State Filings

Tips for Adding Flexibility to Your Commercial Lines Rating Plan

by Michael Covert

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.

Tiering

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.

COVID-19 Effects on State Filings

by Tanya Goerg

Authors: Tanya Goerg, CPU, ARC, AINS and Scott Whitaker, MCM
The ripple effects of the COVID-19 pandemic continue to reverberate throughout the insurance industry. As with nearly all businesses, insurance industry personnel and insurance regulators had to make an immediate and sudden shift to remote work which also immediately impacted form, rate, and rule filings. While improvement has been noted over time, the industry continues to experience impacts such as staffing challenges, increased volume of filings, and in some states, continued delays in review, acknowledgment, and/or approval of filings.
Facing pressure from legislators to provide relief for struggling consumers, Departments of Insurance (“DOIs”) also scrambled to issue bulletins and notices that outlined greater consumer protections.
Here are some of the key pandemic-related impacts on state filings we are observing.

Pandemic/communicable disease exclusions

Many DOIs have temporarily or permanently adjusted their position–through bulletins/notices or filing interrogatories–on exclusions specifically related to “pandemic” or “communicable diseases.”  The DOIs are not allowing exclusions, requiring language changes, or allowing only with sub-limits.
While these DOI positions are primarily noticed with new program filings, they may also be experienced with form, rate, or rule update filings associated with “pandemic” or “communicable disease” exclusions.
It’s important to know that legislative activity regarding this issue is far from settled. Litigators in many states are encouraging legislators to strip away or modify pandemic-related exclusions, but whether these remain a permanent aspect of new state filings is unclear at this point.

Rate relief & telematics in auto

Regional lockdowns dramatically reduced the amount of traffic on the road, shifting the landscape for insurance premium calculations and opening the door for consumer refunds.
As of February 2021, the insurance industry as a whole returned nearly $14 billion in premium to insureds. Regarding rates and rules for auto programs, some states required one or more rate relief filings, while others prohibited or limited rate increase filings. This has had a major impact on the bottom line for many insurance entities.
While the number of hours spent on the road was down during 2020 and early 2021, the severity of claims is up. During this period, open roads, less police presence, and increased road rage incidents fostered conditions that resulted in more catastrophic damages.
Many states allow telematics usage and pay-per-mile policies for automobile insurance. These technologies provide a benefit to consumers, especially now that many workers are no longer commuting to an office. Incorporating telematics into programs helps insurance entities develop products that better fit the driving habits of consumers, today and post-pandemic.

State-specific bulletin updates

Several states issued bulletins and notices that clearly articulate pandemic-related regulatory updates. Here are some noteworthy changes:
Nevada – In June 2020, The Nevada Division of Insurance issued a notice that they would disapprove any new business policy filings that contain COVID-19/virus/pandemic exclusions.
California – As of April 2021, California insurance regulators are beginning to review commercial rate filings that were previously subject to rate freeze requirements, but no rate increase filings have been approved for any lines that California considers to be impacted by the pandemic as of September 2021. They are now considering allowing filings that include sub-limits to COVID-19 exposure.
New Mexico – Regulators at the New Mexico Department of Insurance issued a bulletin in December 2020 stating that at least until the end of the 2021 legislative session, a moratorium will be in place on any filings that include endorsements related to COVID-19/communicable disease/virus. The 2021 legislative session has ended; however, the moratorium remains and it’s unclear how long this position will remain in place.

Objection-based findings

Due to the volume of state filings the team at Perr&Knight handles annually, we have observed some key Department positions in states that have not formally communicated their position through bulletins/notices or other official DOI communication channels. These findings are based on recent interrogatories.

  • Vermont – The Vermont Department of Financial Regulation will approve pandemic-related exclusions if they are no more restrictive than approved Insurance Services Office (“ISO”) or American Association of Insurance Services (“AAIS”) language.
  • Idaho – Idaho continues to disapprove COVID-19/pandemic exclusions, sub-limits, or any other coverage caps related to the current pandemic. That said, the use of the word “current” indicates this Department position may not be permanent.
  • West Virginia – West Virginia Offices of the Insurance Commissioner are currently disapproving any new exclusions related to the COVID-19 pandemic.

The pandemic’s long tail

The end date of many of the above changes is unclear. In fact, many of these temporary state requirements may eventually become permanent. New and carryover legislation continues to add wrinkles to an already unclear landscape. If those making state filings are unaware of these shifts, they may end up receiving a barrage of interrogatories that can severely impact their programs’ speed-to-market.
Working with experienced actuarial and product design consultants like the experts at Perr&Knight can help insurance entities avoid these pandemic-related filing pitfalls. In addition to ongoing boots-on-the-ground experience with regulatory requirements in all 51 jurisdictions, we proactively monitor regulatory positions to make sure our clients are aware of any updates that affect their state filings. We also internally track interrogatories to determine which issues may provoke regulatory pushback, even if currently unpublished. This level of detailed insight can help insurance entities stay on top of filing requirement changes, which can ultimately lead to speedier approvals, even in times of uncertainty.

Let our actuarial and product design experts help you make filings even easier. Contact Perr&Knight today to start the conversation.

South Dakota Springing Forward with Innovation Waiver

by Ieisha James

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

California Approves Vehicle History Rating for Personal Auto

by Brett Horoff

Companies now have a new tool to more accurately price personal auto insurance in California. The TransUnion Vehicle History Score powered by CARFAX® was approved by the California Department of Insurance (“CDI”) in a personal auto filing for Acceptance Insurance.  This is exciting news for those of us that develop pricing for personal auto insurance in California. The filing, which was prepared and supported by Perr&Knight’s actuarial consultants, was approved in February of this year.
Due to California regulations, which limit the rating variables that can be used in pricing personal auto insurance, it’s not often that new methods for risk differentiation are allowed in California. Actually, innovation in pricing personal auto insurance does not happen in California, because new rating variables are, for the most part, not allowed under the regulations. So why did the CDI approve Vehicle History as a rating variable? Well, it is not technically a new rating variable. The regulations allow companies to use vehicle characteristics in pricing personal auto insurance in California. This includes vehicle make, model and model year along with other vehicle characteristics, such as automatic braking and lane departure warnings – all of which insurance companies currently consider when rating personal auto insurance in California. CARFAX’s Vehicle History data adds another layer of information about the vehicle. The traditional rating for vehicle characteristics treats all the vehicles from an auto manufacturer with the identical features (including make, model and model year) the same and does not reflect the actual condition of an individual vehicle. Once the vehicle leaves the car dealer’s lot, there are numerous factors that will have a bearing on the condition of the vehicle over its lifetime, and these factors will impact the damageability, safety and performance of the vehicle. By adding Vehicle History Score, based on the vehicle’s historical footprint, to the rating plan, insurers are able to offer more competitive rates, while managing their risk.
The Acceptance filing included information, which is publicly available, on the performance of the TransUnion Vehicle History Score. Below is a chart displaying this information. It includes the pure premium[1] relativities for the validation sample, which have been adjusted for correlations with other rating variables used in California. The chart displays the pure premium relativities in 10 groups of approximately the same size with the best performing group having a relativity of 0.60 and the worst performing group having a relativity of 1.30.

The above chart demonstrates a strong correlation between the pure premium relativity and the Vehicle History Score.
Insurers are often looking for ways to improve the accuracy of their personal auto rating plans. The TransUnion Vehicle History Score will move insurers in this direction by including more information on the characteristics of an insured’s vehicle. We expect other companies will soon be filing to adopt the TransUnion model for their personal auto program in California.  We look forward to helping insurers with these filings.

About Perr&Knight

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

Contact us today for assistance with your California insurance products.

[1] Pure Premium = Capped Loss / Adjusted Exposures.

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

by Jessica Witvoet

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

States are getting pickier about the rules

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

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

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

Other events impacting 2020

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

Keeping track of the trends

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

Work with an experienced partner

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

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

Improve State Filing Efficiency, Even Working Remotely

by Jessica Witvoet

Authors: Jessica Witvoet API, AIS, AINS, AIT, Diane Karis AINS, CPCU, and Neresa Torres
Many insurance companies were faced with a difficult transition when state or county orders meant to mitigate the spread of COVID-19 forced some or all of their staff to stay home earlier this year. Those who weren’t prepared for extensive remote working scrambled to set up secure systems easily accessible by employees unable to return to the office where servers, desktop computers and physical files are stored.
Because of Perr&Knight’s five regional offices across the United States, we’ve already had extensive experience using digital tools to collaborate from geographically dispersed locations. Our state filings support team conducts the majority of our work online using sophisticated web-based software, enabling us to work together seamlessly from anywhere.
StateFilings.com is a proprietary software tool we use internally to provide insurance filings support for our clients. It is also available for subscription, so insurance companies can more efficiently manage their own rate, rule and form filings.
StateFilings.com enables companies to maintain the pace and accuracy of filings even when working offsite. The software includes built-in features controlling three aspects of the process: project management, research and workflow. Here’s how these tools support the entire scope of insurance product filings support. 

Project Management

Because all aspects of our form filings services are online – including access to SERFF – StateFilings.com updates all phases of the project in real-time and provides visibility to team members who have been granted access. This means an individual can create and submit a filing to a DOI and others can see exactly what has been done and how far along the filing is in the approval process.
This real-time visibility eliminates the need for lengthy internal back-and-forth communication via email and enables all members of the state filings department to provide support or peer review without a cumbersome catch-up process.
On our end, easy access and full transparency for all filings enable our state filings support team to process any countrywide filing project within ten business days. Insurance companies who subscribe to StateFilings.com for their own filings departments also report that access to a single, user-friendly filing repository has dramatically increased their efficiency.
Real-time processing also eliminates the need to regularly check with DOIs to monitor actions. StateFilings.com has access to SERFF via a secure API, so the system automatically downloads approvals or objections and updates project status automatically. Dispositions trigger automatic emails noting the filing has been closed, along with a link to the approval. This high level of automation simultaneously eliminates time-consuming batch processing and ensures individuals in filing departments always have instant access to current information.

Research

StateFilings.com can be utilized as a research tool to evaluate various historic countrywide projects. We use StateFilings.com to enhance our insurance product filings support by checking previous filings to determine particular jurisdictional nuances that may impact our clients’ filings. We can also calculate the average DOI turnaround time by state and line of business to accurately gauge the anticipated time to approval for similar filings.
The software also keeps approved forms and rates and rules on file, accessible via the web. By removing the need to house this information on location-specific servers, filing department staff can quickly review important information, even while working remotely.
Companies who subscribe to StateFilings.com have access to all these features for their own current and historic filings.

Workflow Assignment 

Activity Manager allows users to view outstanding items on a filing including the activity type, due dates and follow up dates for any state included in a project. Assignments can be divided by line of business or state, providing at-a-glance insight into outstanding issues with filings, project assignments and approval status. Work load can quickly be determined, delegated and easily reassigned within Activity Manager to one or multiple users. This functionality allows our team’s supervisor to ensure efficiency and productivity so that we may deliver the most value to our customers.
This level of organization is also helpful for quickly onboarding new members to the State Filings Department. Access to historical filings enables new employees to easily review submitted information, required materials, questions from regulators and any notes made during previous filings.
Because of our nationwide presence and focus on technology, Perr&Knight has been structured to support virtual collaboration for years now, so the shift to remote work was not disruptive to our workflow. We know many of the tools and processes we employ can help other insurance companies improve productivity and get their products to market faster, even in today’s uncertain climate. For insurance filings support, StateFilings.com has been a crucial asset to our business model and we have seen it help other companies achieve the same high level of filing efficiency. 

Perr&Knight is ready to help you add the technological assistance and advantage of Statefilings.com to your organization. Contact Perr&Knight today to talk.

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.

The Impact of COVID-19 on the Travel Insurance Industry

by Crystal London

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

Lessons from the past

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

What’s next for the travel insurance industry?

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

New state filings considerations

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

Opportunities for the future

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

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

California Commissioner Orders Premium Refunds in Response to COVID-19

by Perr&Knight

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

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

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

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

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

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

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

  1. By August 11, 2020:

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

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

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

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

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

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.