Casualty Actuarial Society Seminar on Ratemaking March 7 - 9, 2007 REG-1: “Regulatory Roundtable Discussion” Chuck Romberger, ACAS, CPCU, ARM

2 Pennsylvania Statutory Rate Filing Requirements Climate, Process, “Hot” Issues Potential Legislation

3 Statutory Rate Filing Requirements Personal Auto Homeowners Workers Compensation Medical Malpractice & Other Commercial

4 Statutory Rate Filing Requirements Personal Auto – Prior Approval – Review period: 60 days + 30 by extension – Exception: T.31 Ch. 130 (Pers. Auto & HO) Promotes competition Permits certain decreases in currently approved rates Decreases up to 10% either by coverage or line of ins. “File-and-Use” treatment

5 Statutory Rate Filing Requirements Homeowners – Prior Approval – Review period: 30 days + 30 by extension – Exception: T.31 Ch. 130 (Pers. Auto & HO) (details not repeated – see Personal Auto slide)

6 Statutory Rate Filing Requirements Workers Compensation – Insurer filings LCMs: file-and-use (30-day waiting period) Others: prior approval (30 days days by ext.) – Exs. large deductible, sub-classifications,… – Rating organization filings Prior approval (30 days days by extension) Must annually file loss cost revisions & insurers must adopt on the date approved (usually April 1 st )

7 Statutory Rate Filing Requirements Medical Malpractice & Other Com’l (1 of 2) – Large Commercial Risks No filing requirement! – JUA & Assigned Risks Prior approval – Review period: 45 days + 45 days by extension

8 Statutory Rate Filing Requirements Medical Malpractice & Other Com’l (2 of 2) – Small commercial risks Prior approval: initial rates & changes >10% in agg. – Review period: 45 days + 45 days by extension File-and-Use: changes 10% or less in agg. – Waiting period: 45 days Use-and-File: rates for individual insureds (25%) – File within 30 days of effective date

9 Statutory Rate Filing Requirements For additional information on Pennsylvania’s filing requirements, please see our website at: a=1280&Q= a=1280&Q= Or me:

10 Climate, Process, “Hot” Issues Personal Auto – Top 20 writers are requested to provide extensive data for Department analysis – Department considers rate indications at a level between statewide & company rating territories for all companies – We frequently see Phila. indications below R.O.S., consistent w/ ISO & PCI Stat Data

11 Climate, Process, “Hot” Issues Homeowners – Top 20 writers are requested to provide additional data for Department analysis – Department closely monitors any potential reductions in coverage or limits

12 Climate, Process, “Hot” Issues Personal Auto & Homeowners – Non-Traditional Rating Approaches (1 of 2) More tiers & rating territories Rating territories varying by coverage Complex rating variables & algorithms New & unusual characteristics being considered – Ex. number of flower shops per area or home improvement stores sales per area…

13 Climate, Process, “Hot” Issues Personal Auto & Homeowners – Non-Traditional Rating Approaches (2 of 2) Main concerns – Renewal impacts (conflicts with our laws & regulations) – Fairness, accuracy and potential disparate impacts

14 Climate, Process, “Hot” Issues Workers Compensation – Companies are required to adopt bureau loss costs on the date approved by the Department – Companies can modify LCMs at any time

15 Climate, Process, “Hot” Issues Medical Malpractice & Other Com’l – 2007 Med Mal Capacity Study is underway Limits are currently $500,000/$1,500,000 Comm. didn’t find sufficient capacity in 2005 – Physician & Surgeon rates have not changed much since 2005 – Many new writers in the market in the last 5 years 7 domestics, 6 foreign, 2 surplus lines, & 38 RRGs

16 Potential Legislation Personal Auto – HB 34 (2007) – (A change to “plain language”?) – Amend “tort” to “right to sue” – Increase the minimum limits under the MVFRL From 15/30/5/5 to 25/50/10/10 – Require stacked BI limits – Require an extensive “menu” of coverage options – Possibly require Comp & Coll

17 Potential Legislation Credit / Insurance Scoring – HB 94 (2007) – Legislative proposals are submitted on this topic almost annually in Pennsylvania. – Scoring is not directly addressed in our law… currently. – Underwriting guidelines/practices do not required our prior review and/or approval. – We have not approved a personal lines rate/rule filing that contains credit scoring.

18 Questions???