Welcome ! Residual Market Audit Services NJ AIRE Compliance Audit Program Mark LoVuolo, AIS, API Jack O’Keefe

What is 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  An organization that uses a team management approach

AIPSO’s Mission AIPSO’s mission is to provide high quality services for the automobile insurance residual market at the lowest possible cost. AIPSO will build on its successes as a leader in helping manage the automobile insurance residual market. We will continually rise to the challenge of being a national organization that serves local customer needs. We will remain flexible and will proactively meet the needs of our divergent customer groups at both national and state levels.

1 – Certified Internal Auditor (CIA) 1 – CIA candidate 2 – Certified Property & Casualty Underwriters (CPCU) 2 – pursuing INS or CPCU designations 1 – 30+ years of Claims Experience 30 – Independent Consultants 14 Members of our RMAS staff ‘ “Who is Residual Market Audit Services” (RMAS)

 Provide on-site audits of companies for automobile insurance market mechanisms. What Does RMAS Do?

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

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

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

Audit Process Stage 1: Planning a. Company Selection b. Communication with ISO 1. Call Forms 2. Statement of Compliance 3. Concerns with Companies

Audit Process Stage 1: Planning (con’t) c. Engagement Letter – Includes request for data 1. All private passenger BI claims 2. All reportable claims 3. All other claims d. Company contact information received

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

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

Audit Process Stage 2: Fieldwork c. File review (con’t) Workpapers

Audit Process Stage 2: Fieldwork d.Fieldwork summary e.Closing meeting

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

Audits (32 Companies Reviewed) Reportable Claims Total files reviewed – 1,749 Number of Claimants Over Reported – 323 or 18.5% Dollar Amount Over Reported - $4,627,210

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 – 2005 Audits (32 Companies Reviewed) All Bodily Injury Claims: Total files reviewed – 2,562 Number of Claimants Under Reported – 107 or 4% Dollar Amount Under Reported - $958,012

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 29 –30 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 Mark LoVuolo, AIS, API Jack O’Keefe