RECORDS OF MEETING February 10, 1998
ACTUARIAL COMMITTEE
RECORDS OF MEETING
ACTUARIAL COMMITTEE
A meeting of the Actuarial Committee was held at the offices of C.A.R. on -
TUESDAY FEBRUARY 10, 1998, AT 10:00 A.M.
The following members were present-
Company/Agency Representative
Arbella Mutual Insurance CompanyMr. Thomas Carpenter
CNA Insurance CompaniesMr. Kevin Madigan
Commerce Insurance CompanyMr. Arthur Remillard, Jr.
Commercial Union Insurance CompanyMr. David L. Miller
Economy Insurance AgencyMr. Sumner D. Gilman
Hanover Insurance CompanyMr. Edward Lotkowski
Liberty Mutual Insurance CompanyMr. Gavin Blair
Mahoney & Wright Insurance AgencyMr. Robert V. McGowan
Metropolitan P & C Insurance CompanyMr. Joseph Cofield
National Grange Insurance CompanyMr. Scott Gerlach
Plymouth Rock Assurance CorporationMr. Geoffrey Arnold (1)
Safety Insurance CompanyMr. Dave Brussard
Trust Insurance CompanyMr. Allen Lew
Xifaras Insurance AgencyMr. Louis M. Xifaras
(1) Substituting for Mr. James Stone
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RECORDS OF MEETING February 10, 1998
ACTUARIAL COMMITTEE
Also attending were -
Amica Mutual Insurance CompanyMr. Peter Drogan
Automobile Insurance BureauMs. Cara Blank
Berkshire Mutual Insurance CompanyMr. James Fleming
Commerce Insurance CompanyMr. David Cochrane
Commerce Insurance CompanyMr. Warren Ehrlich
Commonwealth Mutual Insurance CompanyMr. Christopher Cunniff
Metropolitan P & C Insurance CompanyMr. James Haas
Morrison, Mahoney & MillerMr. James J. Moran, Jr.
Morrison, Mahoney & MillerMr. Barnett D. Ovrut
Norfolk & Dedham Insurance CompanyMs. Pamela Woodhull
Office of Peter T. RobertsonMr. Peter T. Robertson
Safety Insurance CompanyMr. Jim McGilloway
Safety Insurance CompanyMr. Edward Patrick
The Sentry Group Mr. John Carponter
The Sentry Group Mr. William E. Commette
USAA Insurance CompanyMs. Linda M. Drozd
USAA Insurance CompanyMr. Don Holroyd
USAA Insurance CompanyMs. Corise Morrison
USAA Insurance CompanyMr. James T. Salek
USAA Insurance CompanyMr. Kent H. Williams
Present from Commonwealth Automobile Reinsurers were-
Executive Vice President & TreasurerMr. Michael Trovato
Vice President & General CounselMr. Joseph Maher
Administration ManagerMr. John Metcalf
Director of CommunicationsMr. Paul Corsetti
Statistical Manager Ms. Natalie Hubley
Statistical Analyst Ms. Kristie Burns
Statistical Analyst Ms. Pamela Gill
Senior Actuarial AnalystMr. Tim Galligan
Actuarial Analyst Mr. Jason Burns
A.C. 98.1
Records of the Previous Meeting
On a motion by Mr. Gilman, seconded by Mr. Xifaras, the records of the Actuarial Committee meeting of September 16, 1997 were unanimously approved as written.
A.C. 98.2
PRIVATE PASSENGER ERP SUBSCRIPTION PROCEDURE
USAA has requested a hearing pursuant to Rule 20 in regard to its request for relief from its ERP oversubscription level. This matter has been referred to the Actuarial Committee for deliberation.
Mr. Maher informed the committee that C.A.R. has an established methodology for dealing with ERP oversubscription relief in the Manual of Administrative Procedures (M.A.P.). However, an appellant has challenged this methodology, contesting that it should be contained in C.A.R.’s Rules of Operation, rather than the M.A.P. On July 16, 1997, the Superior court found in favor of the appellant, but C.A.R. has appealed that decision in the Massachusetts Appeals Court. In the interim, the original appellant has sought an injunction in Superior Court to preclude C.A.R. from taking any action pursuant to the methodology. C.A.R. is awaiting a court date of February 20, 1998 to resolve the issue of the injunction. Until this matter is resolved, it was the recommendation of C.A.R. counsel that should the committee decide that relief was warranted, implementation of any relief action should be held in abeyance until such time as the matter of the injunction has been fully adjudicated.
Mr. Trovato summarized USAA’s appeal for the committee. He stated that USAA believes it is entitled to relief based on C.A.R.’s established private passenger subscription relief procedures, noting that USAA’s ERP-produced business has exceeded 125% of its ‘ought to have’ share for more than 12 consecutive months. Mr. Trovato also informed the committee that one of the main reasons for USAA’s oversubscription is the July 1997 revision to the new servicing carrier gross-up factor. Furthermore, he stated that the existing procedure and methodology calls for relief to 110% of an oversubscribed servicing carrier’s ought to have and that the potential amount of exposures involved in any relief action amounts to approximately 12 – 14 thousand. He stated that the existing relief procedure calls for C.A.R. to distribute a complete listing of USAA’s ERPs’ names, loss ratios, and volumes. USAA’s ERPs could then be contracted voluntarily, or two-partied by an undersubscribed servicing carrier.
Mr. Patrick from Safety Insurance addressed the committee on behalf of USAA. He indicated that USAA was in agreement with Mr. Trovato’s comments, and requested that the committee grant relief to USAA based on the above summary.
A motion was made by Mr. Gilman, seconded by Mr. Xifaras, to recommend to the Governing Committee that USAA be granted relief to the 110% level. The motion passed with 11 in favor, Mr. Lew of Trust opposed, and Mr. Brussard of Safety recused.
A.C. 98.3
PRIVATE PASSENGER RULE 11 – MINIMUM ALLOWABLE EXPOSURES
Sentry Insurance has petitioned C.A.R. pursuant to Rule 20 for relief from the minimum allowable provisions of Rule 11.B.1 (2) regarding reductions in non-ERP exposures for policy year 1996. This matter has been referred to the Actuarial Committee for deliberation.
Mr. Trovato distributed a sheet chronologically detailing the past year’s activity surrounding Rule 11 – Minimum Allowable Exposures, ending with relief granted to MassWest and the larger issues referred back to the Actuarial Committee (see attached).
Mr. Moran, counsel for Sentry Insurance, addressed the committee regarding Sentry’s appeal, and distributed an affidavit stating that the company had lost market share involuntarily during the 1996 policy year. Sentry claims that its market share has decreased involuntarily due to the competitive forces of the automobile insurance marketplace and the many discounts being offered by competitors at the time. Included in the affidavit were examples of Sentry’s attempts to retain market share (see attached). Sentry believes that it should not be subject to the applicability of Rule 11.B.1 (2), since the reduction in their voluntary exposures was not the result of any intentional actions.
Mr. Gilman stated that the MassWest appeal for relief that was granted previously was based on the small size of MassWest and its inability to compete with its larger competitors. He questioned whether it would be appropriate to grant relief to Sentry since they seemed to have simply decided not to compete for business as strongly as their competitors.
Mr. Brussard disagreed, stating that he felt that Sentry had been aggressively pursuing the market at the time, but just fell victim to competitive forces, and thus should not be penalized further.
After further discussion, a motion was made by Mr. Brussard, seconded by Mr. Blair, to recommend to the Governing Committee that Sentry be granted relief from Rule 11.B.1 (2). The motion passed with 11 in favor, and Mr. Lew of Trust and Mr. Miller of Commercial Union opposed.
A.C.
OTHER BUSINESS
A motion was made by Mr. Xifaras, seconded by Mr. Gilman, to discuss item E on the chronologically detailed Rule 11 – Minimum Allowable Exposures sheet distributed earlier by Mr. Trovato. Item E refers to the Governing Committee recommendation that the Actuarial Committee continue discussions on the minimum allowable exposure issue. After some discussion, the committee formed a consensus that the rule provision and language should remain as is, and that petitions for relief should be evaluated utilizing the previously determined four criteria as well as other factors, including the market conditions at the time.
There being no further business to discuss, the meeting was adjourned.
Jason Burns
Actuarial Analyst
February 18, 1998
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