Property

1
Property
Everything You Need to Learn about Rate Filings
But Are Afraid to Know
Casualty
2006
Compliance
Conference
Property Casualty Actuarial Jne Byckovski,
Senior Actuary
Texas Department
of Insurance
2
Property
Everything You Need to Learn About Rate Filings
But Are Afraid to Know
Casualty
2006
Compliance
Conference
General Information What Happens to My Rate
Filing at TDI? What Information Needs to be
Filed? Key Things We Look for in Rate
Filings. Whats Wrong with My Rate Filing?
Examples. Underwriting Guideline Filings Credit
Scoring Model Filings Frequently Asked
Questions
Texas Department
of Insurance
3
Property
General Information
Casualty
2006
Compliance
Filings Made Easy ? Rule - 28 TAC 5.9310
5.9357 (Divisions 4-9) ? FME Guide
provides ? assistance to filers for rule, rate,
and form filings ? required transmittal form and
instructions ? other forms illustrating
information to file and instructions ? contact
information
Conference
Texas Department
of Insurance
4
Property
General Information
Casualty
2006
Compliance
Governing statutes for rate regulation (FME page
Intro-5)
Conference
Rates under TIC Art. 5.13-2 are file and
use ? All rates may be used the day they are
filed. ? Rates are considered filed the day they
are received so long as a filing transmittal form
is included. ? Even if additional supporting
information is requested by TDI, rates are still
considered filed as of the day they were
initially received, and may still be used. ? TDI
does not provide notice of acceptance or
approval Although, an acknowledgment letter is
issued upon receipt of the filing.
Texas Department
of Insurance
5
Property
Casualty
General Information
2006
Compliance
Conference
SERFF
Rate filings are now being accepted via SERFF.
Texas Department
of Insurance
6
What happens to my rate filing at TDI?
Property
Casualty
2006
Compliance
Conference
Texas Department
of Insurance
7
Property
What really happens to my rate filing at TDI?
Casualty
2006
Compliance
Conference
Rate filing received by Intake Unit Intake
Unit sends acknowledgement letter to company and
rate filing to PC Actuarial PC Actuarial
enters basic information into system and then
assigns to appropriate actuarial staff depending
on the line of business Staff reviews rate
filing for compliance
Texas Department
of Insurance
8
Property
What really happens to my rate filing?
(continued)
Casualty
2006
Compliance
Conference

• If necessary, staff communicates with the company
  to gain clarification on proposed changes or to
  obtain additional support.
• ? At some point, usually after staff finishes
  their review, they send the filing to be scanned.

Note While staff may have finished reviewing
the filing, it is possible that future events
(such as complaints) could cause staff to revisit
the filing. Additionally, rating plans that
violate the law can subject a company to
enforcement action even if the actuaries dont
spot the violation initially.
Texas Department
of Insurance
9
Property
Casualty
What Information Needs to be Filed?
2006
Compliance
Conference
All rates, rating manuals, supplementary rating
information, and additional information as
required.
Texas Department
of Insurance
10
Property
What Information Needs to be Filed? (continued)
Casualty
2006
Compliance
Conference
Rate means the cost of insurance per exposure
unit, whether expressed as a single number or as
a prospective loss cost, with an adjustment to
account for the treatment of expenses, profit,
and individual insurer variation in loss
experience, before any application of individual
risk variations based on loss or expense
considerations.
TIC Art. 5.13-2 3
Texas Department
of Insurance
11
Property
What Information Needs to be Filed? (continued)
Casualty
2006
Compliance
Conference
Rating manual means a publication or schedule
that lists rules, classifications, territory
codes and descriptions, rates, premiums, and
other similar information used by an insurer to
determine the applicable premium charged an
insured.
TIC Art. 5.13-2 3
Texas Department
of Insurance
12
Property
What Information Needs to be Filed? (continued)
Casualty
2006
Compliance
Conference
Supplementary rating information means any
manual, rating schedule, plan of rules, rating
rules, classification systems, territory codes
and descriptions, rating plans, and other similar
information used by the insurer to determine the
applicable premium for an insured. The term
includes factors and relativities, including
increased limits factors, classification
relativities, deductible relativities, premium
discount, and other similar factors and ratings
plans such as experience, schedule, and
retrospective rating.
Texas Department
TIC Art. 5.13-2 3
of Insurance
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Property
Casualty
What Information Needs to be Filed? (continued)
2006
Compliance
Conference
Fees
All policy fees, service fees, and other fees
that are charged or collected by the insurer
under TIC Art. 21.35A or 21.35B must be filed.
TIC Art. 5.13-2 5(a-1) TIC Art. 21.35A
recodified as 4005.003 TIC Art. 21.35B
recodified as 550.001
Texas Department
of Insurance
14
Property
Casualty
What Information Needs to be Filed? (continued)
2006
Compliance
Conference
Disallowed Expenses
Disallowed expenses include among other items,
administrative expenses, not including
acquisition, loss control, and safety engineering
expenses, that exceed 110 of the industry median
for those expenses.
TIC Art. 5.13-2 3(a)(1)(A) Note This pertains
to all lines of business subject to TIC Art.
5.13-2.
Texas Department
of Insurance
15
Property
What Information Needs to be Filed? (continued)
Casualty
2006
Compliance
Conference
Actuarial Support
Rates may not be excessive, inadequate,
unreasonable, or unfairly discriminatory for the
risks to which they apply.
TIC Art. 5.13-2 4(d)

• Some form of actuarial support is recommended.
  This would include the data and methodologies
  utilized in the filing.
• ? FME Guide, Page Rates-4 provides a list,
  although not exhaustive, of items that should be
  included, if applicable.

Texas Department
of Insurance
16
Property
What Information Needs to be Filed? (continued)
Casualty
2006
Compliance
Conference
TDI Forms
FME Guide provides various rate exhibits and
instructions on how to complete them.

• While the information to provide on these forms
  is required, the TDI form and format is not
  required. Companies may provide the information
  on their own forms.
• ? Forms can be downloaded from the TDI website.

Texas Department
of Insurance
17
What are some key things we look for in rate
filings?
Property
Casualty
2006
Compliance
Conference
? Description of proposed changes ? Rationale for
proposed changes ? Present rates, proposed rates,
percent changes, premium or policy count
distribution ? Rate change history ? Support
Indications, loss ratio analysis, pure premium
analysis, competitive analysis,
etc. ? Information on the disruption of rate
changes and number of affected policyholders
Texas Department
of Insurance
18
Property
What are some key things we look for in rate
filings? (continued)
Casualty
2006
Compliance
Conference

• ? Assumptions used in catastrophe models
• Information to understand loads based on the cost
  of reinsurance
• Pricing considerations due to changes in coverage
  provided

Texas Department
of Insurance
19
Whats Wrong with my Rate Filing?
Property
Casualty
2006
Compliance
Examples of filings weve received ? Filings
with only a cover letter generally describing the
changes, but no exhibits detailing present or
proposed rates, the percent change or any support
for the revision. ? Filings with only a brief
cover memo and exhibit showing proposed changes
by territory or other rate classification but no
actuarial support or competitive information.
? Filings with potentially large rate impacts
for some classes but no information on
disruption of rate changes at extremes and
number of affected policyholders. ? Filings with
large rate increases without actuarial support.
Conference
Texas Department
of Insurance
20
Property
Casualty
2006
Compliance
Conference
Texas Department
of Insurance
21
Property
You might be the recipient of a question
Casualty
if . . .
2006
Compliance
Conference

• ? your filing consists entirely of a cover letter
  and a transmittal form.
• you file a new and innovative rating element that
  were unfamiliar with.
• ? you file a new rating methodology.
• ? your territorial analysis consists entirely of
  the phrase competitive considerations.
• ? you file for a significant rate increase
  without actuarial support.

Texas Department
of Insurance
22
Property
Why does TDI keep asking me all these questions?
Casualty
2006
Compliance
Conference
? To understand what is being proposed, the
rationale for the change and support for the
change ? To ensure filings comply with statutes
and rules ? To ensure changes in coverage have
been considered in pricing ? To clarify rating
rules and information on rate pages ? To
understand the filing well enough to explain it
to legislators ? To understand the filing well
enough to respond to consumer complaints
regarding premium changes
Texas Department
of Insurance
23
Property
Underwriting Guideline Filings
Casualty
2006
Compliance
Conference

• ? FME Rule and Guide provide underwriting
  guideline filing requirements for personal
  automobile and residential property insurance
  pursuant to TIC 38.002, and for workers
  compensation pursuant to TIC Art. 5.55A.
• ? Underwriting guidelines for other lines are
  required only upon request, pursuant to TIC
  38.003.
• ? Underwriting guidelines should be filed
  separately from other filings.

Texas Department
of Insurance
24
Credit Scoring Model Filings
Property
Casualty
2006
? FME Rule and Guide provide filing requirements
for credit scoring models. ? Insurers using
credit scores to underwrite and rate risks shall
file their credit scoring models or other credit
scoring processes with TDI. ? Filing requirements
apply to insurers writing personal insurance
coverage as defined by TIC Art. 21.49-2U
(recodified as TIC 559). ? Credit scoring model
filings must be made separately from all other
filings. ? Rates or rating factors based on
credit scoring should be included in a rate
filing. ? Credit scoring models are public
information!
Compliance
Conference
Texas Department
of Insurance
25
Property
Frequently Asked Questions
Casualty
2006
Compliance

• Will you send me an email stating that the filing
  has been approved?
• A. No. Rate filings are file and use.
• May we file rates on a refer to company basis?
• A. All rates subject to TIC Art. 5.13-2 must be
  filed. In certain lines, a range of rates for
  risks that are otherwise considered a-rated,
  should be filed.

Conference
Texas Department
of Insurance
26
Property
Frequently Asked Questions
Casualty
2006
Compliance

• What exhibits do we need to fill out?
• A. The Filings Made Easy Guide provides this
  information under Section II Rate Filings, page
  Rates-3.
• Do we have to use the TDI forms from the Filings
  Made Easy Guide?
• A. No. These forms are for your convenience.
  If the information your company puts together
  already encompasses this information, your own
  forms will suffice.

Conference
Texas Department
of Insurance
27
Property
Casualty
Frequently Asked Questions
2006
Compliance
Conference

• What is the maximum schedule rating credits and
  debits permitted?
• A. /-40
• What is the status of my rate filing?
• A. The rate filings are file and use.

Texas Department
of Insurance
28
Property
Casualty
Frequently Asked Questions
2006
Compliance
Conference

• Can the effective date be prior to the date the
  filing is made?
• A. No. The effective date can be the date the
  filing is made or a subsequent date.

Texas Department
of Insurance
29
Property
Casualty
Web Sites
2006
Compliance
Conference

• Filings Made Easy
• www.tdi.state.tx.us/company/rspceasy.html
• General Expense Information 110 of Industry
  Median
• www.tdi.state.tx.us/company/pcflxrt.html
• Various PC Reports and Studies
• www.tdi.state.tx.us/reports/report4.html

Texas Department
of Insurance
30
Contact Information
Property
Casualty
2006
PC Actuarial Staff Major Line
Assignments Phone [phone] Email
pcactuarial_at_tdi.state.tx.us
Compliance
Conference
Phil Presley, FCAS, MAAA, Chief Actuary Jne
Byckovski, FCAS, MAAA Senior Actuary Brian
Ryder, FCAS, MAAA Professional Liability/Med
Mal Jennifer Wu, FCAS, MAAA Commercial
Multi-Peril, CS Models Elizabeth Buhro Workers
Compensation Jinghua Kuang General Liability
Residential Property Tammy Lara Residential
Property Xiaohua Lu Commercial Property TBD
Personal Auto TBD Commercial Auto
Texas Department
of Insurance