1. Welcome ! Residual Market Audit Services NJ AIRE Compliance Audit Program Jack O’Keefe

2. Automobile Insurance Plan Service Organization AIPSO

3. AIPSO is… A management organization and service provider for the residual market with a home office in Johnston, RI A non-profit organization A national organization of about 400 employees An organization with 10 regional offices located throughout the country

4. AIPSO’s Mission AIPSO’s mission is to provide high quality services for the automobile insurance residual market at the lowest possible cost.

5. 1 – Certified Internal Auditor (CIA) 1 – CIA candidate 8 – pursuing INS or CPCU designations 1 – 30+ years of Claims Experience 30 – Independent Consultants 11 Members of our RMAS staff ‘ “Who is Residual Market Audit Services” (RMAS)

6.  Provide on-site audits of companies for automobile insurance market mechanisms. CAIP NJSAIP MAIPF NJCAIP CALC What Does RMAS Do?

7. Audits are a management tool to ensure companies are handling and reporting policies and claims in compliance with a mechanism’s plan of operations. Purpose of Audits

8. Objective of NJAIRE Audits To ensure that companies are submitting complete and accurate data to the NJAIRE central processor - ISO. Operational – Company’s internal controls are effective in processing and identifying NJAIRE business. Compliance - Data reported meets specifications in the Plan of Operations.

9. Audit Process Stage 1: Planning a. Company Selection b. Communication with ISO 1. Call Forms 2. Statement of Compliance 3. Concerns with Companies

10. Audit Process Stage 1: Planning (con’t) c. Engagement Letter – Includes request for data 1. All private passenger BI claimants 2. All reportable claimants 3. All other claims d. Company contact information received

11. Audit Process Stage 1: Planning (con’t) e.Receipt of company data f.Verification of data to call forms g.Complete sample selections h.Confirmation Letter

12. Audit Process Stage 2: Fieldwork a.Opening meeting b. Obtain internal procedures for reviewing data submissions c.File review Determination Forms

14. Audit Process Stage 2: Fieldwork c. File review Work-papers

15. Audit Process Stage 2: Fieldwork d.Fieldwork summary e.Closing meeting

16. Audit Process Stage 3: Reporting 1.Draft Report 2.Company’s Response 3.Final Report

17. 2003 - 2008 Audits 64 Audits Completed Reportable Claims Total claimants reviewed – 3,036 Number of claimants over reported – 478 or 16% Dollar amount over reported - $8,914,271

18. 2003 - 2008 Audits Reasons for Over Reporting: Claimant or Insured Incorrect Threshold Unverified Claimant Threshold These two reasons account for 52% of reporting errors

19. Additional Reasons for Over Reporting Economic Loss Payment Included Claimant had pierced the threshold Claimant was not a NJ Resident Claim Occurred outside of NJ Expense Payments Included in Reporting Insured Vehicle was Commercial

20. Reporting Errors Incorrect Territory Codes (Accident Year 2007 and prior) Settlement Reported in an Incorrect Quarter or Year Over Reporting of the Dollar Amount

21. 2003 – 2008 Audits 64 Audits Completed All Bodily Injury Claims: Total claimants reviewed – 5,340 Number of claimants under reported – 213 or 4% Dollar amount under reported - $1,967,748 Number of claimants over reported as BI claims - 224 or 4.1%

22. Reasons for Under Reporting Claimant had a Zero Dollar Threshold Insured had a Verbal Threshold Unverified Claimant Threshold

23. Reporting Errors Non Bodily Injury Paid Claims Bodily Injury Claims with No Payment Incorrect Territory Codes (Accident Year 2007 and prior) File not Settled in Reporting Year Settlement reported in Incorrect Quarter Commercial Bodily Injury Claims Paid

24. TIPS Plant your corn early “Easy Sleazy” in the third race at Monmouth Park Don’t say “Hi Jack” if you see me at the airport

25. NJAIRE Claim Handling TIPS Claims handlers should be familiar with the NJAIRE procedure manual – NJAIRE.org Know the requirements for verification of the claimant’s threshold (Pgs 31 –32 of the procedure manual) Use the NJAIRE recommended Claim Determination Form Check the final determination after claim is settled and before it is submitted to IT

26. QUESTIONS?  What? Huh?  What does it all mean?

27. Thank you! Residual Market Audit Services NJAIRE Compliance Audit Program Jack O’Keefe