November 5, 2014 ISO – NJAIRE Central Processor Presented by: Mike McAuley

 Current Reporting Requirements Call for Statistics Form #4 – Accident Year 2005 – Present  Most Recent Developments  Use and Financial Impact of Data  Detecting Errors & Benchmark Guidelines

ACCOUNT QUARTER DUE DATE FIRST QUARTERMAY 15 SECOND QUARTERAUGUST 15 THIRD QUARTERNOVEMBER 15 FOURTH QUARTERFEBRUARY 15

 Accident Year 2008 & subsequent  Procedure Manual Exhibit 11a 1. Statewide totals only 2. Standard ISO Territory Definitions (Exhibit 11) 3. Company Defined Territories  Accident Year 2007 & prior  Standard ISO Territory Definitions

 Bodily Injury Earned Exposures, in car years, by insured threshold – data subject to change

 Paid Bodily Injury claimants against private passenger type autos subject to the No-Fault law  Accident Year 2008 & subsequent – by insured threshold and accident year  Accident Year 2007 & prior – by insured threshold, territory and accident year

Reportable Claimant Information  Reportable Claimant Loss Amounts  Number of Reportable Claimants  Loss Adjustment Expenses for Reportable Claimants (separately as Allocated and Unallocated or Combined)  Accident Year 2008 & subsequent – by accident year  Accident Year 2007 & prior – by territory and accident year

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

 Reportable Claimant Determination Form – alternate electronic version released – January 31, 2014  With built-in logic it will further assist members who do not have a systematic approach already in place to come to the proper determination  Presentation (.PPT) from June 2, 2014 webinar focused solely on the Annual Cash Settlement (ACS), including calculations  Both available on the NJAIRE website (

 Provisional Financial Transactions Quarterly assessment (monthly payments) Quarterly reimbursement, plus share of investment income  Annual Cash Settlement (ACS)  Magnitude of Financial Transactions  Cost of Late and Erroneous Data

Multiply number of Zero Dollar Exposures reported, from two quarters prior, by the Assessment per Exposure Example – 3 rd Quarter 2013 Assessment: Assessment per Exposure = $100 Zero Dollar Exposures 1 st Quarter 2013 = 100 Quarterly Assessment = (100 * 100) = $10,000 Monthly Payments = 1/3 of Quarterly Assessment

Multiply company’s share of industry Verbal Exposures, from two quarters prior, by total amount collected via monthly payments and investment income earned Example – 3 rd Quarter 2013 Reimbursement: Verbal Exposures 1 st Quarter 2013 = 500 Industry Verbal 1 st Quarter = 1,000,000 3 rd Quarter 2013 Monthly Payments Collected = $10,000,000 Investment Income Earned 3 rd Quarter = $100,000 Quarterly Reimbursement = (500/1,000,000) * $10,000,000 = $5,000 Share of Investment Income = (500/1,000,000) * $100,000 = $50 TOTAL Quarterly Reimbursement = $5,050

 Purpose  Using latest accident year data : True-up provisional financial transactions from previous calendar year For all accident years: Re-evaluate assessments Re-evaluate reimbursements Account for previous financial action Re-distribute investment income Share of administrative expenses All calculations account for time value of money

$6 million  Approximately $6 million every quarter via provisional financial transactions $375 million  Approximately $375 million every year via the Annual Cash Settlement True-Up

 Late Data - $50 per working day  Resubmissions - $250 per account quarter  Undetected Data Errors – can be over $1,000,000!

How can it be that much??? Ultimate ACS formula assesses and reimburses based on BI Claimants : by Threshold, Territory & Accident Year BI Claimants reported incorrectly can have a significant financial impact

$409,000  Scenario 1 – Three BI claimants reported under wrong Threshold can cost up to $409,000 $382,000  Scenario 2 – Three BI claimants vs. Zero Dollar insured’s reported under wrong Territory can cost up to $382,000

What is done today?  ISO -  High level data checks  Quarterly Submissions  Financial Transactions, including ACS  Company contact regarding questionable data  AIPSO –  Completeness/detailed checks on claim samples during compliance audit process

 Exposures by Threshold -  Volume: +/- 5%  Zero Dollar Exposures as % of total: +/- 2%  BI Paid Claimants by Insured Threshold –  Similar volume per accident year, allow for development  Claim frequencies per threshold similar: 0.5 – 1.5 per 100 car years exposure  Reportable Claimants & Losses –  Percentage of Verbal BI: 4 – 28%, average 9-12%  Reportable Loss Severity: $3,000 - $15,000, average $7,700  Loss Adjustment Expenses –  5 – 35% of Reportable Losses (may lag)  Company Methodology: Formulaic?

More difficult errors to detect:  Territory errors  Completeness Additional checks that could help:  Territory errors – Visual checks  Additional visual checks  Zero Dollar Exposures > Verbal Exposures??  BI claimants vs. Zero Dollar > BI claimants vs. Verbal??  Reportable Claimants > BI claimants vs. Verbal??  Reportable Losses w/o Reportable Claimants, and vice versa  Completeness – Other existing internal data/special reports

 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

 ISO is here to help make your reporting of NJAIRE data as easy and accurate as possible  Any questions? or you can contact me directly:  Mike McAuley, (201)  NJAIRE website, – FAQ’s, copies of all reporting forms, webinar information including.PPT presentations, Procedure Manual, Plan of Operation, etc.