“What Makes a Good Rate Filing?” Chuck Romberger, ACAS, MAAA, CPCU Pennsylvania Insurance Department CAS Ratemaking Seminar – March 11-12, 2004

Overview Know the Filing Environment Consider Reasonability - Different Perspectives Explore the Soundness of Data Sources

Know the Filing Environment Review the state’s Filing Requirements’ Checklist (Part 1 of 3) In PA, our Checklists are available on our website at: http://www.ins.state.pa.us/ins/cwp/view.asp?a=1280&q=527334 Alternatively, e-mail me at cromberger@state.pa.us and I’ll send you the link.

Know the Filing Environment Review the state’s Filing Requirements’ Checklist (Part 2 of 3) – various requirements: Submission Package Transmittal Letter General Form Policy Provisions Rate & Rule (Pricing) Provisions – next slide

Know the Filing Environment Review the state’s Filing Requirements’ Checklist (Part 3 of 3) – various requirements: Rate & Rule (Pricing) Provisions Coverage requirements Filing Review (Waiting) Periods Filing Review Requirement Statutory Pricing Requirements Statutory Pricing Prohibitions

Know the Filing Environment Call or meet with the insurance department In PA, we continue to welcome and encourage this type of dialogue. We meet with 20 to 30 companies annually to discuss either initial filing plans or plans to materially revise existing rating structures prior to the submission of a filing.

Know the Filing Environment Review the state’s Filing Requirements and consider contacting the insurance department before performing an analysis or preparing a filing Keep current on the filing activity of other companies -- check-out our website: http://www.ins.state.pa.us/ins/cwp/view.asp?a=1280&Q=543175&PM=1

Know the Filing Environment Know the statutory review (waiting) period and plan for an effective date that you can easily implement Expect a review period generally consistent with the level of significance of the proposed changes

Consider Reasonability Take-on the policyholder’s perspective Magnitude of change - After several years of “no change” - At the First Renewal Consistency of current v. prior changes How well are your agents or customer service representatives prepared to explain changes?

Consider Reasonability Now, take-on the regulator’s perspective (a.k.a. Identifying common pitfalls) Unsupported / Judgment-based Selections - Loss Development Factors - Loss or Premium Trend Factors - Territory / Class relativities

Consider Reasonability Now, take-on the regulator’s perspective (a.k.a. Identifying common pitfalls) Consistency or Reconciliation to Prior Filings - Overall rate level change - Coverage changes & estimated effects - Rating structure changes - Change in methodology

Consider Reasonability Now, take-on the regulator’s perspective (a.k.a. Identifying common pitfalls) Establishing Territorial Relativities – things that diminish the credibility of a territory - Creating “small” territories - Imposing narrow territorial swing limits - Competitors as the complement

Explore the Soundness of Data Reconciliation – by the insurance company Within the current filing With prior filings With other external data sources

Explore the Soundness of Data Statistical Reports NAII – Statistical Reports - Accuracy & Timeliness Fast Track Monitoring System (PPA) - Concerns with Pennsylvania PIP data - See letter reproduced on next slide…

Question & Answers The end