Welcome! Residual Market Audit Services NJ AIRE Compliance Audit Program Jack O’Keefe

Automobile Insurance Plan Service Organization AIPSO

AIPSO is… A management organization and service provider for the residual market with a home office in Johnston, RI A non-profit organization A national organization of about 400 employees An organization with 10 regional offices located throughout the country

AIPSO’s Mission AIPSO’s mission is to provide high quality services for the automobile insurance residual market at the lowest possible cost.

“Who is Residual Market Audit Services” (RMAS) ‘ 11 Members of our RMAS staff 1 – Certified Internal Auditor (CIA) 1 – CIA candidate 8 – pursuing INS or CPCU designations 1 – 30+ years of Claims Experience 30 – Independent Consultants

What Does RMAS Do? Provide on-site audits of companies for automobile insurance market mechanisms. CAIP NJSAIP MAIPF NJCAIP CALC MJUA

Purpose of RMAS To support Board of Directors (Governing Boards) in their management of Residual Market Automobile Programs

Purpose of Audits Audits are a management tool to ensure companies are handling and reporting policies and claims in compliance with a mechanism’s plan of operations.

Objective of NJAIRE Audits To ensure that companies are submitting complete and accurate data to the NJAIRE. Compliance - Data reported meets specifications in the Plan of Operations. Operational – Company’s internal controls are effective in processing and identifying NJAIRE business.

Audit Process Stage 1: Planning Company Selection Communication with ISO Call Forms Statement of Compliance Concerns with Companies

Audit Process Stage 1: Planning (con’t) c. Engagement Letter – Includes request for data All private passenger BI claims All reportable claims All other claims d. Company contact information received

Audit Process Stage 1: Planning (con’t) Receipt of company data Verification of data to call forms Complete sample selections h. Confirmation Letter

Audit Process Stage 2: Fieldwork Opening meeting b. Obtain internal procedures for reviewing data submissions c. File review Determination Forms

Audit Process Stage 2: Fieldwork File review Work-papers

Audit Process Stage 2: Fieldwork Fieldwork summary Closing meeting

Audit Process Stage 3: Reporting 1. Draft Report 2. Company’s Response 3. Final Report

2003 - 2007 Audits (54 Companies Reviewed) Reportable Claims Total claims reviewed – 2,667 Number of claims over reported – 400 or 15% Dollar amount over reported - $8,018,078

2003 - 2007 Audits Reasons for Over Reporting: Claimant or Insured Incorrect Threshold Unverified Claimant Threshold These two reasons account for 52% of reporting errors

Additional Reasons for Over Reporting Economic Loss Payment Included Claimant had pierced the threshold Claimant was not a NJ Resident Claim Occurred outside of NJ Expense Payments Included in Reporting Insured Vehicle was Commercial

Reporting Errors Incorrect Territory Codes Settlement Reported in an Incorrect Quarter or Year Over Reporting of the Dollar Amount

2003 – 2007 Audits (54 Companies Reviewed) All Bodily Injury Claims: Total claims reviewed – 4,593 Number of claims under reported – 175 or 3.8% Dollar amount under reported - $1,641,298 Number of claims over reported as BI claims - 222 or 4.8%

Reasons for Under Reporting Claimant had a Zero Dollar Threshold Insured had a Verbal Threshold Unverified Claimant Threshold

Reporting Errors Non Bodily Injury Paid Claims Bodily Injury Claims with No Payment Incorrect Territory Codes File not Settled in Reporting Year Settlement reported in Incorrect Quarter Incorrect Insured Threshold Commercial Bodily Injury Claims Paid

TIPS Plant your corn early “Easy Sleazy” in the third race at Monmouth Park Don’t say “Hi Jack” if you see me at the airport

NJAIRE Claim Handling TIPS Claims handlers should be familiar with the NJAIRE procedure manual – NJAIRE.org Know the requirements for verification of the claimant’s threshold (Pgs 31 –32 of the procedure manual) Use the NJAIRE recommended Claim Determination Form Check the final determination after claim is settled and before it is submitted to IT

QUESTIONS? What? Huh? What does it all mean?

Thank you! Residual Market Audit Services NJAIRE Compliance Audit Program Jack O’Keefe