State Filings

How to Navigate California Personal Auto Rate Increases

by Dee Dee Mays

Personal auto writers in California have been abuzz with news of the recent rate increase approved for Allstate Northbrook Indemnity Company. This is the first rate increase approved by the California Department of Insurance (“CDI”) on any type of personal auto program since April 2020. There are many filings still pending. Here are insights on common questions our insurance filings support team hears from insurers:

How did Allstate get their filing approved so quickly?

That is the $165 million dollar question. The Allstate filing was submitted on June 30, 2022, well after many other filings that remain pending. Consumer Watchdog sent a letter to Commissioner Lara urging him to reject the filing, but does not appear to have submitted a formal petition to intervene. In October 2021, the Commissioner mentioned Allstate as one of three companies that needed to provide additional COVID-19 refunds to their policyholders. At this time, there is no publicly available information indicating that Allstate has issued any additional refunds subsequent to Commissioner Lara’s letter.

Allstate provided the following information on refunds to date in their approved filing:

In the final correspondence on the approved filing, that was submitted on the day before the filing was approved, Allstate confirmed that the next rate filing for their program in California would include the removal of their remaining affinity group rating program. This affinity group is for Specialized Professionals. Allstate’s approved manual includes a 4% discount for policies where the “named insured/applicant or spouse is a degreed professional in one of the following occupational groups: Education or Library Science, Science, Engineering, or Information Technology.” This “two-tiered system” was one of the concerns mentioned in the Consumer Watchdog letter.

Is it true that an increase greater than 6.9% requires a public hearing?

No. This is a common misconception. In fact, any filing can result in a public hearing, if a consumer group petitions to intervene and the Commissioner grants their request for a hearing. California Insurance Code 1861.05(c) includes the following [if] “the proposed rate adjustment exceeds 7% of the then applicable rate for personal lines or 15% for commercial lines … the commissioner must hold a hearing upon a timely request. “ In practice, consumer groups petition to intervene on filings with changes lower than 7% as well as higher.

There are currently 51 rate increase filings pending with the CDI. Of those, 5 have proposed increases of more than 7%.The oldest pending filing was submitted in October 2019.

If I have a rate change pending, can I revise it to propose a higher rate change?

Yes. This is similar to submitting a new filing and will result in the new change being added to a future public notice list, usually within two to three weeks after the change is submitted. The filing cannot be approved any earlier than the 46th day after public notice, which gives a consumer time to petition to intervene on the filing. Progressive initially submitted their filing for a 6.9% rate increase on January 7, 2022. This change appeared on the January 21, 2022 public notice list. Progressive amended their filing on September 30, 2022 to propose a 19.3% increase.   his change appeared on the October 14, 2022 public notice list. After no correspondence from the CDI since Progressive submitted the letter to waive the deemer date on March 9, 2022, the CDI issued an objection letter on November 3, 2022 with an November 18, 2022 due date.

What usually happens if a consumer chooses to intervene on a filing?

Hearings are fairly rare, even after a consumer group petitions to intervene. Typically, the CDI will allow the consumer group to be involved in the filing review process and provide their feedback on the filed change. The CDI will hold one or more meetings with the insurance company and the consumer group to discuss the support for the changes and encourage the insurance company and the consumer group to come to agreement on a change and avoid the hearing process. The consumer group will then submit their invoice for their costs that, if approved by the CDI, are paid by the insurance company.  The amount of compensation paid to intervenors from 2003 to 2020 is available at http://www.insurance.ca.gov/01-consumers/150-other-prog/01-intervenor/report-on-intervenor-program.cfm.

This shows the following amounts paid in 2020:

What happened with the Wawanesa personal auto rate increase filing?

As we mentioned in an earlier blog post on the moratorium, Wawanesa Insurance Company chose to reactivate the deemer on their filing, thus triggering a hearing. Our insurance filings support experts have recently learned from a representative of the CDI that “The Hearing for this matter was taken off calendar and a stipulated settlement agreement is being reviewed.”

What should my company do if we need a rate increase in California?

We have provided some additional ideas in our earlier blog. For example, consider accompanying class plan and rule revisions to improve segmentation and underwriting and to alleviate common concerns from the CDI. Regardless of how you proceed, having an insurance filings support expert with years of experience preparing personal auto rate filings in California could improve the time to approval and potentially save a company a substantial amount of money. Whether it is preparing the actual rate filing or performing a review of a rate filing prepared by the company, an expert can provide guidance that will increase the chance of having the most successful filing. There are many hot-button topics that may come up during a review of the filing.  An expert can make you aware of these to reduce the potential for surprises.

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

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

Managing State Filings Just Got Easier

by Perr&Knight

Updating and tracking filings in the System for Electronic Rates & Forms Filing (SERFF) has always been a tedious, time-consuming process for state filings departments at insurance companies. Manual data entry runs the risk of human error and creates the potential for information loss. Both of which can slow the filing pace or set the whole process back to zero with a disapproval.

When Perr&Knight introduced our proprietary StateFilings.com software in 2015, we knew the ability to submit and track filing information from a single, real-time cloud-based platform would save state filings teams a significant amount of time and guard against the minor errors that can negatively impact approvals. For years, companies were manually downloading filing documents from SERFF, entering the filing details into their state filing management system, and sending out filing status reports to interested parties. Those days are over. All of this has been automated through StateFilings.com. Filings departments have been freed to dedicate more time to addressing DOI requests and objections, which helps speed up the time to approval for filings and has a direct impact on a company’s bottom line.

Two-way communication with SERFF is here

Though the initial version and subsequent updates of StateFilings.com was a massive time-saver and a huge help for state filings departments, there was just one piece missing: the system only worked in one direction. Filings departments could use StateFilings.com to monitor information coming from state Departments of Insurance (DOIs) but initiating new filings and uploading information to SERFF still required lengthy manual processes on SERFF’s cumbersome website. Now, we are excited to say that the 4.0.0 release of StateFilings.com has solved the communication challenge by enabling two-way exchange functionality with SERFF. This update streamlines the filing process for insurance companies even further.

StateFilings.com’s recently launched system upgrade uses a two-way API to push data into SERFF, so users are no longer required to access the SERFF website directly. Instead, the entire scope of state filings management can be handled on a single platform via a streamlined, intuitive interface.

A recap of StateFilings.com’s capabilities

As mentioned above, we developed the StateFilings.com software to accelerate the filing process by streamlining workflows for insurance company state filing departments. Because we used this software internally for many years before licensing it to our clients, we knew the platform provided measurable value.

In place of the time-consuming manual processes most state filing departments relied on, our software harnesses the power of technology to manage and automate many mundane (but crucial) state filings tasks. Here are some of the system’s key features and benefits:

  • A cloud-based system enables 24/7 access
  • User-level security and role-based permissions protect sensitive data
  • Filing management (including status)
  • Objection and response library
  • Forms libraries for document management
  • Real-time information updates

More useful features

This year’s upgrades to StateFilings.com build on all the features and functionality above, further streamlining the filing process. Here’s how:

Work while SERFF is down

Users can continue to access and review filings, even if SERFF experiences problems.

‘Note to Reviewer’ improvements

Users are now able to submit notes to DOI reviewers en masse across multiple filings and projects. Editable temple language ensures consistency and cuts down on time spent drafting emails.

Filing cloning ability

Users can create a single countrywide draft and with one “save-as” clone for all 50 states, instead of one by one. When submitting to more than one state, generating multiple clones of one filing with a single click eliminates the repetitive process of filing initiation.

Scheduled item template enhancements

Create and update your scheduled item templates for each project and then save time by applying a template to multiple filings at once instead of having to import the template into each individual filing.

Developed specifically for insurance companies

The SERFF system was a major industry breakthrough for insurance companies who were accustomed to filing paperwork via mail or fax. However, as times have changed, state filings departments have increased the demand for a streamlined, user-friendly experience that mimics many of the other digital tools in the modern office suite.

We applied our decades of experience providing insurance support services for products in every line of business to develop a straightforward but powerful tool based on the realities of companies’ state filing department workflows.

The updated StateFilings.com is the latest advancement to accelerate the filing process, enabling insurance companies to be more efficient with their time and more cost-effective overall.

Interested in learning more about what StateFilings.com can do for your business? Schedule a demo today.

Top 5 Reasons State Filings Are Rejected or Disapproved

by Ashley Allen

Staying on top of state filings can be tricky. Demanding regulators, detailed filing requirements that vary by state and mountains of required supporting documentation can quickly become overwhelming, even for insurance companies with robust in-house filing departments.

Objections or disapprovals from Departments of Insurance (DOIs) can and do happen, but there are some things you can do to mitigate that risk. Though it is impossible to know exactly what a regulator may take issue with, our experience providing state filings support for insurance companies has revealed certain things are likely to cause your state filing to get kicked back to you.

Here are the top five reasons regulators reject state filings.

1. Unclear understanding of each state’s filing requirements and expectations

Unfortunately for insurance companies, every DOI has unique requirements for submitting filings, amending filings, and addressing objections. Failure to comply with each DOI’s requirements can turn a simple objection into outright disapproval.

Incorrect formatting or failure to submit the correct information in the right spot can lead to a rejection. For example, certain states require insurers to submit redlines (marked-up versions) in the same area as final new forms in SERFF. In other states, this documentation is simply considered supporting documentation.

Obtaining clarification is not always easy. Regulators in Maryland, Alaska and Pennsylvania are known for being accessible to answer questions before and during the filing. Some states are less likely to respond to inquiries, leaving you on your own to figure things out.

Unless you are keeping close track of what each state requires for new filings, amendments, objections and overall processes, you risk committing an error that can send your filing back to square one.

2. Failure to comply with state regulations

Your company’s regulatory compliance department should know what is and isn’t permitted within your jurisdictions and lines of business. Submitting forms or rates that aren’t permitted by a specific DOI is a surefire way to receive an objection or flat-out disapproval.

States are particular about what they will allow. Some states won’t permit ranges of rates.  Some won’t allow certain types of forms or Defense within Limits, which is commonly used for professional liability products.

You can often find this information on the state’s DOI website, but it may not always be available.

Incorporating regulators’ expectations into your product design process can facilitate a more timely approval. Your state filings teams may need to work closely with your product development team to make sure your company’s insurance products are designed with compliance in mind from the start.

3. Lack of response to objections

Slow response to objections trips up many state filings departments. Unfortunately, timelines to address objections vary wildly. Some states can give a month or more to respond to an objection.  Others may require an answer in two days. We’ve seen instances of regulators requesting corrections within hours.

If you are not able to respond to an objection by the due date and an extension is not granted, you may want to consider withdrawing the filing and resubmitting later, rather than risk running out of time. Not responding could trigger an automatic disproval—and may land you on the wrong side of regulators.

At Perr&Knight, we use a sophisticated software application, StateFilings.com, that we developed for internal use and then made available for license to our clients. StateFilings.com is a sophisticated tool in the management of state filings. It communicates directly with SERFF, pulling in objections and due dates to make managing workflows less risky.

4. Not reviewing/following the general instructions in SERFF

It may seem like a no-brainer, but it’s surprising how often this happens. Failure to follow directions outlined in SERFF can lead to rejection right off the bat.

While the filing wizard in SERFF led to a massive leap forward in efficiency, some parts of the interface can trip up your filing if you’re not careful. For example, Utah requires a specific certification statement for all filings. If you fail to include this statement with your filing, the Utah Insurance Department will issue an immediate rejection. But SERFF doesn’t have a specific spot for it. Therefore, knowing where to include this information is essential, even if there is no obvious designated area. Many states have unique questions or informational requirements such as this. If fields are blank, SERFF will not let you submit the filing. But knowing when to include specific information in certain fields, even if it’s not technically correct, will enable submission and may provide regulators with the information they require.

Until SERFF includes state-specific filing workflows that match what regulators are looking for, state filings departments will be forced to employ workarounds. Not completing the workarounds correctly—or worse, not knowing they are necessary—could lead to a swift rejection of your filing.

5. Missing or incomplete transmittals or checklists

If your filing is missing a transmittal or checklist, regulators may reject it without even an initial review.

Reasons for incomplete information vary: You may not realize a checklist or transmittal applies to your filing. Some checklists are complex and confusing. In some cases, you may be unsure how to answer a question on a checklist. Depending on the line of business, finding the appropriate checklists and transmittal requirements can be a challenge.

Though the oversight may not be intentional, DOIs don’t care. Missing or incomplete transmittals or checklists mean regulators do not have what they need to move forward, so they may issue a rejection and you’ll be forced to start over. Additionally, using the incorrect version of a transmittal or checklist can also result in an objection.

Ensuring your checklists and transmittals are complete, current, and correct is one of the most basic things you can do to guard against a state filings rejection. Working with partners like the state filings support team at Perr&Knight strengthens your position. Our experts know the requirements of every checklist and transmittal. We peer review your filings to make sure they are complete before submission.

State filings are never static

Our extensive experience providing filings support has shown us that the only constant is change.  Insurance regulators have evolved, so certain shortcuts that worked years ago may no longer be enough. Some states permit longstanding workarounds, but others are becoming stricter about following the rules to a T. Regulations vary by state, which can cause hiccups when filing.

Partnering with state filings experts like the team at Perr&Knight can help protect you against avoidable mistakes that lead to rejections. Our state filings support teams dig into the minutiae, tracking nuances by state and line of business. Working with a team with decades of experience helps you avoid missteps from the get-go.

Beyond filing support, our actuarial consulting and product development teams can make sure the products you plan to offer are designed with compliance in mind. This type of up-front work can pay off huge when it’s time to file. A holistic understanding of the intersection between profitability, compliance, and regulatory approval helps you avoid costly mistakes that can slow your time to market.

Whether you handle state filings in-house or offload submissions to an experienced filings support team, keeping the above in mind will protect you against avoidable errors that put your approvals at risk.

Let our experts help you make state filings more manageable. Contact Perr&Knight today.

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 Perr&Knight

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.