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.

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

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

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 central processor - ISO. 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 claimants 2. All reportable claimants 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 Work-papers

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 64 Audits Completed Reportable Claims Total claimants reviewed – 3,036 Number of claimants over reported – 478 or 16% Dollar amount over reported - $8,914,271

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 (Accident Year 2007 and prior) Settlement Reported in an Incorrect Quarter or Year Over Reporting of the Dollar Amount

2003 – 2008 Audits 64 Audits Completed All Bodily Injury Claims: Total claimants reviewed – 5,340 Number of claimants under reported – 213 or 4% Dollar amount under reported - $1,967,748 Number of claimants over reported as BI claims or 4.1%

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 (Accident Year 2007 and prior) File not Settled in Reporting Year Settlement reported in Incorrect Quarter 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