1. May 9, 2012 ISO – NJAIRE Central Processor Mike McAuley
NJAIRE DATA REPORTING REQUIREMENTS
May 9, 2012
ISO – NJAIRE Central Processor
Mike McAuley

2. OVERVIEW Current Reporting Requirements
Call for Statistics Form #4 – Accident Year
2003 – Present
Use and Financial Impact of Data
Detecting Errors

3. Form #4 – Due Dates To ISO (other than CAIP) or AIPSO (CAIP only)
ACCOUNT QUARTER
DUE DATE
FIRST QUARTER
MAY 15
SECOND QUARTER
AUGUST 15
THIRD QUARTER
NOVEMBER 15
FOURTH QUARTER
FEBRUARY 15

4. Form #4 – Territory Reporting Options
Accident Year 2008 & subsequent
Procedure Manual Exhibit 11a
Statewide totals only
Standard ISO Territory Definitions (Exhibit 11)
Company Defined Territories
Accident Year 2007 & prior
Standard ISO Territory Definitions

5. Form #4 – Required Data
Earned Exposures, in car years, by insured threshold

6. Form #4 – Required Data
Paid Bodily Injury claimants against private passenger type autos subject to the No-Fault law
Accident Year 2008 & subsequent – by insured threshold and accident year
Accident Year 2007 & prior – by insured threshold, territory and accident year

7. Form #4 – Required Data Reportable Claimant Information
Reportable Claimant Loss Amounts
Number of Reportable Claimants
Loss Adjustment Expenses for Reportable Claimants (separately as Allocated and Unallocated or Combined)
Accident Year 2008 & subsequent – by accident year
Accident Year 2007 & prior – by territory and accident year

8. A Reportable Claimant is...
One that could not be made had the claimant selected the Verbal Threshold, AND
One where the claimant selected or defaulted to the Zero Dollar Threshold AND the insured selected the Verbal Threshold
...the basis for establishing NJAIRE

9. How are Reportable Claimants identified?

10. Reportable Claimant Determination Form Effective January 1, 2012 ALL member companies are required to utilize and maintain a copy of the form for ALL paid BI claimants, in paper or electronic form

11. Reportable Claimants to Verbal BI Accident Year 2006 (Individual insurers may vary)

12. Loss Severities by Year (Individual insurers may vary)

13. Use and Financial Impact of Data
Provisional Financial Transactions
Quarterly assessment (monthly payments)
Quarterly reimbursement, plus share of investment income
Annual Cash Settlement (ACS)
Magnitude of Financial Transactions
Cost of Late and Erroneous Data

14. Quarterly Assessment Multiply number of Zero Dollar Exposures
reported, from two quarters prior, by the
Assessment per Exposure
Example – 3rd Quarter 2011 Assessment:
Assessment per Exposure = $90
Zero Dollar Exposures 1st Quarter 2011 = 100
Quarterly Assessment = (100 * 90) = $9,000
Monthly Payments = 1/3 of Quarterly Assessment

15. Quarterly Reimbursement
Multiply company’s share of industry Verbal Exposures,
from two quarters prior, by total amount collected via
monthly payments and investment income earned
Example – 3rd Quarter 2011 Reimbursement:
Verbal Exposures 1st Quarter 2011 = 500
Industry Verbal 1st Quarter = 1,000,000
3rd Quarter 2011 Monthly Payments Collected = $9,000,000
Investment Income Earned 3rd Quarter = $100,000
Quarterly Reimbursement = (500/1,000,000) * $9,000,000 = $4,500
Share of Investment Income = (500/1,000,000) * $100,000 = $50
TOTAL Quarterly Reimbursement = $4,550

16. Annual Cash Settlement (ACS)
Purpose
Using latest accident year data:
True-up provisional financial transactions from previous calendar year
For all accident years:
Re-evaluate assessments
Re-evaluate reimbursements
Account for previous financial action
Re-distribute investment income
Share of administrative expenses
All calculations account for time value of money

17. Magnitude of Financial Transactions
Approximately $6 million every quarter via provisional financial transactions
Approximately $400 million every year via the Annual Cash Settlement True-Up

18. Cost of Late and Erroneous Data
Late Data - $50 per working day
Resubmissions - $250 per account quarter
Undetected Data Errors – can be over $1,000,000!

19. How can it be that much???
Ultimate ACS formula assesses and reimburses based on BI Claimants: by Threshold, Territory & Accident Year
BI Claimants reported incorrectly can have a significant financial impact

20. EXHIBIT A
Scenario 1 – Three BI claimants reported under wrong Threshold can cost up to $409,000
Scenario 2 – Three BI claimants vs. Zero Dollar insured’s reported under wrong Territory can cost up to $382,000

21. Detecting Errors at the Call Form Level
What is done today?
ISO -
High level data checks
Quarterly Submissions
Financial Transactions, including ACS
Company contact regarding questionable data
AIPSO –
Completeness/detailed checks on claim samples during compliance audit process

22. Common Errors Exposures: Car months, Written, Cumulative, Threshold
BI Claimants: Threshold, Territory
Reportable Claimants: ALL BI paid claimants included
LAE: Reported separately and combined

23. General Expectations for Review Purposes
Exposures by Threshold -
Volume: +/- 5%
Zero Dollar Exposures as % of total: +/- 2%
BI Paid Claimants by Insured Threshold –
Similar volume per accident year, allow for development
Claim frequencies per threshold similar: 0.5 – 1.5 per 100 car years exposure
Reportable Claimants & Losses –
Percentage of Verbal BI: 4 – 28%, average 12%
Reportable Loss Severity: $3,000 - $15,000, average $7,700
Loss Adjustment Expenses –
5 – 35% of Reportable Losses (may lag)
Company Methodology: Formula?

24. More difficult errors to detect:
Territory errors
Completeness
Additional checks that could help:
Territory errors – Visual checks
Additional visual checks
Zero Dollar Exposures > Verbal Exposures??
BI claimants vs. Zero Dollar > BI claimants vs. Verbal??
Reportable Claimants > BI claimants vs. Verbal??
Reportable Losses w/o Reportable Claimants, and vice versa
Completeness – Other existing internal data/special reports

25. 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

26. REMEMBER,
ISO is here to help make your reporting of NJAIRE data as easy and accurate as possible
Any questions? or you can contact me directly:
Mike McAuley, (201)
NJAIRE website, – FAQ’s, copies of all reporting forms, webinar information including .PPT presentations, Procedure Manual, Plan of Operation, etc.