Insurance Compliance

The Impact of COVID-19 on the Travel Insurance Industry

by Crystal London

Authors: Crystal London, FSA, MAAA, Consulting Actuary, and Susan Cornett, FLMI, AIRC, CFE, Manager A&H Product Design
Coronavirus Disease 2019 (COVID-19) has had a dramatic impact on the travel industry – likewise the travel insurance industry – since it first made landfall in the U.S. in January. Travel ground to a near-halt in record time as state and federal governments ordered non-essential businesses to shut down, international borders to be closed, and shelter-in-place measures to be adopted, usually with little advance notice.
According to the TSA, airline travel has decreased by approximately 90% from mid-March to mid-May compared to the same period in 2019. This lack of movement has in turn resulted in a dramatic decrease in the need for travel insurance over the past two months, creating serious consequences for the travel insurance industry.

Lessons from the past

The SARS outbreak of 2002-2004 sheds some light on the role of pandemics in the travel insurance industry. After that event, most carriers updated their policies with exclusions and limitations specifically related to pandemics and epidemics. This has led to some confusion among insureds, as those who purchased travel insurance recently automatically assumed their canceled or interrupted trips would be covered. For many carriers, as of January, COVID-19 has fallen into the category of a “foreseen event” as a result of a pandemic, thereby disqualifying it from coverage applying to trip cancelation or trip interruption. However, an exception to this is if the policy includes Cancel for Any Reason or Interruption for Any Reason. As the benefit name implies, the cancelation or interruption is covered under any circumstance. Therefore, insureds who have purchased this “any reason” benefit are covered and could recoup a least a portion of their trip.
That said, most carriers are still offering trip cancelation/interruption coverage as well as medical expense and emergency evacuation coverage if an insured becomes ill, even if due to coronavirus.
However, if insureds cancel or interrupt their travel due to fear of the pandemic (not illness as a result of the pandemic), this reason may not be covered. Given marketing needs and distribution channels, there is no uniform policy across carriers as to when or why these benefits are not covered. Insureds are receiving multiple answers from multiple sources, further adding to their confusion.

What’s next for the travel insurance industry?

Company business is down significantly right now, with some travel insurance carriers seeing double digit decreases in business. Travel insurance coverage isn’t selling because no one is traveling. On the other hand, this decrease in travel has led to a significant decrease in claims payments, so some balancing is occurring.
Some carriers have responded to the pandemic by offering refunds outside the normal free look period or a change of coverage effective date if insureds postpone or reschedule their trip due to coronavirus. The hope is to keep the business on the books, not cancel outright.
Insurers may also face difficultly obtaining reinsurance for travel, especially for catastrophic events. Reinsurance companies, too, are trying to mitigate their risk. Given the current circumstances, reinsurers might be warier, especially due to recent medical models not anticipating a vaccine for another 12-18 months, or travel restrictions remaining in place until testing is widespread or a vaccine is available.

New state filings considerations

Going forward, we anticipate new regulatory compliance hurdles as a result of COVID-19, but to what extent is not yet clear.
Some states have fast-tracked regulatory measures dictating how carriers must address refunds. New York introduced state bill S8124B in March requiring travel insurance companies to refund premiums for COVID-19 related cancelations, but only in the circumstance that no payable claim has been filed already. Additionally, New York Department of Financial Services issued Insurance Circular Letter No. 4 in March allowing carriers to offer cancel for any reason benefits, which it previously did not allow in the state.
We anticipate additional hurdles and delays in future filings for travel insurance. Not just because many Departments of Insurance are operating with a reduced capacity (many are working from home, too), but because there will likely be added scrutiny on travel policies. We also anticipate questions regarding, and possible objections to, the use of epidemic and pandemic exclusions. We have yet to see the full scope of changes regulators will introduce in the coming weeks and months. The travel insurance industry is still adjusting to changes following the 2017 Market Analysis Working Group, subsequent regulatory settlement agreements, and introduction of model travel laws by both NAIC and NCOIL. Those states that have not yet adopted a version of the model law may take the opportunity to address pandemics and epidemics in the legislation at such time as it is adopted.
Make sure your state filings department or insurance support services partner keeps abreast of each state’s updated regulations and statutes. Pay close attention to the release of applicable new bills and circulars. Continuously monitor updates to make sure you follow the new guidelines produced by state DOIs as this unprecedented event continues to unfold.

Opportunities for the future

The news isn’t all bad. After weeks in quarantine, people are beginning to plan vacations and future travel again. They’ve had plenty of time to brainstorm a dream vacation and government stimulus checks have supplied an infusion of cash. In an attempt to generate revenue, travel suppliers like airlines and cruises are offering deep discounts, enticing people to book now for travel in the future.
For many travelers, trip cancelation insurance has never been top-of-mind ­– until now.  People who have never thought of purchasing travel insurance are seeing the value of coverage and may opt for the added peace of mind when booking.
We are also seeing emerging opportunities for carriers to offer policies reflecting a changing travel landscape. Insurance carriers are reassessing coverage options, some opting to include additional pandemic and epidemic perils within their policy. Conversely, instead of added exclusions or limitations, some carriers are weighing options to offer coverage specifically for COVID-19 related issues.
We anticipate a flurry of new state filings in the coming months as carriers rush to reshape their policies to conform to changing customer demands and updated regulatory requirements that are part of this “new normal.”
Right now, our best advice to mitigate the effects of the pandemic is to remain flexible. Prepare to give up a benefit or “unforeseen reason” clause in favor of keeping your eye on the big picture.  As DOIs update regulations to adapt to changing circumstances, carriers, too, will need to remain open-minded and ready to make necessary adjustments as we all write a new future for the travel insurance industry.

Need help navigating the fallout from COVID-19? Our actuarial and product design experts are here to answer your questions and develop a solid plan to move forward.

California Commissioner Orders Premium Refunds in Response to COVID-19

by Perr&Knight

On April 13, 2020, the California Department of Insurance (“CDI”) issued a Bulletin ordering the refund of premium to drivers and businesses affected by the COVID-19 emergency. The implications of the Bulletin are complex and require consideration of various aspects of an insurer’s business model. Perr&Knight is having discussions with the staff at the CDI regarding their expectations for compliance with the Bulletin. We have extensive experience with rate, rule and form filings in California as we submit more filings to the CDI than any other consulting firm and will be assisting insurers with complying with the CDI requirements to ensure that the appropriate adjustments are made for the change in risk and/or reduction in exposure.
The Bulletin requires action of all companies who write the following lines of business in California:

  • Private passenger automobile insurance
  • Commercial automobile insurance
  • Workers’ compensation insurance
  • Commercial multiple peril insurance
  • Commercial liability insurance
  • Medical malpractice insurance
  • Any other line of coverage where the measures of risk have become substantially overstated as a result of the pandemic.

The following is required of each California insurer writing the lines above:

  1. By June 12, 2020, report the following information to the CDI:

a. An explanation and justification for the amount and duration of any premium refund, and how those measures reflect the actual or expected reduction of exposure to loss.

b. Monthly and overall California-specific totals for the following:

i. Percentage of refund applied,
ii. Aggregate premium prior to, and subject to, application of refund,
iii. Aggregate premium refund,
iv. Average premium before and after refund,
v. Average percentage of refund, applied to each policyholder,
vi. Number of in-force policies, and
vii. Number of policyholders receiving refund.

  1. By August 11, 2020:

a. Provide each affected policyholder, if applicable, with a notification of the amount of the refund, a check, premium credit, reduction, return of premium, or other appropriate premium adjustment.

b. Provide an explanation of the basis for the adjustment, including a description of the policy period that was the basis of the premium refund and any changes to the classification or exposure basis of the affected policyholder.

c. Offer each insured the opportunity to provide their individual actual or estimated experience. For automobile policies, this includes an invitation to provide updated mileage estimates as appropriate.

Perr&Knight is available to discuss any questions or unique situations with the CDI on your behalf. We can also provide information on what other companies have done, to the extent this information is publicly available in California or other states. Finally, we can prepare and submit your required report to the California DOI.

We expect that other states may issue similar bulletins. If there is anything that Perr&Knight can do to assist your company in California or any other state, please complete our contact form.

Monitor Agent Licensing in Real Time with License Reporter

by Diane Karis

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

LicenseReporter.com 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, LicenseReporter.com enables our clients to access a transparent view of the various licensing processes.
Using LicenseReporter.com, 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

LicenseReporter.com 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.
LicenseReporter.com 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 –  LicenseReporter.com 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 LicenseReporter.com) 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 LicenseReporter.com 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

by Jason Hudson

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.

A Smarter, More Efficient Way to Manage Adoption Filings

by Karen Barrett Daley

Tracking and managing changes to bureau material has long been a time-draining process for property casualty insurance company staff. When we released Bureau Monitor, a subscription service housed within our StateFilings.com system, our aim was to make our clients aware immediately if there were updates required for their bureau based products. By centralizing loss cost, rule and form circulars for all bureaus and lines of business in a single location and then generating automatic notifications explaining the impact on our clients, the system was able to relieve in-house compliance teams from managing the minutiae of circular tracking. It also provided a crucial first line of defense against compliance violations.
We’ve now taken this process one step further. By combining our useful bureau monitoring service with the filing capabilities built into StateFilings.com, we’re launching our newest service: Bureau Maintenance. It’s a single, automated solution for keeping your state filings current.

How Bureau Maintenance Works

Our team of filing experts monitor the circulars impacting loss costs, rules and forms released by the various rating bureaus, including the Insurance Services Office (“ISO”) and the National Council on Compensation Insurance (“NCCI”). We publish these circulars to Bureau Monitor, which then generates a notification if your company is required to file an update to your product based on your specific adoption profile. Using Perr&Knight’s StateFilings.com platform, our state filings experts will submit the change on your behalf, eliminating your risk of falling behind or slipping out of compliance. Using an online dashboard, you’ll be able to see in real-time which adoptions have been filed and which are pending submission.

Why automate your state filings?

As technology becomes faster, smarter and more secure, it makes sense to outsource to machines the tasks that require lower levels of human discernment. Standard bureau adoption filings are an excellent function for automation because the process requires the management of numerous minor but important details, instead of critical decision-making, which is better suited for people. This approach frees up time and attention for your teams to focus on more complex product compliance tasks. Bureau Maintenance is simply that—maintaining bureau-based products in real-time, rather than being forced to play major catch up down the road.
Read more: Expert tips to speed up state filing approvals.

Updates that matter to you

Because your Bureau Maintenance profile will be unique to your company, you’ll be alerted to only those filing requirements that apply to you. Based on the lines of business you follow, your adoption status, and programs in the states where you operate, you’ll know exactly which circulars need to be adopted via a state filing. This eliminates the need for manual scrutiny of each published circular by your staff.
Even for companies that don’t seem overwhelmed by filing updates, Bureau Maintenance can protect you from the risk of non-compliance. For example, affiliating with an auto-adopt or file-on-behalf status will likely minimize your number of filings. However, in cases of the states that prohibit auto-adoption, you are required to pay attention and submit your filings accordingly. Bureau Maintenance will ensure that nothing falls between the cracks.  On other hand, if you have the opposite bureau affiliation profile — i.e. you have adopted loss costs, rules or forms from a particular bureau at single point in time and don’t intend to make updates— you could still be on the hook for mandatory changes if the bureau adjusts its materials based on regulatory changes. Once again, Bureau Maintenance will make sure that you keep current and compliant.
Read more: How to streamline bureau monitoring.

Maximize your resources

We deliberately created a competitive pricing structure for Bureau Maintenance because this ancillary service is designed to work in conjunction with your in-house teams. As a result, offloading the time-consuming tasks to automated software will increase the efficiency of your human capital on the revenue-generating tasks that forward your business objectives and competitive advantage.
Bureau Maintenance takes away the final piece of worry regarding the management of bureau adoption state filings. By letting dedicated software pay non-stop attention to bureau updates that impact your filings, you reduce the risk of overloading your internal teams or slipping into non-compliance. In an era where more and more businesses are capitalizing on the advantages of improved technology, automating these simple tasks just makes sense.

Contact Perr&Knight today to learn more about how Bureau Maintenance can eliminate your state filings and bureau monitoring headaches.

Think Before You Act: Why Expert Solution Architecture Should Always Precede Critical Data Initiatives

by Joseph Allen

Deploying a data solution that addresses a real-world business problem is not just about drafting a quick set of specs and coding to meet those requirements. Instead, it’s about architecting a solution that will satisfy your true business need.
As experts in insurance data services, we have seen many companies dive headfirst into development without taking the time to outline a process that delivers not only their desired data set, but a viable strategy to keep moving forward.
Companies can sink deeper and deeper into development quicksand, increasing budgetary spend and extending the project timeline by piling more features onto both legacy and modern systems that don’t fully address the problem. To achieve lasting solutions that deliver maximum value, slow down and think before you act.

Focus on the problem, not the tools

Before you undertake any data initiative, it’s vital that you dedicate sufficient time and attention to define the full scope of your problem. We have seen companies get distracted by the latest, greatest software tools and fail to determine whether or not these tools will deliver the information they need.
Focusing primarily on tools is like shopping for ingredients without an idea of the meal you will be preparing. Instead, clearly articulate the problem first, then determine how you will utilize the tools at your disposal to solve this problem as efficiently as possible.
At Perr&Knight, most of our engagements are preceded by an in-depth workshop, during which we aim to identify the true need. Many companies think they need help with one aspect, but it turns out that addressing a different issue will solve their challenge. We apply our insurance data services expertise to determine short-term success as well as define a long-term solution that will help our clients avoid this situation in the future.

Outline specific future actions and activities

After assessing your problem, articulate the specific activities that you will take as a result of obtaining your data set. Knowing these actions informs the scope of what should be contained in your reports. Focus on obtaining useful information that will equip your teams to perform their jobs more efficiently and effectively.

Teams must understand how their roles support your business

IT teams might be deeply focused on technical aspects of the initiative but lack sufficient context for the project as a whole. As such, their expertise is stifled. Don’t limit your IT teams to only the execution of the plan – loop them in early to make sure that the ultimate solution takes into consideration your actual business needs. Spend time bringing your IT team up to speed on how their input fits into the bigger picture of your data initiative and what your overall goals and outcomes are. Equipped with this knowledge, your technical teams become more valuable project assets.

How to avoid “analysis paralysis”

Successful deployment efforts start with the known and build incrementally from there. Look for what you can define that will provide an immediate benefit. In the effort to plan for every possible event, software developers can end up overdesigning their solution architecture. Companies that want to create a massive system to address every possible future need often get stuck developing bloated, unwieldy software that takes forever to deploy.
Perr&Knight’s process is to plant a firm stake in the ground by targeting a specific data consumer with a specific need, then focus on building out just those portions. From there, we expand incrementally, generating deliverables that are definable, measurable, and achievable.

More expert tips to keep your data initiatives on track

  • DON’T cast too wide a net. Keep your eye on the specific problem you’re trying to solve.
  • DON’T chase trends. Make sure your solution delivers the information that addresses your core
  • DO make sure that you are being specific. There’s no point in coding to vague specs.
  • DO define what constitutes success before you undertake the project, including how you will measure progress along the way and metrics that ensure you accomplish various scope items throughout development.

The fact is, data reporting is not a sexy profit center – but it is a critical part of doing business. Everyone wants a quick plug-and-play fix, but solution architecture is more about business modeling than a strictly technical solution. There is no such thing as a silver bullet. Quality solution architecture starts at the business level, i.e. understanding your business problem and applying that knowledge as your guide to implement the best solution. Data initiatives are a marathon, not a sprint. Keep this in mind and you’re sure to go far.

For more information about Perr&Knight’s expert insurance data services, contact us today.

Unique Challenges of Travel Insurance

by Susan Cornett

According to the U.S. Travel Association, Americans took 2.2 billion leisure trips in 2016. This skyrocketing volume of leisure travel opens up new opportunities to develop additional creative products to protect travelers from a range of travel-related setbacks. Today’s travel insurance products run the gamut from standard offerings such as flight cancellation due to illness, to buying the first round of drinks after scoring a hole-in-one on the green, to covering your pet’s stay at the kennel when your return trip is delayed.
But travel insurance product development is like playing a game of Twister. Filing requirements for New Mexico? Put your left hand on blue. Florida? Right hand on yellow. When the dust settles, you’re left with a complicated balancing act of variables that shift according to jurisdiction and coverage.
When you file other lines of business, such as personal auto or homeowners, it’s usually the same SERFF TOI in all 51 jurisdictions. But travel insurance comes with a unique set of stipulations that vary by jurisdiction, coverage type and, in some jurisdictions, coverage amount.
During decades of providing regulatory compliance services, we have seen the ongoing changes that impact travel insurance policies. Here are some of the challenges that are unique to this evolving line of business.

The regulatory environment is changing

As travel insurance has become more popular, jurisdictions are taking a closer look at these policies. This increased scrutiny has resulted in several companies voluntarily entering into regulatory settlement agreements with various Departments of Insurance. Other companies are leaving the market entirely.
In addition to the Market Analysis Working Group (MAWG), NAIC also has a travel insurance working group in the process of drafting a new model law. NCOIL has also developed their own model. These new frameworks will require you to take a closer look at the entire scope of your travel insurance line of business:

  • If group coverage, is the master policyholder a valid group?
  • Are your distribution channels appropriately licensed for each jurisdiction?
  • How do your distribution channels operate?
  • Are the rates consistent across the channels, with all other variables (trip cost, residence, etc.) the same?
  • Do you have processes in place to monitor or audit those distribution channels?

To avoid stiff penalties, make sure you have established the appropriate regulatory compliance processes.

Install adequate support when offering inconvenience benefits

Many insurers are offering inconvenience benefits to make their customers’ lives easier when filing a claim. Things like ultra-quick disbursements or payments via PayPal. If your company is considering offering this level of customer service on travel insurance products, be sure that you have the right operational structure in place before you go to market.

Current regulatory settlement agreements can impact your offerings

Even if you haven’t been flagged for violation, make sure you stay current with the results of regulatory settlement agreements, so you are aware of what regulators are looking for. Your in-house teams or regulatory compliance services provider should issue regular reports to keep your product development team aware of the settlement agreements that can impact your offerings. The Missouri State DOI has compiled a list of the results of recent market conduct investigations, including settlement agreements. This comprehensive list is a good place to start.

Avoid benefit overlap

There is potential for benefit overlap with both A&H and P&C coverages when issuing travel insurance. Some jurisdictions require additional disclosures to remind consumers that coverage is limited or supplemental. Other jurisdictions are requiring insurers to clearly state that a trip cannot exceed 6 months. Otherwise, policies that are too rich in accident and health coverage might raise a red flag with the DOI, making it appear that you are trying to circumvent the Affordable Care Act.
In addition to accident and health considerations, insurers should establish a clear demarcation between traveler benefits and homeowners’ or renters’ insurance plans. Insureds should be reminded to review their existing coverage so that they are aware of overlapping coverage.

Be aware of regulatory requirements regarding excess

Some jurisdictions will not allow excess plans and will require you to be the first payer. These changes can affect rates and filing requirements between jurisdictions. Pay attention to details like this before you undertake the filing process.

Product architecture can vary by jurisdiction

Instead of a single countrywide travel insurance policy modified for each state, you may need multiple versions. This could be because a state requires a split filing (A&H and P&C), or a state doesn’t allow variability. A&H benefits in excess of $50,000? New Hampshire requires insurers to file the P&C coverages separately from the A&H. Check with each state’s Department of Insurance for product architecture requirements as you begin product development.
Hasty or sloppy travel insurance product development jeopardizes approval, which impacts your speed to market. Don’t jump into the travel insurance line of business without taking a careful look at what will be required for every policy in every jurisdiction.
At Perr&Knight, our team of actuaries and product development experts are familiar with the extensive list of requirements for both accident and health and property and casualty insurance. This deep understanding of both sides of the coin can help you navigate the challenges that arise when drafting travel insurance policies.

For more information about how Perr&Knight’s insurance product development services can help you increase speed to market on your travel insurance products, contact us today.

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

by Michael Covert

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

Know Your Filing Requirements

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

Actuarial Transmittals

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

Actuarial Support Required

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

Responding to Department Objections

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

The Benefits of a Mock Market Conduct Exam

by Terri Hitchcock

Authors: Terri Hitchcock, JD, Director of Product Design and Nancy Self, Sr. Product Design Consultant
Regulatory compliance infractions are damaging to an insurance company. Violations can result in fines, cease & desist actions, license suspensions, or, in worst case scenarios, loss of a company’s certificate of authority. In addition to these sanctions from the state DOI, compliance failures can devalue stock and generate terrible press that creates lasting reputational harm.
The best way to handle a compliance violation is to not receive one in the first place. One of the most effective ways to discover compliance weaknesses is to carry out a mock market conduct exam. These “non-official” reviews reveal the systems and processes that increase your risk of penalty when your company comes under examination.
In this article, we’ll discuss how mock market conduct exams are your company’s smartest strategy to uncover potential compliance issues and get ahead of the problem.

Market Conduct Exams in General

Market conduct examinations are the means by which regulators examine the practices, policies, and behaviors of an insurer in the marketplace. As a result, they focus on a broad range of consumer protection topics such as company operations, complaint handling, marketing and sales, producer licensing, policyholder services, claim handling, underwriting, and rating.
Exams will vary. Some are all-encompassing, while others are limited to certain topics. Some states (California, for example) have a regular schedule for market conduct exams, while others may conduct “targeted” exams. Targeted exams can be triggered by things such as complaint activity (i.e., an uptick in complaints or the recurrence of a particular type of complaint) or a significant premium volume change.  In all cases, it’s best to be prepared so when regulators come knocking, you’re not left scrambling.
A “mock” market conduct exam describes the review of your organization by someone other than a regulator (i.e. a contracted regulatory compliance services company or your organization’s internal compliance department).

How Mock Market Conduct Exams Can Help

Conducting an internal compliance audit or partnering with experienced third-party insurance consultants can help your organization identify violation-worthy practices and discover areas you hadn’t considered that could expose you to compliance violations. These “mock” market conduct exams can also help identify gaps between what your policies articulate and how your organization actually operates.
Some companies choose to handle mock market conduct exams internally, but many companies lack the human resources to devote staff for the time needed to conduct a comprehensive mock exam. External insurance consultants can get into the nitty-gritty, pulling random files and double checking against the same criteria that an examiner would–things like claim files, whether or not notices are sent in the correct number of days, adjusting to average reserves; if not, do you have the right documentation in the file? This close scrutiny ensures that you’re looking as deeply as an auditor would.
At Perr&Knight, we don’t just perform mock exams, we advocate for our clients. In addition to identifying potential weaknesses, our regulatory compliance services help companies figure out how to bridge the gap between their current conduct and what they should be doing. This helps companies get on track before the market conduct examiner arrives. Self-identifying problems gains points in the eyes of the examiner since examiners place value on proactivity and self-awareness.
Get comfortable with the fact that it’s only a matter of time before your company is subject to a market conduct exam. Your best bet for minimizing the impact of a negative market conduct exam is to allocate time and resources in advance. In addition to mock market conduct exams, we recommend regularly reviewing your policies and procedures with staff and making sure that these rules are being followed. Also, study market conduct exams on state DOI websites and look at the NAIC regulator handbook to obtain specifics on areas that will be covered, should you receive an exam notice. As with everything in the insurance industry, the best defense is a thorough and complete offense.

For more information on mock market conduct exams and other regulatory compliance services from Perr&Knight, contact us today.

Producer Licensing: Unglamorous and Unavoidable

by Diane Karis

Producer licensing is not complicated but too many agents put it on the backburner. Since it doesn’t bring in revenue, in the rush of day-to-day business, insurance licensing falls to the bottom of the list of priorities. The very skills that make a successful insurance producer are the traits that can cause them to deprioritize unglamorous tasks like filing paperwork and remembering to issue fees. True, there’s no creativity in this primarily “busy work” task, but failure to renew licenses can lead to significant challenges down the road.

Game Over – For Now

Ignoring license renewals creates complications and headaches that require time and money to sort out.  If a producer’s license lapses, it’s basically game over–for now. That agent can’t legally sell insurance. Your insurance agency could be exposed to hefty penalties and the producer could lose their agency appointment. You can also run into problems if the producer’s license is reinstated but his or her appointments have not. Therefore, helping agents to renew on time is simply smart business practice.
These challenges with licensing are not insurmountable. However, like almost everything that falls under the umbrella of regulatory compliance, it’s easier–and more cost effective– to get ahead of the game than to play catch up.

Challenging for Agencies of All Sizes

Managing producer appointments is a time-consuming task for agencies–especially if your agents operate regionally. Every state has a specific process for renewals and you must adhere to each set of requirements carefully. It’s not possible to cut corners. We notice that startups are most susceptible to challenges with licensing since the administrative load is so overwhelming when starting a new agency.  However, mid-size agencies who have been operating for years also have a hard time managing producer appointments after growing their staff or undergoing a territory expansion from a few states to ten or more.

The Benefits of Outsourcing

For some agencies, the smartest solution is to offload this time-consuming, detail-heavy task to an insurance support services company to manage on your behalf. We offer this service at Perr&Knight because we’ve seen the complications–most of them avoidable–that happen when agencies fall behind. Our suite of producer licensing services includes:

  • Submission of name and address changes
  • Tracking of upcoming renewals
  • Issuing of renewals reminders
  • Completion of paperwork for all 50 states and electronic submission (where applicable)
  • Issuing fee reminders to producers

Many agencies try to assist their agents by handling licensing renewals in-house. It’s a viable solution for small agencies but we’ve seen many instances where agencies grow and a single individual (or even small department) just can’t keep up with the paperwork. As a result, licenses lapse.
Another common scenario is when an individual who is overseeing renewals changes jobs or retires–and takes their knowledge, calendar and renewals status with them. This is where an outside insurance support services partner can alleviate the burden by supervising your producers’ licenses for you.
Failure to submit insurance licensing renewals on time seems like minor hiccup but it’s an oversight that can snowball quickly. Licenses are a necessary part of maintaining compliance and lapsed licenses can jeopardize your ability to operate at all. Managing producer appointments falls into the pesky category of “things that don’t make your agency money, but can cost you money if overlooked.” Helping your producers stay on top of their license renewal lessens their load, so they can focus on what they do best: selling insurance.

Get help with your insurance licensing renewals. Contact Perr&Knight to find more about our support services.