RECORDS OF MEETING OPERATIONS COMMITTEE A meeting of the Operations Committee was held at the offices of Commonwealth Automobile Reinsurers, 100 Summer Street, Boston on WEDNESDAY, OCTOBER 25, 2000 Members present - Mr. Edward N. Patrick, Jr. – Chairman Safety Insurance Company Mr. Thomas L. Baird National Grange Mutual Insurance Co. Ms. Margaret J. Batchelder Holyoke Mutual Insurance Company Mr. James P. Coxen Liberty Mutual Group Mr. Edward F. Downey, Jr. Edward F. Downey Insurance Agency Mr. Russell E. Furlong Amica Mutual Insurance Company Mr. Michael J. Hussey The Hanover Insurance Company Ms. Tammi Johnson Fireman’s Fund Insurance Company Mr. Robert P. Littlewood Arbella Mutual Insurance Company Mr. Kenneth M. Quick The Premier Insurance Co of MA Mr. Michael J. Richards The Commerce Insurance Company Mr. Mark A. Sweeney Plymouth Rock Assurance Corporation Commonwealth Automobile Reinsurers present - Ms. Susan Basilesco Director of Financial Services Ms. Wendy Browne Senior Operations Services Manager Ms. Vanita Chambers Underwriting Analyst Ms. Natalie Hubley Sr. Manager of Actuarial/Statistical Services Ms. Jennifer Kelley Senior Data Analyst Ms. Cheryl Kopas Underwriting Technical Assistant Ms. Lynne Rosenburg Operations Services Supervisor Ms. Tina Thibodeau Data Analyst Ms. Pamela Wallace Director of Data Quality Services Records of Meeting -2- October 25, 2000 Operations Committee Also present – Ms. Katherine W. Barry CGI Mr. Edward Colomey Empire Insurance Company Mr. John Delano Pilgrim Insurance Company Mr. Peter Elms The Travelers Indemnity Company Ms. Nicole Green Norfolk & Dedham Mutual Fire Ins. Co. Ms. Donna Jarominski The Commerce Insurance Company Ms. Abbi Laushine CNA Insurance Company Ms. Stephanie Tuscano Plymouth Rock Assurance Corporation Ms. Elisa Vieira St. Paul Insurance Company Operations Committee Chairman Mr. Patrick called the meeting to order at 10:00 a.m. OP 00.01 Records of Previous Meeting A motion was made by Mr. Baird and seconded by Mr. Sweeney to approve the Records of the Operations Committee meeting of May 24, 2000, as written. OP 00.02 Informational Items Mr. Patrick stated that the Governing Committee has not met since the last Operations Committee meeting. OP 00.03 Statistical Subcommittee Ms. Browne reported on the Statistical Subcommittee meeting of October 11, 2000. Ms. Browne stated that at the last meeting Staff provided a more detailed analysis of the volume of data in error to the Subcommittee to show the impact of moving the VIN data comparisons into the statistical edits. The current program for comparing various data elements to those encoded in the VIN indicates acceptable quality for private passenger business for model year, passive restraint discount, high-theft vehicle, and symbol elements. All of the information has been published in Accounting and Statistical Notice Number 328 in order to give the industry ample time to prepare for the upcoming changes. The Subcommittee then requested that Staff work proactively to assist companies in addressing any possible reporting problems prior to the 2001 change. Ms. Browne stated that the Subcommittee was updated on the status of the June 2000 VIN data comparison results. She indicated that the error rate for private passenger business for the industry is currently under 1% which is extremely good. For commercial business, the reporting of passive restraint for the industry is under 5%; however, 5 companies were notified that they could experience reporting problems in 2001 if they do not rectify their present reporting methodologies. She also noted that the reporting of “commercial cost new data” continues to be a problem for the industry; however, Staff did identify a problem with one of its edits and the symbols that were being used from the Polk System. Since the edit problem has been rectified, Staff has seen a drop in the error percentage from 9.4% in first quarter to 4.4% in the second quarter. Due to the fact that the error percentage has dropped significantly, Staff is still anticipating that the editing of cost new data will take effect on January 1, 2002. Records of Meeting -3- October 25, 2000 Operations Committee OP 00.03 Statistical Subcommittee (continued) Ms. Browne reviewed the results of the 4th Quarter 1999 Private Passenger Premium and Loss and Commercial Premium Distributional Analysis (see attached). Twelve companies were asked to respond to issues relating to reporting of private passenger premium. Seven companies explained their distributions as consistent with their books of business. One company addressed reporting problems, with the majority of corrections expected with the submission of 2000 data. Four companies had not yet responded. She noted that forty-four companies were asked to respond to various commercial premium reporting issues. Two companies explained their distributions as consistent with their book of business. Fourteen companies had addressed reporting problems with the majority of corrections expected with the submission of 2000 data. Twenty-eight companies had not yet responded. Ms. Browne advised that sixteen companies were asked to respond to private passenger loss reporting issues. Nine companies explained distributions as consistent with their books of business or claim reserving practices. Three companies had addressed reporting problems with the majority of corrections expected with the submission of 2000 data. Four companies had not yet responded. Ms. Browne stated that the Subcommittee reviewed the most recent Private Passenger and Commercial Rate Edit results (see attached). She stated that for Private Passenger policy effective year 2000, two companies were over tolerance and the industry error rate is 0.17%. For policy effective year 1999, one company is over tolerance due to reporting problems relating to their SDIP data. She noted that until corrected, this company will continue to be penalized. The industry error rate is 0.24%. Ms. Browne stated that for Commercial policy effective year 2000, through six months, the industry data error rate is 4.9% with four companies being over tolerance. For 1999, the industry error rate is 4.05%, with ten companies over tolerance. She also indicated that recent results show improvement since the inception of the commercial rate edit, as shown by the decreasing number of companies over tolerance and current error percentages. Ms. Browne reported that the Automobile Insurers Bureau (AIB) had requested that CAR consider changes to the statistical reporting requirements to ensure that companies with a group affiliation report which also report a separate Annual Statement, use a separate company number for statistical reporting. The AIB indicated that this data is relevant and necessary for it’s under 1% filing. At the May 10, 2000 Statistical Subcommittee meeting, Staff presented an analysis relative to the companies impacted by this proposed change. The Statistical Subcommittee supported the concept, but requested that Staff contact those companies reporting combined statistical data to identify the financial and system impacts of the proposed changes to reporting requirements. Ms. Browne reported that 16 companies were surveyed and 12 responded (see attached). She indicated that six of the companies stated that using a separate company number for reporting of statistical data would have no impact. Four of the companies had a mixed response. These four companies seemed to express concerns over increased costs that may be incurred as a result of this change. Some companies also questioned whether present tape formatting requirements would be modified to be more flexible under an individual company reporting scenario. Two companies were opposed to this change. Ms. Browne stated that at the Subcommittee meeting, Ms. Baker from the AIB, emphasized that several of the companies writing greater than 1% of the market share do not have company codes, and some company groups do not code the statistical data to the company in which the premium is booked. Ms. Baker had stated that both of these situations make it difficult to compile the statistical data into “under and over 1% companies”. Data from the under 1% companies is used at the AIB in the Commercial Ratemaking process. Ms. Baker also pointed out to the Subcommittee that all new companies are issued unique company code numbers. Ms. Browne confirmed this and noted that Records of Meeting -4- October 25, 2000 Operations Committee OP 00.03 Statistical Subcommittee (continued) companies, prior to a certain date, were “grandfathered in” and were not differentiated by an individual company number if the company chose to report data on a combined basis. Ms. Browne stated that some members of the Statistical Subcommittee felt that there should be one set of rules that apply to all companies. The Subcommittee then requested that Staff research how the tape formatting requirements could be modified to be more flexible, so that separate reporting company numbers could be required at some future date. Ms. Browne stated that the results of Staff’s findings will be presented at the next Statistical Subcommittee meeting. Ms. Browne noted that minor clarifications have been made to the Statistical Plans (see attached). She reviewed the two modifications to the Private Passenger Statistical Plan (see attached). The first modification is to the record layout modification key for Model Year Century Code and the adding of a new footnote to the Record Layouts. The second modification is to the records layout modification key for the expansion of Property Damage Limit Code and the adding of a new footnote to the liability premium Record Layout. Ms. Browne presented three changes that will be made to the Commercial Statistical Plan (see attached). The first change is to update the Fleet and Non-Fleet Public Transportation Classification Code Charts to specify type of risk 7 information. The second change is an update to the Garages Classification Code Chart to identify coverage changes that occurred with the implementation of the simplified Garage Policy. The third change is a correction to the Coverage Code Decision Table. The coverage Decision Table currently lists coverages 106-169. These Coverage Codes should be correctly listed as 106-109. These modifications will be effective January 1, 2001. A motion was made by Mr. Sweeney, and seconded by Mr. Baird to adopt the proposed changes to the Statistical Plans, effective January 1, 2001. The motion passed on a unanimous vote. Ms. Browne stated that the Subcommittee was provided with a status report on claim count. She informed the Committee that the Actuarial and Claims Departments are still using the reported claim count and that she would need to confer with these departments about the claim count issue and would have more information for the Subcommittee at a future meeting. OP 00.04 Reinsurance Operations Subcommittee The Reinsurance Operations Subcommittee had not met since the last Operations Committee meeting. However, Ms. Browne stated that CAR would like to recommend to the Operations Committee that a final close-out of policy effective years for 1988 and 1989 for financial purposes occur as of 3 rd Quarter 2000, and for data reporting purposes as of the January 2001 submission. She also stated that this recommendation is based upon a review of the outstanding losses reported in the June 2000 shipments which demonstrate that the volume of open data for these years is small enough to warrant final close-out (see attached exhibit). Mr. Sweeney made a motion to approve the recommendation of a final close-out of policy effective years 1988 and 1989 for financial purposes as of 3rd Quarter 2000 and for data reporting purposes as of the January 2001 submission. Mr. Baird seconded this motion and it passed unanimously. Records of Meeting -5- October 25, 2000 Operations Committee OP 00.05 Operational Reports The Committee had no questions or comments relative to the Operational Reports. OP 00.06 Rule 12 Error Tolerance for 2001 Ms. Browne stated that the Committee should discuss and propose a Rule 12 error tolerance recommendation for 2001. Mr. Richards stated that the Rule 12 is not a penalty program and recommended further reducing the tolerance level for the upcoming year. Mr. Richards made a motion to set the Rule 12 Error Tolerance at 0.25% for policy year 2001. Ms. Batchelder seconded the motion and it passed unanimously. OP 00.08 Rule 12 Update Ms. Browne stated that at the May 24, 2000 meeting, the Operations Committee directed CAR to provide companies with a list of policies that contain discrepancies between the MA-Years-Driving- Experience and the Insurer-Years-Driving-Experience, and request that the companies research these discrepancies and provide an explanation (see attached). Twenty-nine companies were provided with sample listings, to which 15 responded. Thirty-three percent of the discrepancies can be attributed to the company having knowledge of prior out-of-state driving experience. These differences are valid. Twenty-one percent of the discrepancies can be attributed to data entry errors. Twenty-six percent of the discrepancies can be attributed to either a company’s system having an incorrect calculation routine or a lack of a systematic process to perform the calculation. Three companies (all with 100% of their errors in this category) indicated that they have plans to correct this situation. One other company will be contacted because they believe their calculation is correct, when it is not correct. Three percent of the discrepancies appear to be based on inconsistent data at the Merit Rating Board. The Merit Rating Board has been contacted and asked to review the specific policies. Three percent of the discrepancies involve licenses that have been suspended/revoked. Fourteen percent of the discrepancies involve policies where the effective date is on the Date-1st-Licensed anniversary date. The Merit Rating Board has been contacted and asked to provide the proper procedure for these policies. Ms. Browne stated that, based on the results, Staff does not recommend using the new “Insurer Driving Experience” field in the Rule 12 editing process. Staff recommended leaving the Rule 12 system as it is. Mr. Richards asked if CAR will continue to use the Massachusetts Date-1st-Licensed in the edit. Ms. Browne stated that this was correct. The request of the Committee was for CAR not to use the “Insurer Driving Experience” field to impute the class code. OP 00.09 Vanliner Appeal Ms. Rosenburg outlined Vanliner Insurance Company’s request to rescind the statistical penalties assessed for the May, June, and July 1999 monthly accounting shipments which total $24,000. Ms. Rosenburg stated that Vanliner felt the fines were caused by a change in CAR’s edits, and that the penalty was punitive based on the amount of direct premium they have written. Records of Meeting -6- October 25, 2000 Operations Committee OP 00.09 Vanliner Appeal (continued) Ms. Rosenburg stated that CAR felt the penalty is justified due to the advance notification CAR gave to the industry regarding the change in the editing of commercial VIN data. She stated that CAR notified the industry of this change well in advance of it becoming effective. Accounting and Statistical Notice 277, dated October 22, 1997, first notified the industry of the change in VIN editing. Subsequent Accounting and Statistical Notices 284 and 306 contained this information as well as the Operations Committee records of January 21, 1998. Mr. Sweeney made a motion to deny Vanliner’s appeal based on the advance notification CAR provided to the Industry outlining the changes in the editing of commercial VIN data. Mr. Baird seconded the motion and it passed unanimously. OP 00.10 Commercial Rate Filing On June 28, 2000, CAR filed with the Division of Insurance a commercial rate request for ceded policies effective October 1, 2000 and subsequent. Ms. Wallace stated that CAR will release the new rates once the stipulation is approved by the Hearing Officer. Mr. Delano of Pilgrim Insurance asked when CAR expects to release the new rates. Ms. Wallace responded that CAR anticipates that this will occur in mid-December. CAR will then update the Rate Edit System and edit the records by April 2001. Ms. Wallace stated that CAR is concerned about data that companies may not have reported, and will contact companies to get the accrual information for this missing data. After further discussion, the consensus of the Committee was to not make any changes to the procedures for cession and statistical reporting in regard to the Commercial Rate Filing. Other Business Mr. Sweeney made a motion to discuss the meeting schedule for 2001. Mr. Baird seconded the motion and it passed unanimously. Ms. Browne highlighted the proposed schedule of meeting dates for the Reinsurance Operations Subcommittee, the Statistical Subcommittee, and the Operations Committee for 2001 which are outlined below. Committee members were requested to contact Staff with any conflicts. Reinsurance Operations Subcommittee/Statistical Subcommittee: Wednesday, January 10, 2001 Wednesday, March 14, 2001 Wednesday, May 9, 2001 Wednesday, October 10, 2001 Operations Committee: Wednesday, January 17, 2001 Wednesday, March 21, 2001 Wednesday, May 16, 2001 Wednesday, October 17, 2001 Records of Meeting -7- October 25, 2000 Operations Committee Other Business (continued) Ms. Johnson made a motion to discuss reporting issues related to Trust claims. Mr. Littlewood seconded the motion and it passed unanimously. Ms. Browne informed the Committee that the Guaranty Fund had distributed letters to Trust claimants notifying them that they were required to exhaust all other insurance coverages before the Guaranty Fund would reimburse any claim. Accordingly, companies would be expected to cover these claims under their Uninsured Motorist or Property Damage Coverages or through PIP subrogation. Ms. Browne stated that in an effort to assist the industry in assessing the impact of this transfer, CAR could collect this information on behalf of the industry. The Committee briefly discussed the benefits, drawbacks, and possible methodologies regarding the collection of this data. The Committee requested that Staff more completely identify the issues with this proposed collection process so that it could then decide how to proceed. Mr. Baird made a motion to add under Other Business the discussion of the OEM Crash Parts endorsement. Mr. Sweeney seconded the motion and it passed unanimously. Ms. Wallace advised the Committee that the Division of Insurance approved the OEM endorsement and that rates were expected to be determined in conjunction with the 2001 rate decision. Ms. Wallace stated that CAR filed a request with the Division of Insurance to change the effective date for the statistical reporting of this endorsement. If approved, beginning January 1, 2001, it will be mandatory for companies to report the OEM endorsement coverage code if they choose to offer the endorsement. There being no further business, a motion was made by Mr. Littlewood and duly seconded by Mr. Baird to adjourn the meeting. The motion passed on a unanimous vote. The meeting adjourned at 10:56 a.m. JENNIFER KELLEY Senior Data Analyst Attachments Boston, Massachusetts December 4, 2000 Note: These Records have not been approved. They will be considered for approval at the next Operations Committee meeting.
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