Maine, Washington D.C. Issue Price Optimization Bulletins; NAIC to Finalize White Paper Draft Via Webinar Series

Above:  Colodny Fass’ Donovan Brown Notes Maine and Washington D.C. Price Optimization Bulletins

 

 

Maine and Washington D.C. became the latest states to issue bulletins on price optimization last week.

To read an A.M. Best article on the developments, click here.

Summaries of the Maine and Washington D.C. price optimization bulletins are below, with hyperlinks to each.  Following that is information on a Webinar series being held by the National Association of Insurance Commissioners’ Casualty Actuarial and Statistical Task Force to prepare the pending draft Price Optimization White Paper (“White Paper”) for adoption at the NAIC’s Fall National Meeting.

 

Maine Differentiates Between Insurers’ Use of Sophisticated Data and Rating by “Elasticity of Demand”

In Bulletin 405 issued on August 24, 2015, Maine Insurance Superintendent Eric A. Cioppa explained that insurers’ use of sophisticated data analysis to develop finely tuned methodologies with a multiplicity of possible rating cells is not necessarily a violation of Maine’s rating laws, as long as the classifications are based strictly on risk of loss and not on willingness to pay or “elasticity of demand”–a term which he equated with “price optimization.”

Failure to classify risks according to actuarially supported considerations grounded in insurance loss and expense, as well as failure to disclose those considerations fully in rate filings puts insurers at high risk of violating Maine’s rating law, Superintendent Cioppa added.

Any insurer that uses price optimization to rate policies delivered or issued for delivery in Maine should submit revised filings that remove such factors within 60 days after the date of Bulletin 405. 

To view the complete Bulletin, click here.

 

Price Optimization Banned in Washington D.C.

Washington D.C. became the most recent jurisdiction to publish a bulletin regarding use of price optimization in rate filings by property and casualty insurers with its issuance of Bulletin 15-IB-06-8/15 on August 25, 2015.

Acting Insurance Commissioner Stephen C. Taylor advised that any insurer currently utilizing price optimization in any manner to rate insurance policies in the District of Columbia must submit a SERFF filing compliant with Bulletin 15-IB-06-8/15 no later than November 30, 2015, with proposed effective dates no later than March 31, 2016 for both new and renewal business. 

Calling the practice of price optimization “discriminatory,” Acting Commissioner Taylor explained in the Bulletin that “Price optimization refers to an insurer’s practice of charging the maximum premium that it expects an individual or class of individuals to bear, based upon factors that are neither risk of loss related nor estimated expense related.”

To view the Bulletin, click here.

 

NAIC Casualty Actuarial and Statistical Task Force Schedules Three Webinars To Finalize Price Optimization White Paper

Three Webinars have been scheduled during the next month to prepare the National Association of Insurance Commissioners’ (“NAIC’s”) draft Price Optimization White Paper (“White Paper”) for adoption at the NAIC’s Fall National Meeting.

To view the White Paper, click here.

The NAIC’s Casualty Actuarial and Statistical Task Force will hold the Webinars from 1:00 p.m. to 2:00 p.m. (CT) on the following dates:

• Tuesday, September 29, 2015
• Tuesday, October 13, 2015
• Tuesday, October 27, 2015

After the comment period ending September 14 (which was extended from the original due date), the drafting group will present the redrafted White Paper for discussion on the September 29 call.  Then, after each call, the NAIC staff will edit the White Paper and redistribute for the next call.

The NAIC issued the following instructions to participate:

For the Webinar (visual portion) no registration is required.  Go to:

http://naic.adobeconnect.com/draftinggroup/

• Click on link at the day and time of call
• Choose “Enter As Guest” option
• Enter your name and state

To participate on the audio portion of the Webinar (registration IS required and all participants are strongly encouraged to pre-register for the conference call) go to:

• Tuesday, September 29, 2015:  http://dpregister.com/10071833
• Tuesday, October 13, 2015:  http://dpregister.com/10071839
• Tuesday, October 27, 2015:  http://dpregister.com/10071843

Registration can be done at any time prior to the call.

Those without Internet access or unable to pre-register may dial (412) 902-6510 or (877) 270-2148 and ask for the CASTF/DeFrain Call. 

To register for an IP Code click here:   https://services.choruscall.com/client/naic/registration/

After obtaining the IP Code, simply follow the instructions above to register for the conference in question.

The White Paper initiative originated when the NAIC undertook the study of the availability and affordability of auto insurance after the 2013 Federal Insurance Office Regulatory Modernization Report identified insurer data mining activities as a problem manifested by insurance price optimization practices. 

The issue of price optimization was initially heard by the NAIC’s Auto Insurance Study Group during December 2013.  After comprehensive evaluation, it was decided that, because the topic extends beyond auto insurance and requires a great deal of actuarial expertise, further research on it, as well as its regulatory implications, would best be handled by the Casualty Actuarial and Statistical Task Force–part of the NAIC’s Property and Casualty Committee.  The Task Force will ultimately respond to the Auto Insurance Study Group in the form of the White Paper.

 

 

Should you have any questions or comments, please contact G. Donovan Brown at Colodny Fass (+1 850 545 8864 or DBrown@ColodnyFass.com).

 

 

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