduce the potential for surprises.

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 rate filings and providing guidance to industry associations.

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

A New Wave of Insurance Products – Protecting Digital Assets

A little over 100 years ago the steel, oil & gas, and mining industries represented over half of the assets of the top 50 largest companies in the United States. Companies such as U.S. Steel, American Telephone & Telegraph (AT&T), Standard Oil, and Bethlehem Steel dominated the corporate world. What made these companies unique and valuable was that they were large manufacturing entities that owned hard assets such plants, machinery, inventory, storage facilities, phone lines, etc. These companies sought insurance coverage to protect these hard assets in the form of traditional insurance coverages such as commercial property, inland marine, machinery/equipment, etc.

Fast forward 50 years and industries such as technology, telecom, and film, along with oil & gas, now make up over 50 percent of the assets of the top 50 largest companies in the US. It’s also the first time companies in the medical industry have begun to make their way onto this list. Another shift takes place when the assets of these large companies start to become ‘softer’. Intellectual property begins to make its way onto the balance sheets of these larger firms. The film and medical industries were largely able to protect their assets through copyright and patent laws. Additionally, most telecom and technology firms still manufactured hard assets such as computers and phone lines. As such, the insurance industry remained largely unchanged in the coverages that were offered.

After the turn of the millennium, there is a significant change in the makeup of the top 50 list. The largest industries are now led by technology, financial services, and medical companies. Interestingly, the steel industry, which was by far the dominant industry in the early 1900s does not have a single company in the top 50. Now, five out of the top six firms are technology companies, but unlike their predecessors, today’s tech companies’ main assets include intellectual property such as software and data; otherwise known as digital assets. A digital asset is anything that is stored digitally and is uniquely identifiable that organizations can use to realize value. Examples of digital assets include consumer data, documents, audio, videos, logos, slide presentations, spreadsheets, and websites.

Unfortunately, the insurance industry hasn’t caught up with the ever-changing landscape of protecting companies’ digital assets. Crime coverage protects assets that are held by a custodian or investor, while cyber insurance covers first-party losses and third-party liability associated with system failure events, network security, and data privacy. However, most of these policies do not cover the actual loss of data or access to the data. For companies looking for coverage in the emerging digital asset space, it can be challenging to find reasonable insurance capacity at affordable pricing.

At Perr&Knight, our insurance product development experts have designed, developed, and supported numerous products for unique and debutant industries. Our clients have received approvals and started writing numerous products in practically all states. We can assist with actuarial rate and rule development, as well as drafting and reviewing policy language. We also offer compliance services such as licensing and filing work. If you are thinking of expanding into offering a digital asset protection program, please contact us today to discuss your strategy.

The digital asset insurance world is still uncharted territory with a lot of work to be done. However, if you take your time and proceed carefully, you’ll be in the best position to break in early to this market opportunity. Refer to our “From Concept to Reality” brochure for tips on navigating the successful launch of your new insurance products.


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.

2022 Workers’ Compensation Financial Data Calls: What You Should Know

The 2022 reporting season is underway for workers’ compensation financial data calls to the National Council on Compensation Insurance (NCCI) and independent state workers’ compensation rating bureaus. This is a very busy season for reporting analysts and data quality staff who will need to aggregate, validate, and submit all the policy and claims financial detail for the year countrywide.

While there are very few changes in the calls and data capture this year, it remains important to keep tabs on updates from the bureaus. For instance:

  • The New Jersey rating bureau has issued a data call to collect COVID-19 pandemic data.
  • The California rating bureau is requiring the reporting of premium detail by month instead of year, starting with 1st Quarter, 2022.
  • Other rating bureaus have updated their front-end and back-end processes. For instance, NCCI updated its system interface slightly, and the NCCI template for uploading data into the financial call system has also been modified.

These are not significant changes but could affect your workflow and timing.

Companies should use the financial call reporting season as an opportunity to closely review their data collection, aggregation, and submission processes for weaknesses and to make updates accordingly.

Closer scrutiny

The rating bureaus have been implementing more edits and cross-reporting reconciliations in recent years and are therefore catching more data reporting inconsistencies. The risk of incomplete or incorrect data has always been an issue for carriers—deadlines are strict and penalties for late reporting can be substantial. With even greater scrutiny from the rating bureaus, carriers are under even more pressure to ensure accurate, on-time reporting.

Statistical and financial data analysis and reporting are non-revenue-generating tasks that can consume precious bandwidth. Timely, accurate reporting draws time and attention from staff whose focus is generally directed toward high-value tasks. As a result, many carriers opt to partner with reporting specialists like Perr&Knight. Delegating reporting to insurance data services experts alleviates the stress and seasonal time crunch of accurate data preparation and submission.

Common reporting problems

During decades of providing insurance data services for workers’ compensation carriers across the nation, we have seen companies run into issues that can complicate reporting and compromise accuracy. Here are some of the most common pitfalls companies experience:

  • Calculating designated statistical reporting (DSR) premium levels—specifically, applying rating modifications and loss-cost multipliers correctly—can be challenging. Different policy types, rating bureaus, and loss-cost adoptions can create different methods of calculation. Lack of experience with this calculation can result in incorrect DSR premium level reporting.
  • Difficulty understanding how deductible programs work. Some portions of deductible policies are not reported to the bureau. For example, large deductible policies and claims must be excluded from most calls, whereas small deductible policies are generally included.  Pay close attention to whether premiums and claims are reportable net of the deductible versus gross of the deductible when reporting. Plenty of carriers get tripped up here.
  • Issues related to comparisons between financial data and policy/claims data. Disconnects between unit statistical reporting (detailed audited premiums and claims reporting) and financial data calls will cause problems. Companies must uncover discrepancies and clear up edits in financial-to-statistical data reports before submission or risk penalties.

A head-start on accuracy

Working with experienced third-party support teams for reporting also ensures the cleanliness of data before submission to the rating bureaus. Before the Perr&Knight teams even submit data to bureaus, we aggregate all the required information and perform reconciliations to a company’s NAIC Annual Statement. If there is a difference, we work with our clients to resolve the error or create a detailed explanation for the bureau.

Offloading reporting to the experts at Perr&Knight protects against inaccuracy by ensuring all state-specific updates and requirements are taken into consideration. Our financial call reporting specialists make sure all the bases are covered.

The 2022 financial data calls show reporting is becoming more robust as it is further digitized. Data is under closer scrutiny and edits are stricter than ever. For many companies, working with a third-party insurance data services partner is the most efficient, cost-effective solution to ensure data accuracy and receive added support for this essential and resource-consuming task.

Offload this year’s NCCI data call to the reporting specialists at Perr&Knight. Contact us today to learn how we help.

Tips for Adding Flexibility to Your Commercial Lines Rating Plan

Every company writing commercial insurance products needs flexibility in its filed rates in order to charge the appropriate premium. There are many different types of rating flexibilities in the commercial lines insurance marketplace for admitted state filings, but the terminology is somewhat confusing and is often misunderstood. In this summary, we describe each main type of rating flexibility and provide a clearer definition based on our experience with the various Departments of Insurance (“DOI”s) and lines of business.
With some exceptions, commercial lines rates and rules are subject to the DOI’s state filings and approval requirements, similar to personal lines. Commercial lines premiums must also be calculated in compliance with filed rates and rules.
However, commercial lines policy premiums are generally bigger, coverages are more complex, and limits are higher compared to personal lines. As a result, the level of underwriting required for commercial lines is more than personal lines. In addition, risks insured under commercial lines are more heterogeneous, so is difficult for a rating manual to address the rating characteristics of all possible risks. This heterogeneous nature often leads to the need for customized coverage. Also, larger and more sophisticated commercial risks may utilize risk managers to evaluate and mitigate their exposure to loss. To address all of that, commercial lines products require more flexibility in their rating manuals than personal lines.
Incorporating rating flexibilities into a filed commercial lines rate and rule manual can help an insurance company be more competitive, have more accurate premiums and reduce the need for rate filing revisions year over year—saving time and money.
For states that are fully exempt from filing requirements (meaning rates/rules are not required to be filed), companies have more rate flexibility than in states that require filings. Additionally, large risk filing exemptions (which vary by state and are related to number of employees, premium size, etc.) provide companies with greater rate flexibility in determining the appropriate rate for the risk. Below we have addressed the various ways companies add rate flexibility to programs that are filed with the state DOIs.

Schedule Rating Plans

This classic underwriting tool is a table of debits or credits that are applied to the manual rate to reflect the characteristics of an individual insured that are expected to have a material impact on expected loss.
It allows the underwriter to adjust an insured’s premium up or down to recognize that they may be better or worse than the average risk while remaining compliant with the filed rates and rules. Schedule rating is meant to address characteristics of the risk which are generally not otherwise reflected in the rating manual.
Most DOIs allow Schedule Rating plans, but the requirements regarding maximum overall debits and credits, maximums by risk characteristic and minimum premium eligibility vary by state. It is important to be familiar with each state’s requirements to achieve maximum flexibility while remaining compliant.

Ranges of rates

Many states permit ranges of rates within the base rates and rating factors to allow for additional flexibility in a rating plan. Although allowing this flexibility, some states will require underwriting guidance in the rating manual giving some details on how the factors within the range are selected. Note that ranges of rates are allowed in addition to Schedule Rating plans. In combination, they can provide a significant amount of flexibility.

Refer to Company Rating / (a) rates

Refer to company and (a) rating mean the same thing: they tell a DOI in an admitted filing that a particular risk is difficult to price and the premium calculations will be performed internally (generally by an experienced underwriter) and the actual rate will not be filed.
This is also very similar to (and sometimes used interchangeably with) “Individual risk rating”. While most state DOIs allow individual risk rating, the requirements for state filings vary. First, states have different requirements regarding filing the individual risk rating rule—some don’t require a rule be filed at all, others require a simple rule notifying the DOI of an insurer’s intention to individually rate risks, while some require that the manual include specific formulas and/or procedures that will be used to determine the individual risk premium.
States also differ on the documentation or requirements for state filings when an individual risk rating rule is utilized for individual risk. Some require only that the premium calculation be documented in the underwriting file, while others require that the individual premiums be filed with the DOI. There are also some additional reporting requirements in some states. It is important to be familiar with these requirements to ensure your underwriters use this flexible rating tool compliantly.

Guide (a) rates

This term is used less often in the industry and is usually described as a rating plan that has very large ranges of rates and is proposed as a rough “guide” for rating. The final charged rate is not permitted to go outside the bounds of the large ranges included in the rating plan.
Generally, the ranges are so large, it is very similar to (a) rating (described above) but gives a significant amount of additional flexibility when a DOI does not allow a certain section or manual to be completely (a) rated and is looking for some premium boundaries.


Another method for adding rating reflexibility is tiering, which typically includes three to five tiers with factors below and above one. Criteria such as experience, financial stability and loss prevention are typically used for each tier to differentiate risk.
Where permitted, tiering can be introduced within a single company (intra-company tiering) and/or across multiple companies in a group (inter-company tiering). Intra-company tiering guidelines are required to be filed in most states, but are rarely required to be filed for inter-company tiering. The criteria used in tiering should generally not overlap with the criteria used in the Schedule Rating Plans or rating plans with ranges of rates to prevent double counting.

Consent to Rate

Once an insurance carrier has an approved filing, many DOIs allow consent to rate filings. These generally require a short form signed by the insured showing the premium they will be charged, which will be some amount above (or below, in a handful of states) the premium calculated from the filed and approved rate. In some states, support is also required for the deviation. Filing approval is generally very quick, which may make this the optimal way to achieve a more appropriate rate for the risk. 

Do you need guidance on maximizing the rating flexibilities in your commercial lines rating plans? The state filings experts at Perr&Knight are here to help.

Workers’ Compensation Underwriting: How Automated Tools Are Changing the Game

Underwriters and actuaries are under constant pressure to meet demands for increased efficiency and innovation. Though there are more data sources than ever, determining how best to balance data insights with underwriter expertise remains a challenge.
Where should risk management teams direct their focus?
How can underwriters achieve consistency?
Workers’ compensation presents unique complexities. With regulatory processes and large risk rating options that vary by state, workers’ compensation pricing creates an additional gauntlet of details that even experienced underwriters may struggle to manage. The need for comprehensive documentation means underwriters today are facing an uphill battle: how to efficiently make meaningful use of data to improve judgement, not cloud it.
In order for an underwriter to effectively do their job, they need automated workers’ compensation tools that provide quality benchmarks helpful for schedule rating credits and debits, retrospective rating, and large deductible plans. These insurance-specific tools help underwriters and insurance entities improve efficiency and provide data-driven documentation for compliance.
Here are three areas where automation can be a game-changer.

Large Risk Schedule Rating

Because large risks are big enough to be schedule rated, underwriters have ranges available to develop premiums. Large Risk Schedule Rating tools are a comprehensive, data-driven solution that can be utilized to assist underwriters with schedule rating debits and credits. These tools provide the following key features:

  • Consistency with company’s approved program
  • Insights on a particular risk relative to the average risk contemplated in the bureau rates
  • Data-driven results for underwriters
  • Built-in documentation 

Retrospective Rating

For risks who elect to have their premiums based on their actual loss experience during the term, underwriters will need to determine the initial premium and all the necessary parameters that will apply at future adjustments.
Retrospective Rating tools help support workers’ compensation underwriters in the following ways:

  • Calculate the basic premium for retrospectively rated policies
  • Allow for flexible user inputs
  • Comply with plan rules and company guidelines
  • Provide built-in documentation 

Large Deductibles

Large Deductible tools provide benchmarks to supplement underwriter judgment and include documentation for the underwriter’s files. Below are some advantages of using this automated solution when developing large deductible workers’ compensation plans:

  • Ability to develop multi-state large deductible premiums
  • Ensure compliance with approved plan rules and company guidelines
  • Availability of built-in documentation

Automation Tools Support Underwriters

Underwriters are essential to risk evaluation. Their experience, discretion and judgment are an important part of the process. These automation tools use data to inform underwriters on the risk and allow them to focus on the aspects of their job that require their expertise. Additionally, they provide a level of control and consistency to workers’ compensation underwriting that offers peace of mind in the event of an audit or other examination.
Workers’ compensation pricing will always remain an important task for underwriters. However, smart automation puts another helpful tool at their disposal.

Perr&Knight’s Automation Tools

During our decades of actuarial consulting for the insurance industry, Perr&Knight’s experts have built workers’ compensation rating tools for the industry with all the features mentioned above.  We have also added custom configurations unique to each program and jurisdiction so that the tool is consistent with approved rules and company guidelines.
In addition to tailoring the tools for each program, our actuarial consulting teams can update the tools to track alongside industry approvals and workers’ compensation metrics. Our experts are also on-hand to add new enhancements as programs change. These updates ensure the tools keep pace with industry experience.
Contact the experienced actuarial support teams at Perr&Knight to discuss how automation can support your workers’ compensation rating process.

7 Reasons to Perform a Mock Market Conduct Exam Right Now

Operational gaps and regulatory compliance violations are a constant threat to agents, insurers, InsurTechs, managing general agents (“MGAs”), third-party administrators (“TPAs”), and others operating in the U.S. property and casualty insurance market.
Compliance penalties are serious and can include cease and desist orders, consent orders, fines, license suspensions, or the loss of the company’s certificate of authority. Internal inefficiencies, lack of proper controls, insufficient analysis or testing of processes, and/or unfamiliarity with regulatory requirements are often the cause of the violations resulting in penalties.
However, those operating in the insurance market are not sitting ducks for regulatory action. Avoiding these risks – and mitigating their consequences – is possible through mock market conduct exams.
Here are seven reasons why you should undergo this valuable self-assessment as soon as possible.

1. Identify risks before regulators do

Regulators expect you to understand insurance regulatory requirements and be able to demonstrate compliance. Mock market conduct exams compare your processes, procedures and output, such as premium and claim files, to requirements to validate compliance or to identify gaps and provide recommendations for remediation.

2. Protect your reputation

Beyond the lost time and high costs of state Department of Insurance (“DOI”) penalties, negative findings from regulatory bodies can jeopardize your reputation with policyholders, shareholders, your current and potential customer base, and the industry at large. Operational gaps and compliance violations may also bring damages in possibly the most impactful form, that of long-term reputational risk and negative financial impact, such as devaluation of stock or a downgrade in AM Best rating. Conducting regular mock market conduct exams enables you to move forward with confidence that your company will stand up to regulatory scrutiny in the event you undergo an examination.

3. Be proactive with DOIs

Most states encourage you to report issues you surface internally and often allow you to do so in a confidential manner. By conducting self-assessments, and reporting as appropriate, there is often a longer runway for completing the remediation process which allows you to take a more deliberate and planned approach instead of disrupting workflow by shifting your teams’ attention to responding to regulatory requests, which are most often more time sensitive.

4. Reveal “what you don’t know”

Mock market conduct exams are particularly useful for InsurTech companies or companies that are new to the insurance space. The insurance industry contains many regulatory requirements (both obvious and obscure) that can require comprehensive operational protocols and controls. Working with an experienced insurance compliance services partner fast-tracks the awareness and correction of compliance and operational issues that may have otherwise remained hidden until identified through the hands of regulators.

5. Remove blind spots

Compliance is a top consideration for most who operate in the insurance market, but it’s often difficult for internal business units to conduct detailed reviews of processes in which they are already deeply immersed. “Business as usual” is great for achieving day-to-day efficiency, but internal teams may be unaware of their own blind spots. Working with an outside insurance compliance services provider on a mock market conduct exam brings an independent perspective that can reveal previously unseen procedural weaknesses and/or compliance gaps.

6. Correct issues before they become problems

Small issues tend to quietly compound until they become complex, costly problems. Mock market conduct exams can identify if you have correct, efficient processes in place to address regulatory requirements and/or inquiries from regulators or alert companies to ineffective processes that could lead to violations down the road.
For example, a review of policy files may identify that the rates and rules loaded into the policy admin system and/or forms issued to the policyholder are different than those on file with the regulatory authority.
Identifying gaps and/or non-compliance ahead of a DOI inquiry or action enables you to correct these issues before they cause widespread non-compliance. 

7. Prevent costs from spiraling

Mock market conduct exams are controlled investments that protect you against expensive DOI examinations. When examiners from regulatory authorities perform a desk exam or arrive on-site to administer an exam, your company will be on the hook for their time and travel expenses. DOI exams can be more than three times more expensive than conducting a mock market conduct exam with an experienced insurance compliance services partner. Time, fines and reputational harm impact your bottom line; mock market conduct exams improve the likelihood of shorter exams, less business interruption and fewer regulatory actions.

Partner with experts

At Perr&Knight, our depth of operational and compliance knowledge enables us to conduct thorough mock market conduct exams that are relevant to today’s regulatory landscape. We also offer related services including Operational Process and Documentation Reviews and DOI Exam Preparation / Response Training and Guidance.
Performing a mock market conduct exam allows you to proactively obtain an understanding of your operations before gaps and compliance violations result in regulatory action.

Contact the insurance compliance experts at Perr&Knight to discuss your operational needs or schedule a mock market conduct exam.