1. Movie Ticket, $8; Popcorn, $5; Pay-as- you Drive Insurance, $1.10 Chet Szczepanski Chief Actuary Pennsylvania Insurance Department

2. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 A Regulatory Perspective!

3. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 What the law says! Rates shall be neither: Excessive, Inadequate, Unfairly Discriminatory.

4. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 The law tells us what rates can not be. The law does not tell us what rates should be. The law does not tell us how to determine rates.

5. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 The law gives the Commissioner considerable discretion!

6. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 In Pennsylvania, we rely on competition and competitive markets as much as possible.

7. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 Competitive markets require, among other things: Many buyers and sellers Freedom of entry and exit for both buyers and sellers No one buyer or seller sufficiently large to affect the price

8. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 The government HAS interfered in the personal auto market! The government mandates coverage, barring exit from the market for consumers.

9. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 Consequently, the government will serve its constituency by investigating such innovations and regulating their application!

10. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 An Actuarial Perspective!

11. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 AAA: Risk Classification Statement of Principles Three Primary Purposes: Protect programs financial soundness Enhance fairness Economic incentive

12. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 AAA: Risk Classification Statement of Principles Design considerations: Underwriting Marketing Program design Statistical considerations Operational considerations Hazard reduction incentive Public acceptability Causality Controllability

13. Movie Ticket, $8; Popcorn, $5; Pay- as-you Drive Insurance, $1.10 Conclusions: Innovation is necessary for a healthy market The government issues mandates as a result of public consensus There exists a tension between the government and innovators in mandated markets!