Overview of Current Reporting Requirements Quality Reviews NJAIRE Data Reporting Overview of Current Reporting Requirements Quality Reviews

Reporting Requirements Call Forms: Form # 4 – Accident Year 2001-present

Sample Form

Call Forms – Required Data Accident Year 2008 & subsequent – Earned Exposures by threshold – current account quarter only, in car years

Reporting Requirements

Reporting Requirements

Earned Exposures by Threshold and Accident Year (Individual insurers may vary)

Exposure Thresholds for Accident Year 2009 (Individual insurers may vary)

Exposure Thresholds for Accident Year 2009 Individual Company (Actual Data: Minimum 10,000 Exposures)

Exposure Thresholds for Accident Year 2009 Individual Company (Actual Data: Minimum 10,000 Exposures)

Call Forms – Required Data (cont.) Accident Year 2008 & subsequent – BI Paid Claimants against private passenger type autos subject to the No-Fault law by insured threshold and accident year Accident Year 2007 & prior – BI Paid Claimants against private passenger type autos subject to the No-Fault law by insured threshold, territory and accident year

Report: Out of state claimants against NJ insured autos subject to the No-Fault law Intra-Family claimants Claimants involving only economic losses A BI claimant for a claim that is not yet closed may be reported once initial payment is made for that particular claimant. These claimants are not to be reported again even if additional payments are made to that claimant.

2004 Exposures (Insurers may vary) BI Paid Claimants

Accident Year 2008 & subsequent: Call Forms – Required Data (cont.) Accident Year 2008 & subsequent: Reportable Claimant loss amounts and number of Reportable Claimants by accident year Loss Adjustment Expenses for Reportable Claimants, allocated and unallocated (separately or combined)

Call Forms – Required Data (cont.) Accident Year 2007 & prior: Reportable Claimant loss amounts and number of Reportable Claimants by territory and accident year Loss Adjustment Expenses for Reportable Claimants, allocated and unallocated (separately or combined)

A Reportable Claimant is... One that could not be made had the claimant selected the Verbal Threshold, and One where the claimant selected or defaulted to the Zero Dollar Threshold and the insured selected the Verbal Threshold ...the basis for establishing NJAIRE

How are Reportable Claimants identified?

How are Reportable Claimants identified? (cont.) Reportable Claimants should be reported consistent with the facts involved in the settling of the claim.

Reportable Claimants to Verbal BI by Accident Year (Individual insurers may vary)

Reportable Claimants to Verbal BI Accident Year 2005 (Individual insurers may vary)

Loss Severities by Year (Individual insurers may vary)

Due Dates: to ISO (other than CAIP) or AIPSO (CAIP only): ACCOUNT QUARTER DUE DATE FIRST QUARTER MAY 15 SECOND QUARTER AUGUST 15 THIRD QUARTER NOVEMBER 15 FOURTH QUARTER FEBRUARY 15

Quality Reviews Use of the Data Financial Impact on Companies Provisional Financial Transactions Annual Cash Settlement (ACS) Financial Impact on Companies Cost of Late, Erroneous Data Detecting Errors at the Call Form Level

Use of the Data The Call Form data is used to calculate: Provisional Financial Transactions Each company’s quarterly assessment (monthly payments) Each company’s quarterly reimbursement, plus share of investment income

Provisional Financial Transactions: Quarterly Assessment - The quarterly assessment is determined by multiplying the number of Zero Dollar Exposures reported by your company, from two quarters prior, by the Assessment per Exposure determined by the Actuarial Committee for that Accident Year. Example (Exhibit A) – 3rd Quarter 2010 Assessment: Assessment per Exposure = $90 Zero Dollar Exposures reported for 1st Quarter 2010 = 100 Quarterly Assessment = $9,000 Monthly Payments = $3,000

Provisional Financial Transactions (cont.): Quarterly Disbursement – The quarterly disbursement is determined by multiplying your company’s share of the Industry-wide Verbal Exposures, from two quarters prior, by the total amount collected via the monthly payments. Note: Your company’s share of Investment Income is calculated similar to above except it is multiplied by the amount of Investment Income earned on those funds collected via the monthly payments instead.

Example – 3rd quarter 2010 Reimbursement: Company Verbal Exposures reported for 1st Quarter 2010 = 500 Industry Verbal Exposures reported for 1st Quarter 2010 = 1,000,000 Total amount collected via the 3rd Quarter 2010 monthly payments = $9,000,000 Investment Income earned on 3rd Quarter 2010 monthly payments = $100,000 Quarterly Reimbursement = (500/1,000,000)*$9,000,000 = $4,500 Share of Investment Income = (500/1,000,000)*$100,000 = $50 Total Quarterly Reimbursement = $4,550

The Call Form data is also used in: Annual Cash Settlement (ACS): Purpose Using the latest available accident year data: Evaluates provisional financial transactions performed in previous calendar year Re-evaluates assessment and reimbursement calculations for all other prior years (typically 10 accident years included in each ACS) Accounts for all previous financial transactions for each member company as well as the time value of money

Annual Cash Settlement (ACS): The “Pot” of losses to be reimbursed for each accident year being evaluated Determined by NJAIRE Actuarial Committee using Reportable Loss and Loss Adjustment Expense data reported by all member companies Each company’s Assessment* per accident year , accounting for the time value of money – based on zero dollar threshold data * Calculated at the territory level for accident years 2007 and prior. For accident years 2008 and subsequent, this is calculated at the statewide level.

Annual Cash Settlement (ACS) (cont.): Each company’s Reimbursement* per accident year, accounting for the time value of money – based on verbal threshold data Re-distribution of investment income per accident year – based on verbal threshold data Each company’s share of the NJAIRE administrative expenses – based on zero dollar threshold data * Calculated at the territory level for accident years 2007 & prior. For accident years 2008 and subsequent, this is calculated at the statewide level.

Financial Impact on Companies The magnitude of the financial transactions: Approximately $6.5 million every quarter via the monthly payments and quarterly disbursements (the provisional financial transactions) Approximately $412 million every year via the Annual Cash Settlement True-up

Cost of Late, Erroneous Data The costs can be significant: Late Data - $50 per work day Resubmissions - $250 per account quarter Undetected Data Errors – can be over $1,000,000!

How can it be that much? The ultimate Annual Cash Settlement formula assesses and reimburses based on BI Claimants: by Threshold, Territory* & Accident Year BI Claimants reported incorrectly can potentially have a real financial impact *For accident years 2007 and prior

Exhibit B Scenario 1 - Putting just 3 BI Claimants in the wrong Threshold column can cost up to $409,000 Scenario 2 - Putting just 3 BI Claimants vs. Zero Dollar Threshold insured's in the wrong Territory can cost up to $382,000

Detecting Errors at the Call Form Level What is done today? ISO performs high level data checks upon receipt and in the financial transaction process Companies are contacted regarding unusual data

AIPSO performs completeness checks and detailed checks on claim samples in the compliance audit process This covers about 10 companies per year The ISO and AIPSO checks alone can not catch everything

What can companies do? What kind of reviews will be useful? What types of errors are commonly made? How many can be caught by expending a reasonable amount of company resources?

Exposures: Car months, Written, Cumulative, Threshold Common errors: Exposures: Car months, Written, Cumulative, Threshold BI Claimants: Threshold, Territory * Territory errors apply to accident year 2007 & prior

Common errors: Reportable Claimants: All BI Paid Claimants included ALAE, ULAE: Reported separately and combined

Review needs: Current & previous quarter’s data Knowledge about your company About 15 minutes per quarter

Exposures by Threshold: Data needed: Statewide totals General expectation: Volume +/- 5% Zero Dollar Exposures as % of total: +/- 2%

Company A: Earned Exposures by Quarter

Company B: Earned Exposures by Quarter

BI Paid Claimants by Insured Threshold: Data needed: Statewide totals, all Accident Years General expectation: Similar volume per Accident Year, allowing for development Claim Frequencies per Threshold similar, averaging 0.5 – 1.5 per 100 Car Years

Company A: BI Paid Claimants by Quarter

Company B: BI Paid Claimants by Threshold and Quarter

Reportable Claimants & Losses: Data needed: Statewide totals, all Accident Years General expectations: Percentage of Verbal: 4 - 28%, average 12% Reportable Losses: $3,000 - $15,000, average $ 7,900

Company A: Verbal and Reportable Claimants by Quarter

Loss Adjustment Expenses: Data needed: Statewide totals, all Accident Years General expectation: 5 – 35% of Reportable Losses (Note: may lag) Company Methodology: Formula?

More difficult errors to detect: Territory errors * Completeness Checks that could help: Visual Checks Territory errors apply to accident year 2007 & prior

Visual Checks by Territory *: Possible problem areas – Large change in Exposures by Quarter Exposures in Other than Current Accident Year for the Current Quarter Zero Dollar Exposures > Verbal Exposures Territory applies to accident year 2007 & prior. Same checks can be performed at Statewide or Territory level for accident year 2008 & subsequent depending on how each company opts to report their data.

Visual Checks by Territory *: Possible problem areas – BI Paid Claimants vs. Zero Dollar > BI Paid Claimants vs. Verbal Reportable Claimants > BI Paid Claimants vs. Verbal Reportable Losses w/o Reportable Claimants, and vice-versa Territory applies to accident year 2007 & prior. Same checks can be performed at Statewide or Territory level for accident year 2008 & subsequent depending on how each company opts to report their data.

Checks that could help: Completeness Other Existing Internal Data Special Reports

Summary Poor data quality can have a large, hidden impact on your company’s bottom line With a reasonable effort you can help ensure that your company is properly assessed and reimbursed

REMEMBER, ISO is here to help make your reporting of NJAIRE data as easy and accurate as possible. If you have any questions, you can email njairecentralprocessor@iso.com or contact: Mike McAuley, mmcauley@iso.com (201-469-2323) Pat Lloyd, plloyd@iso.com (201-469-2326) Katrine Pertsovski, kpertsovski@iso.com (201-469-3841) You can also visit the NJAIRE website at www.njaire.org. It contains a Frequently Asked Questions section, copies of all reporting forms, seminar information including the PowerPoint presentations, Plan of Operation, Procedure Manual, etc.