Florida Automobile Joint Underwriting Association September 15-16, 2014 Meetings Recap

Sep 16, 2014

 

The Florida Automobile Joint Underwriting Association (“FAJUA”) held a series of meetings on September 15 and 16, 2014.  A summary of each is below.  To view the meeting materials, click on the hyperlinks (also below), or click here.

 

Producer Review Committee

The FAJUA’s Producer Review Committee met yesterday, September 15, to discuss the FAJUA’s Producer Compliance Manual and Contract.  Members reviewed formatting changes intended to make the Contract more cohesive and easier to read.   These changes have already been approved by the FAJUA Board of Governors (“Board”). 

The need for a producer appeal process was also discussed.  Under the current policy, the FAJUA may suspend a producer’s appointment for a variety of reasons.  There was sentiment among some Committee members that the FAJUA should have the ability to permanently terminate a producer’s appointment after a single incident under certain circumstances.  Others felt that a producer’s appointment should not be terminated after a single incident, but that termination should be based on the severity and frequency of violations. 

Some believed that a robust appeal process would be necessary if producer appointments were going to permanently terminated.   Currently, producers may appeal suspensions directly to the FAJUA and the Producer Committee. 

A plan for implementing an appeal process will be presented by the FAJUA staff to the full Board. 

 

Audit, Finance and Budget Committee

The FAJUA’s Audit, Finance and Budget Committee also met on September 15, during which members heard a proposal from the AIPSO company on various audit recommendations.  To view the proposal, click here.

Notably, the AIPSO proposal recommended a full, in-house audit of Dovetail Insurance (“Dovetail”), inasmuch as it is currently in run-off.   It also stated that many of the problems found in Dovetail are due to misclassified or misreported losses, which will impact Dovetail’s bottom line as the company completes the run-off process. 

Questions arose on the value of the proposal’s $22,000 cost, but the Committee ultimately approved the Dovetail audit as part of the entire proposal, which was priced at approximately $35,000. 

It was reminded that the FAJUA staff members are just now completing Dovetail’s 2013 audit, the delay of which resulted from errors in Dovetail’s own reporting system.  Nevertheless, only a few items remain open in the process. 

The Committee also discussed $49,000 dollars in premium adjustments being held by the FAJUA for Dovetail.  A recommendation to retain the money until Dovetail’s run-off is complete was adopted.

It was reported that the FAJUA’s cash flow projections for September 2014 through January 2015 indicate that there will not be enough money to sustain the organization during that period. 

To raise the funds, the FAJUA staff members recommended the implementation of an assessment of approximately $4.7 million during October of 2014 and an additional assessment of approximately $1 million in January.  A cash flow analysis will be conducted in November of 2014 to re-assess the need for the January assessment. 

The Committee also discussed the 2015 FAJUA budget request, which represents a 1.5 percent increase from 2014 due to the rising cost of employee benefits.  However, the budget increase is smaller than originally anticipated, because the higher 2014 cost of benefits was projected at 15 percent, but ultimately only increased by 6 percent. 

The FAJUA resolved to conduct more in-house audits in an effort to avoid audit fees.  In 2014, the FAJUA paid approximately $130,000 in fees, but efforts will be made to to restrict that cost to $100,000.  Much of the increase in the 2014 audit cost was due to the need for added supervision of Dovetail, it was explained.

The FAJUA Staff requested Committee approval for the procurement of a Vehicle Identification Number (“VIN”) computer information system and Comprehensive Loss Underwriting Exchange (“CLUE”) System.  The VIN system would be used to input information into FAJUA’s databases, allowing for a vehicle’s VIN to be entered into the computer, while automatically populating pertinent data relating to that vehicle.  This system, which costs approximately $30,000, is expected to reduce human error and increase efficiency. 

The CLUE system provides comprehensive claims history data related to applicants for coverage.  It can produce claims information, household data and other data necessary for accurate underwriting at a cost of $4.23 per report.

 

Board of Governors

The FAJUA Board met on September 16, during which members heard a brief overview of ongoing FAJUA activities. 

Currently, the FAJUA has over 1,200 policies in force, from which there has been a noticeable recent increase in claims activity.  The FAJUA Staff hypothesized that the rise is due to an increase in FAJUA’s policy count over the last year. 

It was also reported that the FAJUA recently entered into contracts with G4S Security Solutions and Kelly Investigative Service to conduct Special Investigative Unit (“SIU”) activities. 

The Board was informed that the FAJUA is currently evaluating its authorizing statute for potential legislative initiatives in 2015. 

In the Audit, Finance and Budget Committee report, it was explained that the FAJUA has collected over $1.5 million in member fees year to date, but recent cash flow projections predict a cash shortfall prior to January 1, 2015.  The Board voted to approve a $4.7 million assessment to be levied in October that will correct the issue.  Nevertheless, the FAJUA Staff recommended an operational audit of the organization. 

The Board also approved the 2015 FAJUA budget, which includes salary increases for FAJUA staff and an additional two expenditures that were not included in the 2015 budget–the CLUE system and the “Vintelligence” VIN system. 

Board members questioned whether CLUE was the most appropriate product available for the intended purpose and asked the staff to investigate the market options further.   Vintelligence will cost the FAJUA approximately $33,000 on an annual basis.

However, the Board ultimately approved the 2015 budget, inclusive of the CLUE and Vintelligence procurement, but with instructions to seek other vendors prior to entering into a contract with CLUE.

The Board also approved the 2015 Producer Compliance Manual and Contract as amended by the Producer Review Committee. 

Lastly, the FAJUA Staff members provided the Board with a review of proposed rate changes for 2015.  Indications for the FAJUA’s 2015 rate filing showed the need for a 51 percent rate increase, notwithstanding the 25 percent base rate cap. 

The Board also approved a rate filing for private passenger vehicles that reflects a 25 percent increase.  The indications for the new commercial rate demonstrated the need for an 18.9 percent increase, but the FAJUA Staff only requested Board approval of a 14 percent increase.  The Board approved the commercial rate filings. 

At the conclusion of the meeting, Board members were presented with an overview of FAJUA claim and producer data.  Notably, over 80 percent of all Personal Injury Protection insurance claims emanate from Miami-Dade County.  Given this statistic, it was recommended that all available resources be pointed toward claims handling in that area.  Also, Board members learned that approximately 30 percent of all new FAJUA policies are originating from a single producer in the state.  The FAJUA’s SIU providers have been asked to review the producer in question. 

To view the materials from the meetings summarized above, click on the following hyperlinks:

 

Board of Governors

 

Producer Review Committee

 

Budget Audit Finance Committee

 

 

Should you have any questions or comments, please contact Colodny Fass& Webb.

 

 

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