Insurance Operations Archives - Page 2 of 4

Predictive Analytics Provide Big Gains for Small Insurance Companies

It is no secret that the amount of data in the world is expanding at an extremely rapid pace, and in a time where business is being conducted online due to COVID-19, this rapid data production is going to accelerate more than ever. Of course, this mass influx of data is only useful to companies when they have access to it.
This data gap between insurance companies will widen even more due to COVID-19 as large companies with direct-to-consumer online platforms will see increased business due to stay-at-home orders and less in-person business. The increase in online business could be used in predictive models to analyze marketing trends and gain new market share, which leads to more business to enrich pricing and claim triage models, which increases profits and the ability to gain market share. From there, the cycle will start all over again.
A large data gap already exists between large and small companies, and now the gap for online business capabilities is also growing at an increasing rate. What can small companies do to help make sure that gap does not become insurmountable?
Luckily, external data is now more readily available and easily accessed than ever before. Companies with little data (or in some cases even no data) can take advantage of external information for predictive modeling. Some examples of external data sources include:

Government information such as census demographics, weather databases, occupational statistics, geospatial, and property tax information.
Numerous industry statistics and services from advisory organizations such as ISO, NISS, or NCCI.
Industry information from publicly available rate filings and financial statements.
Quote comparison services for competitive analyses.

Misconceptions about small companies’ ability to use predictive analytics are not limited to data constraints. There is also a common misconception about the models themselves having to be extremely sophisticated. While it may be true that many companies are using such complex models, smaller companies can still benefit from the use of analytics by simplifying their scope to accommodate less data. Some examples include:

Creating models that assist with monitoring programs by ranking predictors with the largest impact on results. These give quick insights to help focus additional research.
Using simpler assumptions and grouping variable levels in order to increase the credibility of the model.
Combining company data with external data sources to add additional predictors to your results.
Consulting with industry experts to follow modeling best practices such as removing data outliers and/or missing values in order to maximize the amount of usable data and not skew results.

Not only can these scenarios be applied today to help insurer performance, but Perr&Knight has experience in assisting clients in each and every one of them. With both experienced predictive modeling personnel and industry expertise in virtually all lines of insurance, Perr&Knight is uniquely qualified to assist small companies in implementing predictive analytics to help improve insurer performance and profitability.
As the world continues to evolve technologically, so too does the sophistication of insurance products and the insurance process. It is important for small companies to modernize their approaches to help minimize the data gap in an increasingly data-driven environment.

Leverage the power of predictive analytics. Contact the experts at Perr&Knight to learn more about how your company can use data from predictive analytics to improve business outcomes.

Digital Transformation: Are You Sure You’re Ready?

by Rob Berg

Motivations behind digital transformation initiatives usually involve improving speed, cost, or quality of products or services. Migrating to the cloud, increasing mobility, implementing robotic process automation (RPA), deploying intelligent automation solutions, or capitalizing on data from the internet of things (IoT) all have the power to profoundly impact an insurance company’s competitive standing – if not their very survival.
With 67% of insurers considering implementing digital transformation initiatives over the next twelve to eighteen months[1], companies not considering these changes will soon be left behind.
However, undertaking an initiative too hastily may overlook critical organizational considerations likely to inflate project costs and jeopardize the success of the program.
Throughout hundreds of insurance technology consulting engagements, we have identified five phases comprising successful preparation for every tech project: Initiate, Design, Experiment, Prioritize, and Plan. Each is a valuable component of the process which, if executed carefully and correctly, has the potential to double the chances of success of your IT project.
In this article, we’ll cover an often-overlooked – but vitally important – aspect of the Initiate phase: determining your readiness to even begin.

The Picture Is Bigger Than You Think

Because every company’s systems are so deeply intertwined, each affects more aspects of the business than may be initially apparent. Even if equipped with good intentions, simply jumping into major structural or process changes can create serious roadblocks for other departments or processes down the line.
In our decades providing insurance technology consulting services, we have seen dozens of costly – and avoidable – challenges arise when companies implement new initiatives without adequately ascertaining the impact of their project on the whole of the organization. It’s not uncommon for organizations to discover their planned initiative reflects only a superficial portion or “end of the line” aspect of the required change, when they should plan for complementary tech upgrades or cultural impacts in other departments as well.
By “preparing to prepare,” you determine your organizational readiness to undertake any transformation – digital or otherwise. And, taking a holistic view reveals the true scope of the initiative, one that may extend well beyond initial expectations.

Conduct a Readiness Assessment

We believe so strongly in the value of determining whether organizational readiness supports – or inhibits – a project’s ultimate success that we have designed a comprehensive organizational Readiness Assessment.
Conducted during a sixty- to ninety-minute web meeting, the assessment reviews key questions about your organization to determine its level of readiness in six areas of your business: Personnel, Processes, Technology, Metrics, Governance, and Environment.
The assessment drills down into a range of relevant factors:

Personnel availability
Team skills
Individual and team empowerment
Staff commitment
Impact of program on processes
Process indoctrination
Benefits realization
Technology infrastructure
Software considerations
Interfaces
Metrics definitions
Visibility into KPIs
Response to met or unmet KPIs
Extent of existing program planning
Program organization
Program procurement
Program implementation & deployment
Program support, monitoring & evaluation
Physical location
Company culture
Team morale
Other business-specific considerations

A page out of Perr&Knight’s Digital Transformation Readiness Workbook

Answers to straightforward questions on these subjects reveal a clear picture of your organization’s strengths and weaknesses in areas with the potential to impact the result of your transformation initiative. This valuable contextual view enables your team to further develop your strategy before beginning project planning, in order to avoid playing costly catch-up later.
The results of this exercise create the foundation for the remaining four steps of preparation for your project. In addition to determining your level of readiness overall, this assessment provides a useful starting point to prioritize areas for work before and during your digital transformation initiative.

The results area of Perr&Knight’s Digital Transformation Readiness Workbook

Preparation Is Important – But So Is a Tolerance for Risk

Successfully executing any major change requires commitment, tenacity, and a risk tolerance from leadership and the organization as a whole. To promote innovation, there must be support for experimentation and a willingness to endure the challenges of repeatedly failing, learning, and failing again before success finally takes root. The values that represent your organizational culture are crucial – if individuals are punished for failure, they will cease to experiment, and innovation will become a distant hope rather than a realized goal.
Gaining a thorough understanding of the benefits of a successful endeavor balanced against the pitfalls that lie ahead – even before approaching the starting line – gives you a much stronger chance of completing a successful digital transformation initiative and truly remake the way you do business.
To support the insurance industry’s unprecedented embrace of digital transformation, the workshop is being offered by Perr&Knight on a complimentary basis to organizations contemplating any type of transformation project. The accompanying readiness workbook and resulting assessment will be provided at the workshop’s conclusion.

Interested? Contact Perr&Knight today and carve out just ninety minutes to significantly increase the likelihood of a successful digital transformation initiative – ready or not.

[1] SOURCE: 2020 Financial Services Digital Transformation Survey, BDO

Pioneering Insurance Automation

by Patrick Light

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

A Breakthrough in Automation: Ratefilings.com

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

Statefilings.com Expands the Scope of Automation

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

The Future of Automation at Perr&Knight

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

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

Six Impacts of COVID-19 on the Cannabis Insurance Market

by Kyle Hales

When the current Coronavirus pandemic finally ends, we’ll have seen that no industry was left unimpacted by its path of disruption and change. This includes the ever-expanding legal cannabis insurance industry in the United States. Below are what I believe to be six impacts of COVID-19 on the cannabis insurance market.

1. Insurers who currently have programs on file are well-positioned to see continued growth in this marketplace.

The good news for the cannabis industry is that it has been deemed an essential service by numerous states; similar to grocery stores, pet stores, and beverage centers, among other businesses. As such, the cannabis industry can continue to grow, sell, and distribute their product in a similar manner as before. And analogous to the large increases beer, wine, and alcohol sales, I would anticipate that the cannabis market will continue to see booming demand during the pandemic.

2. Smaller cannabis manufacturers, processers, and distributors will be negatively impacted.

The recent trend of capital markets drying up for the cannabis industry will only be exacerbated by COVID-19. Additionally, coronavirus assistance through the CARES Act and other federal programs is unavailable to the cannabis industry. This will put further pressure on businesses that were not immediately profitable. With unemployment recipients receiving an additional $600 in unemployment benefits through the CARES Act, many of these smaller businesses will find it difficult to hire new employees. They may need to offer higher wages to entice furloughed individuals to reenter the workforce, further putting a squeeze on smaller businesses. It’s likely that larger companies will buy out some of these smaller entities, forcing consolidation of the industry. Cannabis insurers will need to be cognizant of the market forces impacting certain areas of the cannabis industry.

3. Current insurance carriers will likely more closely focus on the business they have already written, while their expansion plans are put on hold.

The efforts for the cannabis marketplace to continue to expand its presence has been put on hold. In New York, for example, last month Governor Cuomo conceded that it’s, “unlikely marijuana will be legalized in the state this year,” essentially delaying its legalization until 2021, at the earliest. With state governors dealing with more complicated issues, such as when to reduce/eliminate the quarantine restrictions, I don’t anticipate the legalization of cannabis to grab the attention of many state legislatures.

4. It’s likely that the approval of new insurance products offering cannabis coverage will be delayed, while excess and surplus lines carriers continue to enter the market in an effort to scoop up any excess demand for coverage.

In March, the state of Pennsylvania requested that insurance carriers not submit any “non-essential” filings in their jurisdiction. With the possibility of other states potentially implementing similar restrictions on filings, it is possible that any new program or rate change filings would get further delayed or rejected by the states. This likely means that insurers will have short-term pricing power to increase premiums through flexibility in their rating plans. They will also be able to more closely underwrite their insureds without fear of losing business to the competition.

5. More carriers will strongly consider reducing their product liability exposures for cannabis products

This has been evidenced in the vape pen manufacturers, especially those manufacturers who were sourcing products overseas. The COVID epidemic has begun to expose how underlying health issues are adversely impacting the death rate. It wouldn’t be a stretch to me if insurance carriers draft further exclusions, especially those that specialize in smokable cannabis products. It’s likely that COVID-19 is addressed, by name, similar to asbestos.

6. Reinsurance will be more difficult to find.

Fear of the unknown has always been a hindrance to the availability of reinsurance markets and the cannabis insurance industry is in the unenviable position of being a relatively new marketplace for reinsurers. The added stress and uncertainty of the future due to COVID-19 will only exacerbate the already tight market conditions for cannabis reinsurance. Hopefully, this will be at least somewhat offset by the natural aging process that an industry goes through, as reinsurers become more familiar with the risks and exposures they underwrite.
When this pandemic finally ends and life returns to “normal” or “new normal”, we should expect to see the cannabis market continue to grow, but with fewer and mostly larger entities. Insurers who understand this marketplace and can quickly adapt to these changes will be able to rapidly respond to its inevitable expanding insurance needs.

Questions about how the insurance industry is being impacted by recent events? Contact us today.

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.

Auto Accidents Drop Dramatically with COVID-19 Stay-At-Home Order

by Brett Horoff

Authors: Brett Horoff, ACAS, ASA, MAAA, Director, Consulting Services, Dee Dee Mays, FCAS, MAAA Principal and Chief Actuary, and Denise Farnan, ACAS, MAAA Principal and Consulting Actuary.
To control the spread of COVID-19, many states have issued Stay-At-Home[1] orders for non-essential workers, resulting in a large portion of the workforce working from home and many businesses temporarily closing. Schools have also been forced to close or have moved to online solutions for classes. These changes have brought a significant drop in the number of miles driven by each household and the volume of the traffic on the roads. With fewer miles being driven and a decrease in traffic density, the number of auto accidents has decreased.
According to the Public Policy Institute of California, essential workers are one-third to one-half of the California labor force. The definition of essential workers varies across the state. It includes sectors such as healthcare and public health, emergency services, food and agriculture, energy, water and wastewater treatment, transportation and logistics, communication and technology, government operations, critical manufacturing, hazard materials, financial services, chemicals and defense industries. Outside of these sectors, households are no longer commuting to work. There has also been a significant reduction of personal auto use as this is pretty much limited to driving to the grocery store, pharmacy or to pick up takeout food from restaurants.
The average annual miles driven in the U.S. is 13,476[2] or approximately 260 miles per week. For non-essential workers, this could be down to less than 30 miles per week assuming five trips a week that are six miles round trip. This represents an 88.5% reduction in the weekly miles driven for households with nonessential workers from 260 miles per week to 30 miles per week. For households with essential workers, they will also have a reduction in the miles driven per week; however, the essential worker will still be driving to work. Assuming half the average annual miles driven is commuting to work, then an essential worker is driving 130 miles per week to commute to work plus another 30 miles per week for personal use. With these assumptions, they would be seeing a 38.5% reduction in the miles driven per week from 260 miles per week to 160 miles per week. If half the households have essential workers, the reduction in miles driven is 63.5%, which is just an average of the figures for non-essential and essential workers. This is a very rough estimate with simplified assumptions, but it gives you an idea of the impact that the Stay-At-Home orders are having on miles driven.
The number of auto accidents will be directly related to the number of miles driven, so insurance companies should be seeing a significant drop in the number of auto accidents. With fewer vehicles on the road and a decrease in traffic density, there should be fewer auto accidents. The number of reported auto accidents in Los Angeles is down approximately 25% in March 2020 compared to March 2019 based on adjusted data[3] from the City of Los Angeles. The Safer at Home Order was issued by the City of Los Angeles on March 19, 2020, so the full impact on auto accidents is likely to be more than double.
It is still very early to assess the impact that COVID-19 and the impact that Stay-At-Home orders will have on the number of auto accidents. The definitions of essential workers have been changing over time and the orders could be extended. When the orders are lifted, we may also see a slow return back to the prior driving habits. There are several insurance companies that have already taken action to get the savings from the decrease in auto accidents back to their customers. Allstate has submitted filings this week to state Departments of Insurance for a Shelter-in-Place Payback endorsement that authorizes and facilitates discretionary payments to policyholders. They also had a press release on April 6, 2020 that states their customers will receive more than $600 million as part of this payback. Another insurance company, American Family, announced on the same day that they will return $200 million in premium to their auto customers related to the COVID-19 impact on auto accidents. There also insurance companies with pay-per-mile programs where any savings is automatically passed on to the customer, since the customer pays for each mile driven.
There are a number of filings being made by insurance companies to the state Departments of Insurance to address the impact of COVID-19 on auto accidents. Go Maps has filed to offer personal auto discounts to essential workers and recently unemployed workers in multiple states. Next Insurance has filed to reduce the commercial auto premium for their customers for the month of April in several states. Safe Auto Insurance Company and Elephant Insurance Company have also filed rate reductions related to COVID-19. There are several insurance companies that have filed endorsements lifting the delivery exclusion in personal auto policies during the COVID-19 pandemic in order to provide insurance coverage to the increasing number of people delivering medicine and food.
While several insurance companies are moving fast to pass the savings from a decrease in auto accidents on to their customers, there are consumer groups saying it is not enough. There is much uncertainty right now and the full impact of COVID-19 on auto accident frequency will not be known until the pandemic is over. It is likely that insurance regulators in each state will take a look at the impact of COVID-19 on auto accident frequency and may require the premium savings to be passed on to the consumer.

About Perr&Knight

Perr&Knight is one of the largest providers of State Filing Consulting Services to the insurance industry and is available to help insurance companies with preparing and submitting filings addressing COVID-19’s impact on auto insurance or other lines of business. Our actuaries can help companies estimate the impact of COVID-19 and have assisted companies with preparing and submitting filings related to COVID-19.

Contact us to schedule a consultation.

[1] Also referred to “Shelter in Place” or “Safer at Home” in some municipalities.
[2] Figure is for 2018 and is from the U.S. Department of Transportation Federal Highway Administration.
[3] Data was through March 28, 2020 and was extrapolated to month-end. It was also adjusted for a reporting lag.

Rate, Rule and Form Filing Activity in Response to COVID-19 Crisis

by Dee Dee Mays

We have all seen the various headlines regarding what companies are doing in response to the COVID-19 Crisis. Many Departments of Insurance (“DOI”s) are encouraging companies to act quickly to provide relief to policyholders during these difficult times. Perr&Knight is closely monitoring the rate, rule and form filings submitted by insurance companies to the DOI in each jurisdiction, to the extent these filings are publicly available.
If you are interested in obtaining additional information on filings related to the COVID-19 crisis, please complete our contact form.
Here are samples of changes included in company filings:

Allstate has made two changes:
- Revising their rules and forms to include an exception to commercial activity exclusions to cover the delivery of food, medicine or other goods while a statewide Emergency Order is in effect related to the COVID-19 virus.
- Adding a Shelter-in-Place Payback Endorsement to Allstate, Esurance and Encompass personal auto policies. Per the Allstate press release, “…customers will receive a Shelter-in-Place Payback. Most customers will receive 15% of their monthly premium in April and May, totaling more than $600 million.”

American Family has announced that they are refunding $50 per insured vehicle to their personal auto policyholders for a total return of approximately $200 million. We have not seen any filings publicly available as of yet.

Clear Blue Insurance Company temporarily removed late fee and reinstatement fee surcharges to provide relief to the insureds in their CB Rideshare Commercial Auto program that covers transportation network company drivers.

Erie has filed a new Additional Payment, Gift Card and Gift Certificate Reimbursement Coverage. This provides reimbursement for the remaining balance of an unexpired local business gift card or gift certificate when the local business has permanently gone out of business. The coverage will be added to all ErieSecure Home, ErieSecure Condo and ErieSecure Tenant policies covering a primary residence, at no additional charge.

Germantown Insurance Company is notifying homeowners policyholders with payment issues to arrange for delayed billing or switch to an installment payment plan. They have filed changes to their underwriting scorecard to avoid penalizing policyholders who make these changes.

Silicon Valley-based insurance company Go announced that it is offering a 50% discount on auto insurance to all Essential Workers in Texas who are on the front lines of the COVID-19 crisis. See the press release at https://www.goclub.com/get.

National American Insurance Company has added new Contractor and Subcontract Epidemic Bond Riders in response to the impact of COVID-19. These riders amend a surety bond to allow for equitable adjustments of contractual obligations if work is delayed, disrupted, suspended, or otherwise impacted as a direct or indirect result of any virus, disease, contagion, including but not limited to COVID-19.

Next Insurance has submitted filings to implement a temporary relief measure regarding COVID-19 for insureds in their Commercial Auto and Liability (Errors and Omissions, Premises and Operations, etc.) programs. The Company’s intent is to reduce 25% of April’s 2020 premium for all insureds who purchased a policy prior to March 1, 2020.

Utica National group has expanded the eligibility for Commercial Auto lay-up credits to all risks/vehicle types. The expanded eligibility is intended for businesses that plan to take vehicles out of service due to loss or reduction in business due to the COVID-19 pandemic.

Several companies are filing COVID-19 related leave of absence endorsements for their medical malpractice policies to help their insureds whose employment may be affected due to COVID-19 related lay-offs, office closures, and illness, among other things.

If there is anything that Perr&Knight can do to assist your company with any filings, please complete our contact form at https://www.perrknight.comcontact/.

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.

Common Mistakes When Pricing Long-Term Contracts

by Michael Covert

Developing pricing for long term contracts, specifically auto warranty, poses a tricky challenge for insurers. Determining rates for losses that will not occur until three, five, or seven years into the future requires balancing multiple factors to help ensure profitability and appropriate matching of premium earnings and future losses.
Auto warranties, supplemental tire and wheel coverage, guaranteed auto protection (“GAP”), and other long-term contracts require careful actuarial analysis of multiple variables. Mistakes can be costly – and won’t become apparent until well into the future.
Luckily, by avoiding some of these common mistakes, you can develop pricing for long term contracts that protects your customers and keeps you in the black.

Best in class rating manual structure / pricing flexibility

The long-term contract space, specifically for auto warranty, is much more competitive than ever before, as many insurers and InsurTech companies create brand new programs to corner a piece of this market. Therefore, in order to remain competitive and profitable, insurers must achieve as much flexibility on rating plans as possible. Greater flexibility means you have a higher chance of achieving profitability from the get-go without having to continually refile your rating plans to adjust rates.
Working with actuarial experts who apply expertise with long-term contracts across multiple states can dramatically enhance your pricing process. Actuarial consulting experts can develop a factor-based manual that makes it significantly easier to understand the base rates, rating factors and the impact of rate changes on future policyholders. Determining actual relativities for the main rating variables, along with associated base rates, can turn those old school 500-page “rate cards” into concise rating plans, lessening the time drain on your staff for review and understanding of the material as well as reducing the likelihood of erroneous price quotes and premium reversals.

Misjudging your competition

Competitive analysis provides both a starting point and a point of comparison for your rating plans. It’s a valuable component of the big picture. In addition to jurisdictional and coverage plan comparison, there are two lesser-known areas where you may not be obtaining a true sense of how your pricing stacks up against the competition for auto warranty business.
Less experienced folks in this space may compare rates and factors without thoroughly examining the class plan (actual vehicles) to which these factors are assigned. Not everyone assigns auto classes the same way, so it’s crucial to confirm that you’re looking at comparable plans.
Differences in individual components covered in vehicle service contracts can also throw off the accuracy of your competitive analysis. In order to achieve a true apples-to-apples comparison, you must drill down into individual components of each vehicle service contract to make sure that coverages align.

Incorrect profitability analysis

While you may see your market share rise quickly in this space from a balance sheet perspective, in order to understand profitability, you must earn premium appropriately over the life of the long-term contract. Too much upfront premium earnings may lead you to believe that your loss ratio is strong, but when earned premiums start to slow and losses begin to stack up – there is little that can be done to course-correct at that point. It’s imperative to track your earning patterns alongside your loss development to maintain a consistent loss ratio over time.

Rate level indication inaccuracies

Relying solely on an overall rate level indication can paint an incorrect picture. For example, development of losses will vary considerably on whether a vehicle is new versus used. Similarly, with comparing new cars with say 0-10,000 initial miles versus “new” vehicles with 24,000 to 36,000 initial miles. The rate level indications are generally very different for numerous combinations of new/used, term/length of the contract and initial mileage of the vehicle. It’s important to understand how to best break out each one in order to achieve accurate rate level indications as well as balancing homogeneity and credibility in your data.

Not peer-reviewing your work

If you’re not already writing business in this space, much of the above is likely not apparent. As a result, you may inadvertently begin writing a significant amount of “bad” business while other insurers are steering clear. Even if you have been writing certain types of extended service contracts, it’s easy to fall into oversights that could result in leaving money on the table. Experienced actuarial consulting partners can provide an unbiased, fresh perspective on your work, taking into account product expertise, state-by-state knowledge and a deep understanding of rating plans and rate flexibility to ensure that your rates are reasonable for the associated risk.
As competition in this space rises, insurers are rushing headlong into product offerings that might end up costing them dearly down the line. The old saying, “You can’t fix old business” has never been more applicable than to long-term contracts, because the bottom line is: you’re on the hook until the end of the contract. However, by carefully analyzing each element in your rating and working with an experienced actuarial team comprised of subject matter experts, you can sidestep the mistakes outlined above and develop a proven, competitive and profitable product.

Are your extended service contracts priced correctly? If you’re writing new business or want to double-check current offerings, the actuarial experts at Perr&Knight will let you know if you’re on the right track.