"Request for Proposal - Actuarial Services"
Request for Proposals to Provide Actuarial Services to General Insurance Statistical Agency (GISA) BACKGROUND In 2006, GISA was established to carry out the activities of a statistical agent on behalf of participating Canadian jurisdictions. As the statistical agent, GISA: • promotes the timeliness of statistical data collection, analysis and reporting mechanisms; • acts on behalf of the participating insurance regulators to coordinate and harmonize the statistical data filing requirements for insurers regarding the experience of their business in such jurisdictions; and • promotes the quality and value of statistical data generated by licensed insurers. GISA collects and makes available statistical data under the mandatory Automobile Statistical Plan (ASP), Ontario Commercial Liability Statistical Plan (CLSP) and Ontario Statutory Accident Benefits Statistical Plan (OSABSP) from all insurance companies including Facility Association writing automobile insurance business in Alberta, Ontario, New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island, Yukon, Northwest Territories and Nunavut. See Appendix A for more information on GISA and Appendix B for an overview of statistical plans. In 2006, GISA entered into an agreement with the Insurance Bureau of Canada (IBC) to act as GISA’s service provider to provide statistical plan services, whereby the statistical plan data is collected, processed and exhibits are produced. Historically, IBC has retained a consulting actuary to provide actuarial services for certain aspects of the data collection, quality assurance and exhibit review processes. See Appendix C for IBC data processes. GISA will now be retaining the consulting actuary directly and is issuing this RFP to give companies and individuals an opportunity to bid for the required actuarial services. A selection committee has been established which will ensure that a fair and objective selection process is followed. TERM OF AGREEMENT This appointment will be to provide actuarial services for Ontario ASP data to GISA for a period of one year, anticipated to start April 1, 2010 (training period is not included and will be negotiated). Subject to satisfactory performance, GISA intends to extend the agreement for an additional three years to include provision of actuarial services for ASP data for all participating provinces and territories and all statistical plans (including CLSP and OSABSP). 1 SCOPE OF ACTUARIAL SERVICES GISA requires the following actuarial services to be provided: a) Regular services: • Review the reasonability of major data error corrections, including adjustments and exclusions, made by IBC • Review the reasonability of the Unallocated Loss Adjustment Expense Factors (ULAE) and Health Levy Factors calculated by IBC for ASP (Note: Health Levy Factors are not prepared for Ontario and Territories) • Analyze the loss development data and prepare the Loss Development Factors (LDFs) for ASP (all the published private passenger excluding farmers and other classes of vehicles) and CLSP with a report on the methodology and assumptions used (Note: Loss Development Factors for CLSP is not currently prepared) • Review exhibits, including introduction and notes to each of the statistical exhibits, and express opinion on publication of the exhibits (see Appendix G for Draft GISA Catalogue of Exhibits) • Respond to questions from GISA, regulatory staff and IBC regarding the exhibits b) Ad hoc services: • Review special reports requested by regulators • Review major or technical changes to statistical plans and reporting requirements • Provide advice on impacts to exhibits and exhibit production as a result of industry and/or regulatory changes, as well as projects • Report to GISA Committee(s) and Board on statistical related matters • Appear at Rate Boards hearings as requested OTHER CONSIDERATIONS • Reporting: The incumbent will report to the GISA Secretariat. • Transition: The training phase will begin in February, 2010. In the first year, the incumbent will receive guidance from FSCO and IBC to provide actuarial services for ASP. During the first year, the IBC Consulting Actuary will continue to provide actuarial services for the rest of the participating provinces and territories and the statistical plans (CLSP and OSABSP). Subject to satisfactory performance, starting in the second year, the incumbent will provide actuarial services for the rest of the participating provinces and territories and statistical plans, with the guidance of FSCO and IBC. • Seasonality of Work: The actuarial services will be provided throughout the entire year, however certain times of the year requires more resource hours than others. The exhibit review and factor processes will be predominantly done from April to July and September to November. See Appendix H for Target Exhibit Release Timeline. • Plan for OSABSP: Ontario’s Health Claims for Auto Insurance (HCAI) initiative is part of an ongoing effort to improve and automate the exchange of standardized health claim information between health care providers and insurance companies. When the HCAI data collection system is fully operational, there will be changes to the ASP and OSABSP. 2 • Consultation on projects: The incumbent will provide ad hoc actuarial services for relevant projects. For instance, GISA may request advice from the incumbent on an initiative which proposes changes to the ASP and examines alternatives to provide certain data to Regulators. Another project involves changing the technology that collects and processes data, as well as produces exhibits. The incumbent may be consulted to provide advice on the impact of the technological changes to the data and exhibits. TIMELINES AND PROCESS FOR PROCUREMENT The following timelines have been established to complete the procurement process: 1) Issue RFP: August 21, 2009 2) Information session (see below): September 18, 2009 3) Submission deadline: September 28, 2009 4) Internal evaluation by: October 16, 2009 5) Candidates interviewed by: October 30, 2009 6) GISA Board approve selection: December 17, 2009 7) Communication of decision by: December 18, 2009 8) Contract signed by: January 16, 2010 9) Training and transition: February, 2010 onwards 10) Begin actuarial service: April 1, 2010 Candidates will have the opportunity to ask questions at the information session to help prepare their proposals. Participation at the information session is optional. All proposals should be emailed to email@example.com by end of day on September 28, 2009 with contact information included. RANKING OF SUBMISSIONS The evaluation of proposals will be conducted in the following three stages: Stage I Mandatory Requirements Stage II Rated Criteria Stage III Interview Stage I – Mandatory Requirements Submissions will be reviewed to determine compliance with all of the mandatory requirements stipulated. Submissions which do not comply with all of the stipulated mandatory requirements will be disqualified and not evaluated further. Conflict of Interest declaration: Each submission must declare whether the actuarial firm or independent actuary has any actual or perceived conflict of interest. Member in Good Standing: Each submission must include the leading actuary’s professional memberships as a Fellow member in good standing of the Canadian Institute of Actuaries and Casualty Actuarial Society. Experience and Knowledge: The submission must state whether the firm or individual has at least 10 years of experience providing property & casualty insurance actuarial services and has an understanding of the regulatory environment for automobile insurance markets in Canada. 3 Rate Bid Forms (Years 1-4): The submission must include a rate in Canadian funds, inclusive of labour and materials, travel, insurance and other costs. The submission must include hourly rate for the first year and for the following three years (see Appendix D for Rate Bid Forms). Stage II – Rated Criteria Submissions that satisfy the mandatory requirements will be scored on the basis of the rated criteria. The following is a description of the rated criteria categories and related weighting. The proposals would be evaluated and selected for Stage III - Interview. Conflict of Interest 20 points The submission must provide details of any actual or perceived conflict of interest, including the organizations involved, the work performed, and how the present and future conflicts will be managed, including the process for managing these conflicts. Experience and Qualifications 40 points The submission must provide a brief description of the firm and selected leading actuary and team. It should include the roles and responsibilities of team members and their resumes together with a description of the services previously and/or currently delivering with an emphasis on experience relevant to the needs of GISA as articulated in the information provided. The submission should include a description of knowledge, skills and expertise in providing actuarial services in property and casualty insurance. The submission should describe the leading actuary’s approach to handling similar seasonal work and how the exhibit production cycle will be managed. Cost of Services 30 points Candidates will be required to submit Rate Bid Forms with total cost for each year and hourly rates that will include all labour and materials, travel, insurance and other costs. The agreement between GISA and incumbent will have a cap on the annual cost of services. Stage III – Interview 10 points Selected candidates will be required to participate in an interview by the selection committee of not more than 1 hour. The evaluation of the interview will be scored on the candidates’ responses to questions. e.g. What does your firm see as the challenges in performing the actuarial services required by GISA and how will those challenges be addressed? SELECTION COMMITTEE The following will form the selection committee, whose responsibility will be to evaluate proposals, interview candidates and recommend selection to the GISA Board of Directors: 1) Nurez Jiwani, Director, Regulatory Coordination, GISA 2) Arthur Hagan, Deputy Superintendent, Alberta Insurance & Financial Institutions 3) Dennis Chan, Chief Actuary, FSCO 4) Winston Morris, Superintendent of Insurance for Newfoundland and Labrador IBC (service provider) representative will provide technical support to the selection committee. 4 NON-DISCLOSURE AGREEMENT If your firm is interested in making a submission, kindly execute and return the completed Non- Disclosure Agreement (see Appendix E) so proprietary information can be provided to assist with your submissions. APPENDICES A Background Information on GISA B Overview of Statistical Plans C IBC Data Processes D Rate Bid Forms – Year 1, Year 2, Year 3, Year 4 E Non-Disclosure Agreement (for release of the following proprietary information) F Historic Estimated Time Spent G Draft GISA Catalogue of Exhibits H Target Exhibit Release Timeline 5 APPENDIX A: BACKGROUND INFORMATION ON GISA THE AGENCY The GENERAL INSURANCE STATISTICAL AGENCY/AGENCE STATISTIQUE D'ASSURANCE GENERALE was incorporated as at June 28, 2005 as an independent legal entity under the Canada Corporations Act – Part II to carry out the activities of a statistical agent on behalf of all participating Canadian jurisdictions. In this capacity, GISA has the ability to enter into contracts, collect revenue and incur operating and capital costs related to the activities of a statistical agent. GISA’s Mandate The mandate, or purpose, of GISA is to collect, and make available, required statistical information to support a healthy, accessible and responsive marketplace for property & casualty insurance. GISA’s mission is to provide effective oversight of the statistical plans and related insurance data, and to ensure that timely, reliable and accurate information is efficiently produced. GOVERNANCE GISA has established the following governance structure to fulfill its mandate and carry out its activities: 6 Board of Directors GISA’s governance structure consists of a tripartite Board of Directors of up to 13 members comprising of regulators, industry representatives and public representatives. Board Committees Three Board committees, an Executive Committee, a Finance & Audit Committee, and a Statistical Plan Committee, have been established to provide stewardship and strategic management of the agency. In addition, an Industry Advisory Committee has been established reporting to the Statistical Plan Committee. Executive Committee The Executive Committee provides ongoing oversight and direction in the operation of the agency and the Secretariat. Finance & Audit Committee The Finance & Audit Committee reviews, provides advice and makes recommendations to the Board of Directors on: a) External Audit The Committee is responsible for overseeing the external audit process, including: I. Recommending the appointment of an external auditor and the terms of the engagement to members; II. Reviewing any non-audit services provided to the Agency or its service provider by the auditor; III. Discussing the audit plan and scope with the external auditor and management; IV. Receiving the external auditor’s report and meeting with the external auditor and management to discuss audit findings and management responses; b) Internal Control and Risk Management The Committee assesses and makes recommendations regarding: I. The significant operation and financial risk exposures faced by the Agency; II. The adequacy and effectiveness of the internal control system maintained by management to ensure the efficiency and effectiveness of operations; III. The reliability of financial reporting, and compliance with legislation and regulation; c) Financial Performance and Planning The Committee reviews financial plans and results with management and any relevant external parties to ensure that they reflect Board policies and priorities. Responsibilities include: I. Recommending the annual budget to the Board and reviewing proposed in-year changes; 7 II. Reviewing with management its performance targets, operating and capital budgets, and assessment of results compared to budget; III. Reviewing the terms of the contract with the service provider, the performance under this contract, and management’s recommendations for any performance sanctions; IV. Reviewing the terms of staffing arrangements for the Agency Secretariat; V. Recommending and reviewing a mechanism for recovering costs of the Agency’s operation; VI. Reviewing officers’ and directors’ expense summaries; Statistical Plan Committee The Statistical Plan Committee oversees, provides advice and makes recommendations to the Board of Directors on: 1. GISA’s Data Rationalization Strategic Initiative; 2. GISA’s Data Collection, Analysis and Reporting Strategic Initiative; 3. the non-financial aspects of the Technology Renewal Program; and 4. any other issues as requested by the Board of Directors. The Statistical Plan Committee functions both in response to requests from the Board, and on a proactive basis providing advice and recommendations on the operation of the statistical plans and on data requests. Industry Advisory Committee The Industry Advisory Committee, established by the Statistical Plan Committee, operates as an ad-hoc Committee. The Committee’s mandate is to provide advice on technical and business issues pertaining to the mandated statistical plans (Automobile Statistical Plan, the Commercial Liability Statistical Plan for Ontario, and the Ontario Statutory Accident Benefits Statistical Plan) and other statistical data as requested by the Statistical Plan Committee. This governance approach establishes a direct accountability link between the statistical agency, the provider of statistical plan services to the agency and its stakeholders. It provides provincial and territorial regulators with control over the Statistical Plans and clarifies that the integrity of the data assembled is ratified by a body independent of the industry. In short, this governance structure best serves the industry and the public interest. 8 APPENDIX B: OVERVIEW OF STATISTICAL PLANS Automobile Statistical Plan (ASP) A number of Insurance regulatory authorities across Canada have the authority under their respective insurance legislation to collect experience from all licensed insurers in a form approved by the regulatory authority. The ASP Manual sets out the statistical data reporting requirements of each participating jurisdiction. The current version of the ASP Manual can be found on the GISA website: http://www.gisa.ca/gisasite/gisa_website/en/techman/documents/ASP_Manual_V1.4.pdf. Statistical data captured through the ASP is used by both industry and government. Statistical data, which is captured on an accident year basis, matches premiums and claims costs based on the year that the accident occurred, to provide a more accurate picture of experience to estimate future costs and is used in the process of determining rates. As certain types of claims, such as claims for third party liability or accident benefits take a long time to settle, insurers must revise estimates of claims liabilities on a regular basis. Claims costs in any financial period reflect claims payments made and adjustments to claims liabilities in the financial period, for accidents that occurred in the current and prior years. Financial data does not provide the proper basis for estimating costs for determining rates. As statistical data is available at a fine level of detail there can be greater understanding of the automobile insurance product. For example, information on both the average cost of claims and the number of claims is available from the ASP, as well as information based on the use of vehicle (e.g., private passenger or commercial) or by classification elements. Also, by having data available at an industry-wide level, there is a broader statistical basis on which to make estimations of costs. Ontario Commercial Liability Statistical Plan (CLSP) The Financial Services Commission of Ontario (FSCO) has the authority under the Ontario Insurance Act to collect experience from all licensed insurers in a form approved by the Superintendent. The CLSP Manual sets out the statistical data reporting requirements of the Province of Ontario. The current version of the CLSP Manual can be found here: http://www.fsco.gov.on.ca/english/insurance/clsp.pdf. Reporting under the CLSP is mandatory for all insurers (including unincorporated groups, exchanges or pools of organizations) that write commercial liability insurance in the Province of Ontario. Ontario Statutory Accident Benefits Statistical Plan (OSABSP) The Financial Services Commission of Ontario (FSCO) has the authority under the Ontario Insurance Act to collect experience from all licensed insurers in a form approved by the Superintendent. The OSABSP Manual sets out the statistical data reporting requirements of the Province of Ontario. The current version of the OSABSP Manual can be found here: http://www.fsco.gov.on.ca/english/insurance/auto/OSABSP.pdf. 9 The reporting of OSABSP is mandatory, effective for all accidents occurring on or after January 1, 1995. The reporting requirements under OSABSP, as set forth by the FSCO are in addition to the continuing reporting requirements outlined in the ASP in the Province of Ontario. Ontario’s Health Claims for Auto Insurance (HCAI) initiative is part of an ongoing effort to improve and automate the exchange of standardized health claim information between health care providers and insurance companies. 10 APPENDIX C: IBC DATA PROCESSES Data Collection: The submission of statistical plan data by insurers and the initial processing by IBC. Upon receipt of the data, IBC staff checks the statistical data thoroughly for completeness and accuracy. When a data quality problem is identified, IBC staff investigates the problem with the reporting company and confirms corrective actions to address the problem. At times, a new data set is submitted to replace the old data set. If this is not possible due to time constraints, IBC and regulatory staff may require data adjustments to the exhibit and further corrective actions. In extreme cases, the data set with problems is excluded from the exhibit production. The work is performed by the IBC Data Collection team with some involvement by the Consulting Actuary for major data quality problems. Quality Assurance: Various ancillary processes to improve data quality. Further quality check is performed to check the reasonability of companies’ data and to identify errors that could be missed by the automated edit checks during data collection. IBC Data Accuracy team works to arrange with firms to make the corrections before the data is closed for exhibit production. Other quality assurance processes are performed to ensure the completeness and quality of data which may have been missed by earlier quality control processes. There is minimal or no involvement of the Consulting Actuary during the Quality Assurance processes. Exhibit Production: The transformation of collected data into exhibits and reports. The normal exhibit production cycle starts in the middle of March every year when the collection of the previous year’s data is completed. This production cycle extends to the end of December when all the exhibits for the prior and the first half of the current year are published. See Appendix H for Target Exhibit Release Timeline. The majority of the work is performed by the IBC Actuarial Team. The review and revision of exhibit data is conducted in three stages: (a) review the “raw” exhibits and associated data files; (b) identify required data adjustments and exclusions and review a second set of exhibits based on those adjustments and exclusions; (c) develop factors to further adjust certain data and review a third set of factored exhibits, where applicable Ongoing consultation and coordination with the external Consulting Actuary is an integral part of the Actuarial review processes. IBC prepares the Loss Development exhibits with exclusions and adjustments and provides it to the Consulting Actuary. The Consulting Actuary prepares the factors and is provided for review by GISA (and regulators). Once approved, IBC applies the factors to the data. IBC develops the “Unallocated loss adjustment expense factors” and health levy factors, which are then reviewed by the Consulting Actuary. Subsequently, IBC applies the factors to the data to produce exhibits and review as described above. At this stage, the Notes to the exhibits are also prepared jointly by the IBC Actuarial staff and Consulting Actuary. Once each of these exhibits has been reviewed and appears reasonable, it is submitted for approval to GISA (and regulators) and the exhibits are published or made available to the public once approved. 11 There are three stages of approval for each exhibit: IBC, Consulting Actuary, and GISA (and Regulators). The Consulting Actuary reviews each exhibit to ensure the data appears reasonable for publication. Because the Consulting Actuary has been consulted previously regarding any significant issues, exclusions, or adjustments, the Consulting Actuary also reviews the exhibits to see that these changes have been made correctly. In addition, the Consulting Actuary reviews any notes to the exhibits that have been included and develops additional notes as required. A key focus of the Consulting Actuary is an assessment of the exhibit in regard to the purposes for which it will be used. Those used for technical rate making purposes by Regulators and the industry are evaluated against different standards than those that will be used for more general purposes. 12 APPENDIX D: RATE BID FORMS All-inclusive hourly rates are to be firm and fixed for the annual period. The rates should be provided in Canadian Funds, inclusive of labour and materials, travel, insurance and other costs (excluding Goods and Services Tax). Please include an estimate of the number of hours required to provide the services and the total estimated cost of the services with explanation. YEAR 1 Services: Ontario ASP The Year 1 services include the regular and ad hoc services specified in the Scope of Actuarial Services for only Ontario’s ASP. The Historic Estimated Time Spent in 2008 is presented in Appendix F for reference. Services Level of Number of Hours Year 1 Expertise Hourly Rate Regular Leading Actuary $ Services $ Support Sub-total Ad hoc Leading Actuary $ Services Support $ Sub-total Total Estimated Cost of Services for Year 1 $ YEAR 2 Services: ASP for All Jurisdictions, CLSP and OSABSP for Ontario The Year 2 services include the regular and ad hoc services specified in the Scope of Actuarial Services for all participating jurisdictions and all statistical plans. The Historic Estimated Time Spent in 2008 is presented in Appendix F for reference. Services Level of Number of Hours Year 2 Expertise Hourly Rate Regular Leading Actuary $ Services $ Support Sub-total Ad hoc Leading Actuary $ Services Support $ Sub-total Total Estimated Cost of Services for Year 2 $ 13 YEAR 3 Services: ASP for All Jurisdictions, CLSP and OSABSP for Ontario The Year 3 services include the regular and ad hoc services specified in the Scope of Actuarial Services for all participating jurisdictions and all statistical plans. The Historic Estimated Time Spent in 2008 is presented in Appendix F for reference. Services Level of Number of Hours Year 3 Expertise Hourly Rate Regular Leading Actuary $ Services $ Support Sub-total Ad hoc Leading Actuary $ Services Support $ Sub-total Total Estimated Cost of Services for Year 3 $ YEAR 4 Services: ASP for All Jurisdictions, CLSP and OSABSP for Ontario The Year 4 services include the regular and ad hoc services specified in the Scope of Actuarial Services for all participating jurisdictions and all statistical plans. The Historic Estimated Time Spent in 2008 is presented in Appendix F for reference. Services Level of Number of Hours Year 4 Expertise Hourly Rate Regular Leading Actuary $ Services $ Support Sub-total Ad hoc Leading Actuary $ Services Support $ Sub-total Total Estimated Cost of Services for Year 4 $ 14 APPENDIX E: NON-DISCLOSURE AGREEMENT This Non-Disclosure Agreement is made and entered into this day of 2009. BETWEEN: GENERAL INSURANCE STATISTICAL AGENCY (Hereinafter referred to as “GISA”) AND: (Hereinafter referred to as “VENDOR”) SUBJECT: Request for Proposal to Actuarial Services to GISA GISA wishes to have VENDOR enter into this Non-Disclosure Agreement in order that VENDOR’S obligation with respect to the “Confidential Information” can be fully defined by the parties, and agreed to by VENDOR with respect to the information provided by GISA to the VENDOR to assist in the determination and submission of the Vendor’s proposal to provide actuarial services to GISA. “Confidential Information” means: (i) all information provided by GISA in writing or visual form and (ii) all information provided orally by GISA which GISA desires to protect from disclosure provided that such information is identified as Confidential at the time it is transmitted and is subsequently confirmed as such in writing by GISA within fifteen (15) days after the date of such oral transmission. Vendor Obligations With Respect to Confidential Information VENDOR agrees not to use or discuss the Confidential Information provided by GISA except to the extent necessary in submitting the Vendor’s proposal to provide actuarial services to GISA. VENDOR agrees not to make copies of the Confidential Information or make it accessible to any person except to the extent necessary in submitting the Vendor’s proposal to GISA. AGREED TO BY: AGREED TO BY: (VENDOR) (GISA) Signature: Signature: Name: Name: Title: Title: 15 16