1. A. Overview of Current Reporting Requirements B. Quality Reviews

2. Reporting Requirements 1. Call Forms: Form # 4 – Accident Year 1999-present, for policies issued or renewed on or after 7/1/1999

3. Reporting Requirements Sample Form

4. Reporting Requirements Call Forms – Required Data For Accident Year 2008 & subsequent – Earned Exposures by Threshold – Current Account Quarter Only, in Car Years

5. Reporting Requirements

10. Earned Exposures by Threshold and Accident Year (Individual insurers may vary)

11. Reporting Requirements Exposure Thresholds for Accident Year 2008 (Individual insurers may vary)

12. Reporting Requirements Exposure Thresholds for Accident Year 2008 Individual Company (Actual Data: Minimum 10,000 Exposures)

13. Reporting Requirements Exposure Thresholds for Accident Year 2008 Individual Company (Actual Data: Minimum 10,000 Exposures)

14. Reporting Requirements Call Forms – Required Data (cont.) For Accident Year 2008 & subsequent – BI Paid Claimants by Insured Threshold and Accident Year For Accident Year 2007 & prior – BI Paid Claimants by Insured Threshold, Territory and Accident Year

15. Reporting Requirements 2004 Exposures (Insurers may vary) BI Paid Claimants (Insurers may vary)

16. Reporting Requirements Call Forms – Required Data (cont.) For Accident Year 2008 & subsequent: Reportable Claimant Loss Amounts and Number of Claimants by Accident Year Loss Adjustment Expenses for Reportable Claimants, Allocated and Unallocated (separately or combined)

17. Reporting Requirements Call Forms – Required Data (cont.) For Accident Year 2007 & prior: Reportable Claimant Loss Amounts and Number of Claimants by Territory and Accident Year Loss Adjustment Expenses for Reportable Claimants, Allocated and Unallocated (separately or combined)

18. Reporting Requirements A Reportable Claim is... One that could not be made had the claimant selected the Verbal Threshold (Tort Limitation), and One where the claimant had the Zero Dollar Threshold (No Tort Limitation) and the insured selected the Verbal Threshold...the basis for establishing NJAIRE

19. Reporting Requirements How are Reportable Claims identified? Via the Reportable Claim Determination Form: Policies issued or renewed on or after 7/1/1999* *This is when the definition of the Verbal Threshold changed.

20. Reporting Requirements

21. How are Reportable Claims identified? (cont.) Reportable Claims should be reported consistent with the facts involved in the settling of the claim.

22. Reporting Requirements Reportable Claimants to Verbal BI by Accident Year (Individual insurers may vary)

23. Reporting Requirements Reportable Claimants to Verbal BI Accident Year 2004 (Individual insurers may vary)

24. Reporting Requirements Loss Severities by Year (Individual insurers may vary)

25. Reporting Requirements 2. Due Dates: to ISO (other than CAIP) or AIPSO (CAIP only): ACCOUNT QUARTERDUE DATE FIRST QUARTERMAY 15 SECOND QUARTERAUGUST 15 THIRD QUARTERNOVEMBER 15 FOURTH QUARTERFEBRUARY 15

26. Quality Reviews 1. Use of the Data a. Provisional Financial Transactions b. Annual Cash Settlement (ACS) 2. Financial Impact on Companies 3. Cost of Late, Erroneous Data 4. Detecting Errors at the Call Form Level

27. 1.Use of the Data The Call Form data is used to calculate: Provisional Financial Transactions Each company’s quarterly assessment (monthly payments) Each company’s quarterly reimbursement, plus share of investment income

28. 1. Use of the Data (cont.) Provisional Financial Transactions: Quarterly Assessment - The quarterly assessment is determined by multiplying the number of Zero Dollar Exposures reported by your company, from two quarters prior, by the Assessment per Exposure determined by the Actuarial Committee for that Accident Year. Example (Exhibit A) – 3 rd Quarter 2009 Assessment: Assessment per Exposure = $100 Zero Dollar Exposures reported for 1 st Quarter 2009 = 100 Quarterly Assessment = $10,000 Monthly Payments = $3,333.33

29. 1.Use of the Data (cont.) Provisional Financial Transactions (cont.): Quarterly Disbursement – The quarterly disbursement is determined by multiplying your company’s share of the Industry-wide Verbal Exposures, from two quarters prior, by the total amount collected via the monthly payments. Note: Your company’s share of Investment Income is calculated similar to above except it is multiplied by the amount of Investment Income earned on those funds collected via the monthly payments instead.

30. 1.Use of the Data (cont.) Example – 3 rd quarter 2009 Reimbursement: Company Verbal Exposures reported for 1 st Quarter 2009 = 500 Industry Verbal Exposures reported for 1 st Quarter 2009 = 1,000,000 Total amount collected via the 3 rd Quarter 2009 monthly payments = $10,000,000 Investment Income earned on 3 rd Quarter 2009 monthly payments = $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

31. 1. Use of the Data (cont.) 1. Use of the Data (cont.) The Call Form data is also used in: Annual Cash Settlement (ACS): Purpose Using the latest available accident year data: Evaluates provisional financial transactions performed in previous calendar year Re-evaluates assessment and reimbursement calculations for all other prior years (typically 10 accident years included in each ACS) Accounts for all previous financial transactions for each member company as well as the time value of money

32. 1. Use of the Data (cont.) 1. Use of the Data (cont.) Annual Cash Settlement (ACS): The “Pot” of losses to be reimbursed for each accident year being evaluated Determined by NJAIRE Actuarial Committee using Reportable Loss and Loss Adjustment Expense data reported by all member companies Each company’s Assessment* per accident year, accounting for the time value of money – based on zero dollar threshold data * Calculated at the territory level for accident years 2007 and prior. For accident years 2008 and subsequent, this is calculated at the statewide level.

33. 1. Use of the Data (cont.) 1. Use of the Data (cont.) Annual Cash Settlement (ACS) (cont.): Each company’s Reimbursement* per accident year, accounting for the time value of money – based on verbal threshold data Re-distribution of investment income per accident year – based on verbal threshold data Each company’s share of the NJAIRE administrative expenses – based on zero dollar threshold data * Calculated at the territory level for accident years 2007 & prior. For accident years 2008 and subsequent, this is calculated at the statewide level.

34. 2.Financial Impact on Companies The magnitude of the financial transactions: $8 million every quarter via the monthly payments and quarterly disbursements (the provisional financial transactions) $430 million every year via the Annual Cash Settlement True-up

35. 3.Cost of Late, Erroneous Data The costs can be significant: Late Data - $50 per work day Resubmissions - $250 per account quarter Undetected Data Errors – can be over $1,000,000!

36. 3.Cost of Late, Erroneous Data (cont.) How can it be that much? The ultimate Annual Cash Settlement formula assesses and reimburses based on BI Claimants: by Threshold, Territory* & Accident Year BI Claimants in the wrong place have a real financial impact *For accident years 2007 and prior

37. 3.Cost of Late, Erroneous Data (cont.) Putting just 3 BI Claimants in the wrong Threshold column can cost up to $254,000 – Scenario 1 * Putting just 3 BI Claimants vs. Zero Dollar Threshold insured's in the wrong Territory can cost up to $227,000 – Scenario 2 * * Exhibit B

38. 4.Detecting Errors at the Call Form Level What is done today? ISO performs high level data checks upon receipt and in the financial transaction process Companies are contacted regarding unusual data

39. 4.Detecting Errors at the Call Form Level (cont.) AIPSO performs completeness checks and detailed checks on claim samples in the compliance audit process This covers about 10 companies per year The ISO and AIPSO checks alone can not catch everything

40. 4.Detecting Errors at the Call Form Level (cont.) What can companies do? What kind of reviews will be useful? What types of errors are commonly made? How many can be caught by expending a reasonable amount of company resources?

41. 4.Detecting Errors at the Call Form Level (cont.) Common errors: Exposures: Car months, Written, Cumulative, Threshold BI Claimants: Threshold, Territory * * Territory errors apply to accident year 2007 & prior

43. 4.Detecting Errors at the Call Form Level (cont.) Common errors: Reportable Claimants: All BI Paid Claimants included ALAE, ULAE: Reported separately and combined

45. 4.Detecting Errors at the Call Form Level (cont.) Review needs: Current & previous quarter’s data Knowledge about your company About 15 minutes per quarter

46. 4.Detecting Errors at the Call Form Level (cont.) Exposures by Threshold: Data needed: Statewide totals General expectation: Volume +/- 5% Zero Dollar Exposures as % of total: +/- 2%

47. 4.Detecting Errors at the Call Form Level (cont.) Company A: Earned Exposures by Quarter

48. 4.Detecting Errors at the Call Form Level (cont.) Company B: Earned Exposures by Quarter

49. 4.Detecting Errors at the Call Form Level (cont.) BI Paid Claimants by Threshold: Data needed: Statewide totals, all Accident Years General expectation: Similar volume per Accident Year, allowing for development Claim Frequencies per Threshold similar, averaging 0.5 – 1.5 per 100 Car Years

50. 4.Detecting Errors at the Call Form Level (cont.) Company A: BI Paid Claimants by Quarter

51. 4.Detecting Errors at the Call Form Level (cont.) Company B: BI Paid Claimants by Threshold and Quarter

52. 4.Detecting Errors at the Call Form Level (cont.) Reportable Claimants & Losses: Data needed: Statewide totals, all Accident Years General expectations: Percentage of Verbal: 4 - 28%, average 15% Reportable Losses: $3,000 - $15,000, average $ 7,500

53. 4.Detecting Errors at the Call Form Level (cont.) Company B: Verbal and Reportable Claimants by Threshold and Quarter

54. 4.Detecting Errors at the Call Form Level (cont.) Loss Adjustment Expenses: Data needed: Statewide totals, all Accident Years General expectation: 5 – 35% of Reportable Losses (Note: may lag) Company Methodology: Formula?

55. 4.Detecting Errors at the Call Form Level (cont.) More difficult errors to detect: Territory errors * Completeness Checks that could help: Territory errors * Visual Checks * Territory errors apply to accident year 2007 & prior

56. 4.Detecting Errors at the Call Form Level (cont.) Visual Checks by Territory *: Possible problem areas – Large change in Exposures by Quarter Exposures in Other than Current Accident Year for the Current Quarter Zero Dollar Exposures > Verbal Exposures * Territory applies to accident year 2007 & prior. Same checks can be performed at Statewide or Territory level for accident year 2008 & subsequent depending on how each company opts to report their data.

57. 4.Detecting Errors at the Call Form Level (cont.) Visual Checks by Territory *: Possible problem areas – BI Paid Claimants vs. Zero Dollar > BI Paid Claimants vs. Verbal Reportable Claimants > BI Paid Claimants vs. Verbal Reportable Losses w/o Reportable Claimants, and vice-versa * Territory applies to accident year 2007 & prior. Same checks can be performed at Statewide or Territory level for accident year 2008 & subsequent depending on how each company opts to report their data.

58. 4.Detecting Errors at the Call Form Level (cont.) Checks that could help: Completeness Other Existing Internal Data Special Reports

59. Summary 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

60. REMEMBER, ISO is here to help make your reporting of NJAIRE data as easy and accurate as possible. If you have any questions, you can email njairecentralprocessor@iso.com or contact: njairecentralprocessor@iso.com Mike McAuley, mmcauley@iso.com (201-469-2323)mmcauley@iso.com Pat Lloyd, plloyd@iso.com (201-469-2326)plloyd@iso.com You can also visit the NJAIRE website at www.njaire.org. It contains a Frequently Asked Questions section, copies of all reporting forms, seminar information including the PowerPoint presentations, Plan of Operation, Procedure Manual, etc.www.njaire.org