1. CAS Ratemaking Seminar Non Medical Professional Liability Pricing Stephen Kantor, FCAS, MAAA March 7, 2002

2. Fireman's Fund Interstate2 Data Issues  Buried within Annual Statement  Often controlled by producer  Difficult to look at industry data  Need specific filing information  Impact from surplus lines

3. Fireman's Fund Interstate3 Typical Rating Factors  Step rate  Area of practice  Size of firm  State/Territory  Claims history

4. Fireman's Fund Interstate4 Initial Pricing Often Shopped By Producer  Has certain price in mind  Based on current carrier  Limited data available Based on Competitor  Look at filings  Read the market

5. Fireman's Fund Interstate5 On Going Pricing Premium and Loss Experience  Sparse  Green  Volatile Can you combine with other programs? Can you compare to industry data?

6. Fireman's Fund Interstate6 Two Distinct Application Types  Flat Price  More complicated

7. Fireman's Fund Interstate7 Flat Priced  One size fits all  “Cash with APP”  Application asks 4-5 questions which basically ask Is this a typical risk? Any claims?  Often Association sponsored

8. Fireman's Fund Interstate8 Lawyers  State/Territory  Step rate  Area of practice  Size of Firm – number of lawyers  Claims history  Deductible  Defense outside limit  Other factors often built in to IRM

9. Fireman's Fund Interstate9 Lawyers Area of Practice % of PracticeCredit/Debit Entertainment 1- 10 0% 11-20 +5% Over 20 +10% Real Estate 1- 5 10% 6-20 +5% 21-50 +10% Over 50 +20%

10. Fireman's Fund Interstate10 Lawyers Area of Practice % of PracticeCredit/Debit Litigation Defense 1- 25 -5% 26-50 -15% Over 50 -33% Litigation Plaintiff 1- 25 0% 26-50 +5% 51-60 +10% 61-75 +15% Over 75 +20%

11. Fireman's Fund Interstate11 Lawyers Size of Firm Number of LawyersCredit 1-50% 6-105% 11-15 10% 16-2015% 21-2520% Over 2525%

12. Fireman's Fund Interstate12 Lawyers An Example Credit/Debit Area of PracticeLitigation Defense30%-15% Litigation Plaintiff40% +5% Real Estate15% +5% Other15% 0% Size of Firm12 Lawyers 10% Limit$1,000,000/$1,000,0001.85 Deductible$5,000.15 Claims Experience1.15 Step Factor Step 21.40 (Base Rate) X (1.85 -.15) X (.95) X (1.10) X (1.15) X (1.40)

13. Fireman's Fund Interstate13 Real Estate E&O Based on Agency Revenue and Number of Licensed Agents  Some States Mandatory Expect better experience Usually good experience data available No IRM  The best realtors ask the right questions  Loss only deductible work against insurers  Claims often occur when agent represents both Buyer and Seller  Mold is new claims issue – failure to disclose  Discussions occurring on mold exclusion  Still competitive marketplace

14. Fireman's Fund Interstate14 Massage Therapist  Sponsored by AMTA  Insurance is automatic – part of dues  One size fits all  Certification required for membership  Few carriers

15. Fireman's Fund Interstate15 Non Profit D&O  Based on Expense – how much $ Association takes in  If expenditures > revenue  Look for positive fund balance  Endowment  EPLI is important

16. Fireman's Fund Interstate16 Accountants  Revenue based  Risk management drive Accounting Malpractice.com (Mark Cheffers - the Enron expert)  Competitive market  Suits for fees  Shared office space  Engagement and disengagement letters crucial

17. Fireman's Fund Interstate17 Accountants Areas of practice have expanded over past 5 years  Financial planning  Management advisory  Elder care ( Financial and Healthcare) Consulting  Has made underwriting more difficult  Audits have greater exposure than bookkeeping

18. Fireman's Fund Interstate18 Accountants How will Enron affect the industry?  Opinions vary  More careful underwriting Audits used in SEC Filings Consulting And Auditing

19. Fireman's Fund Interstate19 Public Officials/Public Entities  Population of city  Tax revenues/Tax base  Proximity to large cities  Balance between revenue and expenses  Power plants/libraries/school districts  Lots of EPLI  Competitive market

20. Fireman's Fund Interstate20 Teachers Rate is on Per Head Basis  Completely Association driven  Can cover “Failure to Educate” Will this be the next claims black hole?  Covers extra curricular activities

21. Fireman's Fund Interstate21 Title Agents  Billings/Revenue  Several large Title Companies  Mis-handling of Escrow Accounts - drives many claims

22. Fireman's Fund Interstate22 Cash with App Shorthand Reporters  Association of Court Reporters Interior Designers  Most claims either wrong fabric or the couch doesn’t fit

23. Fireman's Fund Interstate23 Convention Cancellations  Rated on revenues expected to be raised  Insurance covers the shortfall on revenues  Became a big issue after 9/11