1. Welcome to Mutual Insurance Day 2016 Pamic.org Mutual Insurance Day May 2, 2016 Harrisburg, PA

2. Welcome to Mutual Insurance Day 2016 Pamic.org Program Welcome Remarks Insurance Department – (not available) PAMIC Legislative Overview, Ron Gallagher Keynote 1: Senator John Eichelberger Mid-Atlantic Update: Erin Collins, NAMIC Keynote 2: Dave Patti, PA Business Council Lunch Legislative Visits Ice Cream Social

3. Welcome to Mutual Insurance Day 2016 Pamic.org Welcome Remarks What’s in your Packet Agenda Grassroots Brochure Save the Date/PAC flyer Walking Map Issue Papers Hints & Tips for your meeting Tracked Legislation Schedule of Visits Ice Cream Social Flyer

4. Welcome to Mutual Insurance Day 2016 Pamic.org PAMIC Legislative Overview Setting the Stage Hot Issues Premium Tax Sales Tax Solvency Monitoring/Financial Exams Personnel Changes at PID Peak at new legislation: 2014 – present Grassroots Program The “PAC Pitch”

5. Welcome to Mutual Insurance Day 2016 Pamic.org PAMIC Legislative Overview: Setting the Stage

6. Welcome to Mutual Insurance Day 2016 Pamic.org PAMIC Legislative Overview: Setting the Stage

7. Welcome to Mutual Insurance Day 2016 Pamic.org PAMIC Legislative Overview: Setting the Stage

8. Welcome to Mutual Insurance Day 2016 Pamic.org PAMIC Legislative Overview: Setting the Stage

9. Welcome to Mutual Insurance Day 2016 Pamic.org PAMIC Legislative Overview: Setting the Stage

10. Welcome to Mutual Insurance Day 2016 Pamic.org PAMIC Legislative Overview: Setting the Stage

11. Welcome to Mutual Insurance Day 2016 Pamic.org Hot Issues: Premium Tax Governor's FY 2016/2017 Budget requests a 25% increase in the premium tax from 2% to 2.5% Background The State Fire Commissioner, a former Senator, Tim Solobay, brought the proposal to the Governor’s attention as a way to provide additional funding to Volunteer Fire Departments in December 2015. Premium taxes operate in a “retaliatory” manner on Pennsylvania domestics operating in other States raising additional tax revenue outside of Pennsylvania Erie Insurance Group publicly states an increase in the premium tax would cost Erie policyholders an additional $10.8 million to Pennsylvania and $14.5 million to other States. Solution: Oppose any increase in the Premium tax

12. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Hot Issues: Sales Tax Governor’s proposed FY 2016/2017 Budget expands the sales tax base making many items and services taxable. Background Many services purchased by insurers such as legal services (for both corporate and policyholder) are proposed to be taxed raising costs for insurers that will ultimately be reflected in rates. Solution Oppose any increase in the sales tax base. Educate legislators on the impact to policyholders and administrative costs. $

13. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Hot Issues: Solvency Monitoring/Financial Exams To work with the PA Insurance Department (PID) to ensure adequate resources are available for solvency monitoring to protect consumers and avert Guarantee Fund assessments. At the same time, we want to guarantee that Pennsylvania's Mutual industry stays competitive and thrives.

14. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Hot Issues: Solvency Monitoring/Financial Exams Factors Affecting current and prospective Exam Costs Greater Federal scrutiny on financial firms (Sarbanes-Oxley early 1990’s, Dodd-Frank 2010) Greater International intrusion (Solvency I, Solvency II) and FIO Regulators adopting “Enterprise Risk Management” exam protocols following Dodd-Frank Corporate Disclosure Annual Statement (PID drafting legislation)

15. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Historical Look at PID Financials PID Budget dropped from high watermark of $27 million in 2007 to a low of $18 million (2010 through 2014) PID Complement dropped from 320 regulatory staff in 2007 to 222 (2011 through present) Combination forced PID to out- source exams PID recognized challenges with recruiting, retaining, and compensation of PID examiners

16. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Sample Exam Cost PAMIC Survey shows range in increase from 11% to 235% Some companies report exams cost doubling each exam

17. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Changes at PID Executive Level Personnel Amy Daubert, Chief Counsel Joe DiMemmo, Deputy, Corporate & Financial Regulation Melissa (Missie) Griener, Director, Financial Exams Welcome to Addison, new baby Insurance Commissioner

18. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Legislation under Watch 40 bills actively being monitored Committees Being monitored: House Insurance House Appropriations House Transportation House Labor and Industry House Judiciary Senate Banking and Insurance Senate Appropriations Senate Transportation Senate Labor and Industry

19. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Legislative Issues under Watch Asbestos Trust Fund Transparency Corporate Governance Annual Disclosure Statement Increase in Auto Minimum Limits Statute of limitations on filing law suits Workers’ Compensation Medical Guidelines Emergency/VFD Reimbursements Self Storage Insurance Service Contracts Flood Insurance Budget (Premium Tax, Sales Tax, Increased Fees) Internal Audit & Audit Committee Regulation

20. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org New Legislation 2014 - Present HB 1638 (now Act 13 of 2016): Amends the Motor Vehicle Physical Damage Appraiser Act further providing for compliance with act by adding that an appraiser may prepare a repair estimate obtained by personal inspection or by photographs, videos or telephonic means. An appraiser may not require the owner of a vehicle to submit photographs or videos in order to obtain an appraisal. The appraiser shall furnish a legible copy of his appraisal with the repair shop selected by the consumer to make the repairs and also furnish a copy to the owner of the vehicle. Further provides supplemental repair estimates that become necessary after the repair work is initiated due to discovery of additional damage to the motor vehicle may be made by personal inspection or by photographs, videos or telephonic means, providing that in the case of disputed repairs a personal inspection shall be required.

21. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org New Legislation 2014 - Present SB 494: Now Act 3, 2016: Amends the Flood Insurance Education and Information Act by repealing the required report under the Act. HB 1481: Now Act 78 of 2013: Amends the Insurance Company Law adding an article providing for risk management and own risk solvency assessment to require an insurer or insurance group to maintain a risk management framework and complete an own risk and solvency assessment (ORSA), set forth the requirements for filing an ORSA summary report with the Insurance Department, and provide for the confidential treatment of the ORSA, the ORSA summary report and other ORSA- related information. The legislation allows for a one-year compliance timeframe if certain ORSA standards are required. The bill provides for online filing as laid out in the legislation.

22. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org New Legislation 2014 - Present HB 1846, Now Act 184 of 2014, Amends the Workers Compensation Act further providing for schedule of compensation by adding that the reimbursement for drugs and professional pharmaceutical services shall be limited to 110 percent of the average wholesale price (AWP) of the product, calculated on a per unit basis, as of the date of dispensing. A physician seeking reimbursement for drugs dispensed by a physician shall include the original manufacturer's National Drug Code (NDC) number. In no event may a physician seek reimbursement in excess of 110 percent of the AWP of the drugs dispensed by a physician as determined by reference to the original manufacturer's NDC number. A repackaged NDC number may not be used and will not be considered the original manufacturer's NDC number. If a physician seeking reimbursement for drugs dispensed by a physician does not include the original manufacturer's NDC number, reimbursement shall be limited to 110 percent of the AWP of the least expensive clinically equivalent drug, calculated on a per unit basis. Provides no outpatient provider, other than a state-licensed pharmacy, may seek reimbursement for certain dispensed drugs as provided in the legislation. Further provides no outpatient provider, other than a state-licensed pharmacy, may seek reimbursement for an over-the-counter drug. Also requires the Workers' Compensation Advisory Council to annually conduct a study of the impact of this new subclause including calculation of the savings achieved in the dispensing of pharmaceuticals. Within 18 months, the Pennsylvania Compensation Rating Bureau shall calculate the savings achieved through the implementation of the changes. For calendar year 2016, the amount of the savings shall be used to provide an immediate reduction in rates, equal to the savings, applicable to employers' workers compensation policies.

23. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org New Legislation 2014 - Present SB 914, now Act 46 of 2013, The Insurance Regulation and Oversight Fund Act creates the Insurance Regulation and Oversight Fund as a dedicated funding structure for the Insurance Department. The fund will consist of fifty percent of all fees, reimbursements, funds, money, and other revenues collected, received, or derived by the Insurance Department, as well as 100 percent of all penalties, fines assessments, augmentations, or settlements received by the Insurance Department from persons and entities under the supervision of the Insurance Department.

24. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org New Legislation 2014 - Present SB 1356, now Act 182 of 2014, Amends the Unfair Insurance Practices Act defining "affiliated insurer" and adding affiliated insurers under the definition of "renewal" or "to renew." SB 1357, now Act 183 of 2014, Amends the Insurance Company Law defining "affiliated insurer" and adding affiliated insurers under the definition of "renewal" or "to renew."

25. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Grassroots Program The “PAC Pitch”

26. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Keynote Speaker 1: Senator John Eichelberger

27. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Mid-Atlantic Update: Erin Collins, NAMIC

28. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Keynote Speaker 2: David Patti, President & CEO, PA Business Council and Roundtable The Pennsylvania Business Council envisions a Commonwealth in which residents enjoy a very high quality of life in sustainable communities, where those who are seeking employment find high quality jobs with good compensation, and where those who invest their capital and hard work can grow firms that flourish and are profitable. In order to create and renew this vision of Pennsylvania, the Pennsylvania Business Council will work aggressively to: define key long-term public policy strategies and solutions that make the Commonwealth more competitive; and elect candidates for office who offer the best capacity to create and sustain a better Pennsylvania.

29. Welcome to Mutual Insurance Day 2016 www.pamicwww.pamic.org Lunch: Leland Room Visit with Legislators, 2:00 pm till 3:30 pm Ice Cream Social, 3:30 pm in Capitol Rotunda