The Human Side of Operations

by Rob Berg

Insurance is an industry famously associated with numbers, statistics, and financial data. And yet, behind every policy, every claim, and every transaction, there are individuals – people just like you and me – who have feelings and emotions, ups and downs, good days and bad.

From the customers who purchase insurance policies to the employees who work for insurance companies, there is a human side to insurance company operations that is often minimized, unnecessarily subjecting the insurer to being poorly perceived. During decades of providing insurance operations consulting services, we have seen the upside of companies that recognize the power of their people – and the problems that arise when they don’t.


Most obviously, insurance companies interact with their policyholders. When a customer decides to purchase a policy, they’re often making a significant financial commitment, and the insurance company is charged with ensuring the policy adequately secures a given risk at a fair price.

As the face of an insurance company, agents are often the first point of contact. They help customers understand their insurance options, explain the benefits and limitations of different policies, and answer any questions they may have. In many cases, insurance agents build long-term relationships with their clients, providing ongoing support and assistance as their insurance needs change over time.

However, in our age of increasing self-service and minimal human interaction, countermeasures must be taken to preserve the value of the relationship. During insurance operations and technology consulting engagements, we always caution our clients against letting automation usurp the very real value of a genuine human bond.


Of course, when a customer experiences loss or damage, they must file a claim to receive compensation. This is a particularly stressful and emotional time for the customer; it’s critically important that claims managers handle the claim with sensitivity and efficiency throughout the process. Claims adjusters who investigate the claim, determine the extent of the loss or damage, and work with the customer to reach a settlement are especially prone to being perceived as greedy and unsympathetic, which reflects poorly on a carrier brand.

Because adjusters are often best positioned to provide emotional support and guidance during this difficult time, they’re vulnerable to tacking too far to the analytical side of operations (often in service of their organization’s key performance indicators) while neglecting the claimant’s very real emotional and financial needs.

Adjusters take note: A failure to satisfy customers during the claims process can cause a tremendous hit to an insurer’s credibility and reputation. Take a random look at online reviews for practically any insurance company for proof.


Perhaps most importantly, because work consumes a substantial portion of our lives, insurance companies are increasingly responsible to their employees for their wellbeing. This means, in addition to providing a safe and healthy work environment, competitive compensation, and opportunities for professional advancement and development, that they actively support their autonomy (their ability to work without constant managerial intervention), competence (their feeling of being appropriately challenged by the work they do), and relatedness (the feeling that they’re adding value to something larger than themselves).

Unsurprisingly, according to Self-Determination Theory – a rigorously researched psychological construct for human motivation – autonomy, competence, and relatedness are three psychological needs that underpin employee engagement. Failure to respect those needs can result in poor morale, burnout, and high turnover.


Finally, insurance companies have a social responsibility to the communities they serve. This includes investing in programs and initiatives that promote safety and prevention, supporting local charities and organizations, and working to make insurance more accessible and affordable for everyone.

The human side of insurance company operations is often overlooked, but it merits greater attention as it is essential to the success of the industry. From the agents who sell insurance policies to the claims adjusters who help customers in their time of need, to the employees who work behind the scenes, and the communities they serve, the human element is what makes insurance companies truly effective and valuable to society. By recognizing and valuing the people who are involved in every aspect of insurance operations, we can build stronger, more resilient communities and a more compassionate and sustainable insurance industry.

Empower your teams to do their best work. Contact the insurance operations experts at Perr&Knight today to discuss how we can help.

Why Insurance Experts Should Lead Software Configuration

by Bob Cericola and Mark Nawrath

Adding products to legacy software or to new software system implementations has long been a challenge for insurance companies. While developing your insurance products and filing with the Departments of Insurance (DOIs) in the states where you write business, concurrently defining product requirements and setting up testing can be a considerable challenge if you are working with software vendors who have limited experience managing the complexities of insurance.

Partnering with actuarial and insurance technology experts helps you sidestep common pitfalls so you can bring your new products to market faster. When decades of experience providing actuarial consulting services meet proven insurance technology implementation support expertise, you end up with more accurate, useful insurance product requirement definitions that streamline the path to success.


Though insurance software products are all based on unique, carrier-specific requirements, many share baseline similarities that general software vendors overlook. For example, instead of building systems with the perspective that “this is a uniform product with deviations and company-specific information to match 51 jurisdictional filings,” many software vendors inefficiently capture requirements and re-build the same software 51 times. This lack of expertise slows implementation timelines and exposes your organization to compliance violations – all of which drain the project’s budget and impede speed to market.


Partnering with software vendors who offer “out of the box” software to meet insurance product requirements may seem like a good idea, but their lack of insurance expertise can easily cause misalignment of the system’s output with DOI filings, as well as a mismatch between the system’s back-end data and the real-world requirements of statistical reporting. When entering products into your company’s software, it makes more sense to work with experts who understand how product and workflow configuration impact compliance with statistical agents, rating bureaus and DOIs.

At Perr&Knight, we have established a proven process for defining requirements that is efficient, scalable and meets compliance standards for all 51 U.S. jurisdictions. Our subject matter experts possess the domain knowledge to expedite the configuration, testing and maintenance of carrier-specific insurance products for all rating, underwriting and policy administration systems.


The real economies and efficiencies in insurance product development occur when partnering with seasoned insurance experts from the outset. At Perr&Knight, our decades of actuarial consulting services experience inform our insurance product requirements definition, testing and maintenance solutions. Our and BureauMonitor solutions are designed to integrate seamlessly with your existing software, empowering you with access to circulars, publications and carrier-defined workflows to initiate, monitor and archive DOI filings in a single repository.


Due to the complexity of insurance products, software requirements must emulate the insurance-specific product requirements from the start. Inaccuracies in product requirements and limitations in testing are common problems that plague companies partnering with vendors that lack insurance experience. Even more serious are the risks that quickly arise from an absence of comprehensive requirements that align with compliance mandates.

Insurance technology experts like those at Perr&Knight can bring spiraling software implementation projects back under control, even if your company has involved outside vendors for development or implementation. However, partnering with Perr&Knight from the start of product ideation and software implementation planning ensures you achieve the best possible economies of time and scale. Because our teams work with internal peers to efficiently develop requirements from the outset, and partner with our clients to define their product requirements to advance software implementations, our clients waste less time and resources moving their software implementation project forward and retroactively solving compliance and reporting issues.


Our insurance technology consulting department is the fastest-growing division of Perr&Knight. This is because carriers, program administrators and Insurtechs recognize the value of working with insurance experts for insurance product requirements definition and testing. Our technology team partners with our actuarial consulting services team to define insurance product requirements documents that truly match software requirements. The result is peace of mind that your implementation process will stay on track to launch your products quickly and begin writing business as soon as possible.

See how our experienced insurance technology consultants can streamline your new product integration. Contact Perr&Knight today.

Six Ways Experts Smooth the Transition to a New Policy Admin System

by Scott Whitaker and Bob Cericola

An aging policy administration system may prohibit your organization from reaching its full potential. Functionality limitations, the inability of your system to keep up with new products and terminated support for older systems all stifle productivity and may force your teams to rely on complicated workarounds that fail to hold up against regulatory scrutiny.

Switching to a new policyholder system creates opportunities to elevate efficiency, improve accuracy, and increase profitability. However, failure to adequately prepare may inversely lead to problems such as inaccurate ratings, incorrect forms or versions of forms, delays in implementation, rework and staff frustration.

Unfortunately, your system vendor’s implementation team may only get you so far. Yes, they possess deep technical expertise and know the software inside and out, but they often lack the depth of knowledge on insurance-related specifics and regulatory requirements that can cause trouble in the future.

Instead, consulting with experienced insurance technology and compliance experts helps your organization sidestep the common pitfalls that delay launch and cause budgets to be exceeded.

At Perr&Knight, we have developed robust operations and technology consulting and product design departments to help insurance companies manage digital transformation more smoothly. Here’s how we help our clients successfully transition to a new policy admin platform.

Clarify system requirements documents

A clear understanding and comprehensive documentation of your filings and implementation rules enables us to develop a plan for the appropriate configuration for your new system or to conduct an internal audit.

The complexity of defining requirements and upfront configurations varies greatly depending on whether you use a rating bureau program, an independent/proprietary program, or a mixture of both (which is common for some commercial programs). Clear and complete documentation defines the impact of forms, rates, and rules to your new product, ensuring the new system functions correctly for your organization.

A precise requirements document means everyone can operate from a shared roadmap. Our insurance technology consulting experts put together a comprehensive requirements document, surfacing and addressing any gaps in the process. The more information we have upfront, the better equipped we are to help you succeed.

Vendor selection consulting

Determining which platform best suits your needs is not always straightforward. Unfortunately, different solutions do not offer apples-to-apples comparisons, leaving you to parse through the details of various platforms to determine if they will be suitable to handle your requirements. What you don’t know that you don’t know may reveal itself after you have selected a vendor and implementation is well underway.

Consulting with insurance technology specialists before deciding on a vendor provides peace of mind. We dig into the details on your behalf, asking vendors pointed questions about your unique business requirements to ensure the proposed solution delivers the highest ROI.

Correct configuration of the new platform

This sounds like a given, but insurance companies often fall into this trap. Third-party vendors hired to manage the transition often lack deep experience in regulatory compliance. Because every state has subtle but important differences in reporting requirements, working with experienced insurance technology consultants ensures your new system is configured to meet compliance standards in every jurisdiction your organization does business.

Too many companies begin implementation and are confronted with a harsh wake-up call when the output is not what they expected from their new policy admin system. But front-end configuration drives the back-end data sets. Therefore, when configuring your new system, we consider the regulatory compliance demands required on the back end. At Perr&Knight, we have extensive forms, rate, rule, and regulatory compliance knowledge and the technical expertise to ensure your output is accurate.

Rating bureau data extracts that are mismatched with expectations are one of the signs of a problem with the new system. Unfortunately, we have seen these errors take insurance companies by surprise when suddenly facing a complaint, data call, or other regulatory inquiry. Of course, reactively remedying misalignment is always possible and often increases costs and delays implementation. Being proactive is preferable, more economical, and allows for a smoother and more timely implementation.

Make sure data is compliant before migrating to the new system

The data you input into your new platform has significant downstream implications. Data input into the policy system feeds forms, claims, statistical reporting, and so on. Inaccuracies in your input can quickly cause data drift that will negatively impact reporting, exposing your organization to increased regulatory attention, especially if the state(s) where you operate issue a data call or request for more information.

Too many companies shift their data over to a new platform without taking the time to determine whether their data is still “good quality.” Taking the time to make sure your input is compliant before migration saves the expensive time drain of trying to clean up data after the transition. Our insurance data specialists can conduct a full audit of your data to evaluate compliance before migrating to your new system.

Schedule a mock market conduct exam

With so many variables in play, a current assessment ensures your existing policy admin system and data are correct and ready for your new system. As part of our Compliance Operations Assessment & Training (COAT) services, Perr&Knight’s compliance experts evaluate rates, rules and forms produced from the current system.

Determining whether your existing policy admin system is accurate before switching to a new platform is a small upfront investment that pays off significantly down the line. This assessment protects you from unplanned and expensive updates to your new system, after all your data has been input and policies have been issued. In addition, it reduces the likelihood of consumer impact (e.g., confidence), unnecessary financial impact (e.g., interest due) and brand reputational harm.

Get ahead of the issues by partnering with experts

Trusting insurance technology experts like Perr&Knight during the planning phase is the most cost-effective way to manage a successful transition. Not only can we surface and address your current platform’s shortcomings, but we can also outline a plan to correctly configure your new system and ensure your existing data is clean and compliant before migration. That said, if you find yourself facing unexpected difficulties at any time during an implementation, we can always apply our insurance-specific technology expertise to help you get back on track quickly and cost-effectively.

Switching to a new policy admin system will always be complicated but partnering with experts means it doesn’t have to be a headache.

Contact the insurance operations and technology specialists at Perr&Knight today to discuss how we can help you make change more manageable.

Are Your Personal Auto Rates Keeping Up with Soaring Claim Costs?

In the personal auto insurance industry, the cost of repairing or replacing cars involved in accidents has spiked and continues to rise. These increases appear in insurer claim severity data as double-digit percentage increases in the cost of covering property damage and collision claims. Propelled by persistent supply chain shortages, general inflation, and shifting composition of vehicles under coverage, some of these higher costs may be here to stay.

Insurers should be responsive to these changes or risk inadequate rates to cover future costs. As actuarial consulting partners to some of the nation’s top insurance companies, we have helped many insurers accurately predict future premiums needed to keep up with these rising costs.

Here are some factors influencing higher costs and what to expect in the coming year.

Claim costs have risen dramatically

Property damage coverage and collision coverage costs are tied to the price of vehicles and vehicle parts. The cost of vehicle repairs and replacements has sharply increased, coinciding with pressures on the global supply chain caused by COVID-19, changing consumer demand, and inflationary impacts.

Countrywide data shown in the table below reveals the average cost of a claim for property damage and collision coverages has increased by over 30%. Many areas of the country have experienced more significant spikes. For example, Florida, Georgia, Maryland, and New York all have experienced claim cost increases closer to 40%.

Source: Chart created using data from the Insurance  Services Office, Inc.  Fourth Quarter 2021 Private Passenger Automobile Fast Track Data Circular AS-PA-2022-013 published on May 12, 2022. Includes copyrighted material of Insurance Services Office, Inc., with its permission.

Safety features drive up costs

New safety-related vehicle features are also raising the price tag for repairs as late-model vehicles feature more crash avoidance technology than ever. True, some of these technologies reduce accident frequency. However, expensive new technologies also elevate repair costs as many of the parts used in these systems are located on the vehicle’s exterior.

For example, the Insurance Institute for Highway Safety (IIHS) April 2019 report showed the average payment per claim for damage to the insured vehicle goes up by $109 for vehicles equipped with the forward collision warning without autobrake.

As the auto industry promotes tech-powered safety features as a selling point, increased associated repair costs are a trend we don’t expect to reverse. According to the IIHS, the percentage of registered vehicles estimated to utilize these systems will increase by over 20 percentage points by 2024.

Shift toward electric vehicles also has an impact

Car buyers’ affinity toward electric vehicles (EVs) will also push severity up. Overall, the number of electric cars on the road in the United States is small, but in some areas like California, EVs make up a significant proportion of new vehicles. In the near term, severity will rise with the expansion of EVs on the road because it takes time to build a robust parts network and shops will need to invest in training to service these new vehicle types.

Additionally, global semiconductor shortages continue to squeeze the supply of microchips in cars, which means low supply and high prices. The dynamics causing parts shortages are likely to persist into 2024 (S&P Global, 2022).

As gas prices rise and the popularity of electric vehicles continues to climb, claims costs may trend upward as well.

Insurers nationwide are scrambling to increase rates

Though most insurers reduced rates and/or returned premiums during the height of the pandemic, insurance companies today are feeling the pressure of rising claim costs, resulting in a mass push to increase rates. Due to this realization, rate increase requests are pouring into Departments of Insurance across the country as shown in the graph below. States like California are experiencing long wait times for rate increases to be approved.

Source: Chart created using data from S&P Global Market Intelligence

The type of support required for personal auto rate filings varies by state. With staffing shortages slowing down the filing review process at Departments of Insurance and inflation putting pressure on the rates charged by insurance companies, it is more important that the submitted filing meets all the state-specific requirements. Improving the time to approval could save a company millions of dollars. Partnering with actuarial consulting experts like Perr&Knight for support can reduce the risk of inaccuracies that can slow the approvals process.

Higher costs are here to stay

Supply chain shortages and inflation, new safety technologies, and EV popularity are driving claims costs up and show no sign of abating any time soon. To keep pace with higher expected loss costs, insurers should proactively keep pace with rate increases. Actuarial consulting partners like the team at Perr&Knight can evaluate rates and rating structures to ensure rate adequacy and determine what actions are needed to promote both short and long-term success.

Contact Perr&Knight today to let our actuarial consulting and state filings experts help you ensure the accuracy of your personal auto rates.

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.

Travel Insurance: A Changed Landscape

The travel landscape has shifted dramatically over the past two years. From travel disruptions resulting from coronavirus variants to the recent surge in gas prices to the abrupt decline in both travel insurance sales and claims, it’s been a wild ride for travelers and insurance companies alike.

Here’s what has changed in the travel market over the last two years, how these changes have influenced today’s travel insurance product development, and what we expect to see moving forward.

Flights as a measure of travel insurance health

Looking specifically at the number of flight bookings is the biggest indicator of what’s happening in the travel market today. Flights are a key indicator because historically, travel insurance was purchased more often when a flight was involved.

In 2019, we saw 2.5 million travelers a day pass through TSA. The initial landfall of Covid-19 in March 2020 threw the market into near-instant havoc, experiencing a sharp decline seemingly overnight. Since then, the travel industry has shown great strides in rebounding.

What’s important about today’s counts is the behavior or seasonality characteristics noted at the end of the year (“holiday season”) that mimic pre-pandemic travel, except at a lower level. However, Americans’ appetite for travel is gaining momentum quickly, resulting in numbers that are nearly back to 2019 levels in two short years.

We are also seeing similar travel behavior from 2019 mimicked in the first four months of 2022—further proof that the market has a strong foothold on the path back to “normalcy.”

Flights and cruises are on the rebound

Beginning in 2020, the largest dip in travel behavior was due to the onset of Covid-19 first reaching the United States. Since that initial bottoming out, the market has made increasing trends upward. Domestic travel has started to gain momentum and is increasing at a rapid pace. As of March 2022, U.S. travel is only roughly 5% below 2019 levels, which is heavily weighted toward domestic travel. International travel experienced a more sluggish rebound in 2020 but is strengthening at nearly the same rate as domestic travel in 2021.

The cruising market took a near-instant nosedive once the outbreak of Covid-19 reached the United States. Today, cruising travel is still less than 50% of 2019 levels. During 2021, the cruising market has shown gradual (but slow) growth. Younger travelers are wary of the potential for virus transmission in enclosed spaces and are therefore not eager to board a ship anytime soon. However, older travelers appear to have a high likelihood to start cruising again soon. This is especially good news since the last of the baby boomers are reaching retirement age, meaning they have ample time and money for travel.

More travelers are hitting the road

Increased road travel is altering insurance product development to accommodate travelers’ changing needs. Travel by car and RV is having its day in the sun. According to the U.S. Travel Association, RV or car trips jumped in popularity in 2020 and 2021— a trend that appears to be continuing in 2022. Great news for the industry: 85% of Americans are expecting to travel this summer. Roughly 80% plan to travel in their personal or rental vehicles and 46% plan to fly.

Today’s travel insurance product offerings have been modified to focus on needs specific to road travelers, including medical coverage and rental car collision, as opposed to air travel-centric products like trip cancellation/interruption, missed flights, or lost baggage.

That said, 59% of American travelers believe travel prices are too high right now which has prevented them from traveling in the past month. The travel price index is 16% higher than 2019 levels, mostly due to rising fuel costs. However, this statistic does not indicate declines in future outlooks.

From pandemic to endemic: how coverage is changing

Many carriers considered pandemics like Covid-19 to be foreseeable events, so travel products have historically excluded events such as pandemics and epidemics. As a result, there was immense confusion among policyholders and insurance companies regarding specific coverages and exclusions for insureds who purchased travel insurance both before and after the initial outbreak of the virus.

That said, carriers continued to cover trip cancellation and trip interruption as well as medical expenses and emergency evacuation if an insured became ill, even due to the coronavirus.

As the virus moves from pandemic (actively spreading across borders) to endemic (a constant presence), insurance carriers are adjusting their insurance product development to reflect the “new normal” in the travel industry.


Policies generally do not cover cancellations or interruptions based on fear of contracting the virus, which is why “cancel for any reason” (CFAR) became such a hot topic. CFAR or IFAR (interruption for any reason) covers the cancellation or interruption of a trip under any circumstance. Even if the insured simply doesn’t feel like going on the trip anymore. Insureds who purchased this “any reason” benefit are covered and could recoup at least a portion of their trip. These benefits have since become a very sought-after benefit by insureds seeking peace of mind, which is especially relevant in case a new Covid-19 variant is detected.

Carriers are also reassessing pandemic and epidemic exclusions, opting to include them as covered perils in their policies. This is especially important as insureds start to take a closer look at their policies to determine what is covered and what isn’t.

Government-issued travel advisories

One of the coverages also being called into question today is trip cancellation or interruption due to government restrictions based on the U.S Department of State travel advisories. While cancellation or interruption may not cover the pandemic in general, cancellation or interruption because of government restrictions or travel advisories of level 4 (“Do not travel”) that could potentially include Covid-19 or various other reasons may be covered if the policy includes government restrictions as a listed peril in the policy. This may also include the CDC travel risk assessment of level 3 (“high risk”) which was recently revised and unveiled. Otherwise, government restrictions would not be covered. However, CFAR or IFAR would cover these scenarios.

Increased interest in travel insurance

Fortunately, the United States is essentially “back to normal” for domestic travel within the 50 states with no mandatory pre-arrival testing or quarantines. The federal mask mandate on commercial transit has also been discontinued. Vaccine and mask mandates are now based on state and city ordinances. The number of countries without travel restrictions also continues to climb as 2022 rolls on, which means the government restriction peril may no longer be as valuable as it once was.

A survey from the Automobile Club of America (AAA) found that one-third of U.S. travelers said they are more likely to buy travel insurance for their trips through the end of 2022, specifically because of the pandemic. 69% of travelers said, “the ability to cancel a trip and get a refund” is most important to them when considering travel insurance for an upcoming trip.

As more people become aware of the existence and usefulness of travel insurance, sales have seen a 10% to 20% jump over 2019 numbers with spikes as high as 53% increase over 2019 following news of the Omicron breakout. This increase in sales has resulted in a better claims experience than previously seen since anti-selection is being hedged against broader market sales.

The average frequency of 2021 claims based on internal data was less than half that in 2019. As a percent of total claims, the initial spike of CFAR claims has dampened but continues to be a highly utilized claim which we expect to continue into 2022, given consumers’ new knowledge about its value.

A new landscape

Covid-19 is here to stay. The initial fear of the virus is winding down, but the industry will continue to see spikes and dips as each new variant emerges. Travelers and insurers must learn to live with this new landscape and respond accordingly. Insurance companies must embrace this new landscape and take these shifts into account during their product development.

Another big takeaway for travel insurers is their ability to monitor claims. Claims submitted under CFAR should be categorized to determine those that are really for Covid-19 but may be disguised as something else. Tracking Covid-specific claims will help do just that. Likewise, more insurers have options specific to pandemic coverage and are providing coverage as its own benefit (trip cancellation, trip interruption, medical expense, and evacuations).

As consumers begin to feel more confident in their return to travel, the goal is to provide equal comfort in their protections through travel insurance.

Contact Perr&Knight and let our experienced actuaries and product design consultants help you develop insurance products that match today’s market.

Get Help from Perr&Knight’s Experts

As we head into the second half of 2022 and the summer months filled with employees taking vacations, you may find that you have a lot of work to get done by year-end and not enough experienced people to get it all done.

If you are like many of the insurance entities we work with, you likely have an abundance of work to kick off new projects and introduce innovative product offerings, but not enough internal resources to tackle these projects. The experts at Perr&Knight can help.

Due to inflationary pressures, you may find it necessary to make rate changes on some of your insurance programs. Perr&Knight can help.

If you need to outsource additional work, our team has the capacity and expertise to take it on. We can help with any phase of actuarial, product development or state filings work.

Contact us today to discuss how we can help with your projects.

California PPA Rate Filing Moratorium: What Should Insurers Do?

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

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

Submitting a rate filing during the rate freeze

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

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

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

Filing for a variance

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

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

Waiving or not waiving the deemer

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

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

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

Class plan filings are an option

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

Use an expert with years of California experience

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

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

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

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.

Key Things to Know Before Getting Into the Insurance Business

Authors: Mark Nawrath, PMP, MBA, and Dean Ferdico
Today’s technology advancements have the potential to transform businesses across industries. Aging systems and increased demand for new and innovative products mean insurance is ripe for disruption, but new solutions are not always as easy to implement as they may seem. Insurance is both complex and highly regulated: a double hit for Insurtech or non-insurance companies looking to break into the space. That said, there are endless opportunities for your company to make major waves in the industry…if you take a careful approach.
Based on our decades of insurance consulting along with our experience helping numerous Insurtech startups over the last several years, here’s what you should know as you break into the insurance market.

The insurance industry is highly regulated

Many of today’s Insurtech companies emerge from the finance world, where modern technology has transformed everything from customer service to the nature of banking itself. While U.S. banking must comply with a single federal charter, insurance products are subject to disparate rules in 51 jurisdictions, multiplied by 20 to 30 lines of business that each has its own individual coverages. The number of details required for each product filing can be staggering and small errors have the potential to stall the filing on the path-to-market.
Partnering with a seasoned insurance technology consulting company with state filings experts enables you to achieve a clear roadmap of what to expect, potential pitfalls, and areas to consider before you get too far along in the product development process. Experienced partners will provide you with a clear understanding of the playing field and help you draft a realistic strategy for rolling out your product.

Add insurance executives to your team

State Departments of Insurance (DOIs) look favorably upon companies with proven histories in insurance. They have no time to teach inexperienced technology companies or non-insurance companies the ins and outs of creating a compliant filing. Bringing a seasoned insurance executive onto your team – and partnering with proven insurance consultants – helps sidestep avoidable regulatory pitfalls and adds instant credibility to your organization in the eyes of the regulators. The same also applies when raising capital. Venture capital firms feel more comfortable investing in firms with experienced in-house teams and insurance consulting experts onboard.

Primary insurers are skittish

Around eight years ago, many primary insurance companies started issuing paper to unproven Insurtech companies – a move that ultimately damaged their standing with state DOIs. Since then, primary insurers (as well as reinsurance companies) are more discerning about with whom they will do business. After all, their reputations and licenses are on the line. This is where working with a seasoned insurance technology consulting company with state filings experts pays off. Having insurance consultants on your team to thoroughly review and pressure-test your proof of concept will help you stand out to primary insurers and reinsurance carriers.

Insurance compliance is full of hurdles

Receiving approval from state DOIs and remaining compliant also means your policy, billings, and claims administration systems must all meet regulatory standards. These standards include everything from how your products are priced to how you advertise to consumers to how data must be reported. Some requirement documents are thousands of pages long, a difficult task to manage for teams short on insurance experience.
Whether you are implementing an Insurtech solution or offering ancillary insurance along with your primary service offerings, insurance product development is a tricky process. Even bureau-based products that lean heavily on Insurance Services Office (ISO) or National Council on Compensation Insurance (NCCI) content are extremely complicated to interpret and adopt in a compliant manner. Seasoned insurance consultants like the team at Perr&Knight know this content and the related regulatory requirements inside and out because we work with them daily.
We help new Insurtech and non-insurance companies understand how to consume the content to develop an insurance product, how to structure the content for systems development and testing, and how to implement a compliant operational process from the outset. Building compliant systems and communications from the ground up protect your company from speed to market issues or costly re-work while avoiding potential fines for your carrier partner.

Use professional “matchmakers”

Primary insurance companies and reinsurers have what Insurtech companies and non-insurance companies need: approved licenses from state DOIs and capacity. Insurtech/non-insurance businesses have what primary carriers are looking for: fresh ideas, technologies, and access to new markets. Both must vet one another, a daunting task if neither company can accurately verify the validity of the other party’s credentials.
Experienced insurance consultants like the team at Perr&Knight can provide an insurance-focused perspective to determine whether the partnership will be beneficial for both parties. Evaluations from unbiased insurance professionals can increase your confidence that your prospective partner can deliver.

The future is full of opportunity

Technology and consumer product development move with lightning speed. Insurance, on the other hand, is extremely sluggish. The merging of these complementary industries opens a plethora of opportunities for proactive companies, but success is never guaranteed. Re-framing your expectations, working with experts, and adopting a calculated approach to your new insurance offerings are the most effective ways to improve your position. Start exploring “what you know you don’t know” with seasoned insurance experts before you get too far down the road.

Considering launching a new insurance product? Talk to the team at Perr&Knight first.