1998.09.16 - Records of Meeting
RECORDS OF MEETING
GOVERNING COMMITTEE
A meeting of the Governing Committee was held at the offices of Commonwealth Automobile Reinsurers, 100 Summer Street, Boston on
WEDNESDAY, SEPTEMBER 16, 1998 AT 10:00 A.M.
Members present -
Mr. Sumner D. Gilman – Chairman
Economy Insurance Agency Inc.
Ms. Nancy Z. BenderNancy Z. Bender Insurance Agency, Inc.
Mr. Charles I. Boynton, IIIBoynton Insurance Agency, Inc.
Mr. Richard W. BrewerArbella Mutual Insurance Company
Mr. Andrew J. CarpentierCNA Insurance Company
Mr. Edward F. Downey, Jr.Edward F. Downey Insurance Agency
Mr. Joseph J. GiblinLiberty Mutual Insurance Group
Mr. Robert W. HarveyMetropolitan P&C Insurance Company
Mr. William F. Hofmann, IIIProvider Insurance Group, Inc.
Mr. J. Barry MayHanover Insurance Company
Ms. Nanci S. PetersGeorge Peters Insurance Agency
Mr. Thomas K. RandallMassWest Insurance Company
Mr. Arthur J. Remillard, Jr.The Commerce Insurance Group
CAR Officers present -
Mr. Ralph A. IannacoPresident
Mr. Michael J. TrovatoExecutive Vice President and Treasurer
Mr. Joseph J. Maher, Jr.Vice President and General Counsel
Mr. Dana I. JewellAdministrative Vice President and Secretary
Records of Meeting-1-September 16, 1998
Governing Committee
CAR Officers present -
Ms. Valerie Gedziun Vice President Claims
Mr. Paul RyanVice President and Chief Information Officer
Mr. Frank Underhill Vice President Auditing
CAR Staff present -
Ms. Susan BasilescoFinancial Manager
Ms. Wendy Browne Data Operations Manager
Mr. Jason Burns Actuarial Department
Mr. Paul Corsetti Director of Communications
Mr. Timothy Costain Servicing Carrier Coordinator
Ms. Cindy DuffyStatistical Department
Mr. Timothy Galligan Actuarial Department
Ms. Pam GillStatistical Department
Ms. Natalie HubleyStatistical Manager
Mr. John D. Metcalfe Administrative Manager
Ms. Sharon Schorge Manager of Actuarial & Statistical Services
Ms. Kim Tobin Administrative Assistant
Ms. Jennifer Vieira Statistical Department
Ms. Pam WallaceUnderwriting Manager
Also present -
Mr. Francisco SaAmazonia Insurance Agency
Ms. Cleo AndersonAMICA Mutual Insurance Company
Ms. Adrienne BerkleyArbella Insurance Group
Mr. James FlemingBerkshire Mutual Insurance Company
Mr. Michael RocheBurns & Levinson
Mr. David CochraneCommerce Insurance Company
Ms. Susan FlahertyCommonwealth Mutual Insurance Company
Mr. Phillip DannCommunity Insurance Agency of Fall River
Mr. Gene DvorkinDvorkin Insurance Agency
Mr. Norman A. WalczakElectric Insurance Company
Mr. Frank PascalEmpire Insurance Company
Ms. Doreen Carter
Mr. Richard Harris
Mr. Leonard FisherAttorney
Mr. William CahillHanover Insurance Company
Mr. David J. LaneHastings-Tapley Insurance Agency
Ms. Erin ShaafHorace Mann Insurance Company
Ms. Kathy Geromini-KarpeISI Systems
Mr. Donald DeversLHD Inc.
Mr. James MatersonLiberty Mutual Insurance Company
Mr. Daniel J. Foley, Jr.Massachusetts Association of Insurance Agents
Mr. Joseph S. MulkernMassachusetts Division of Insurance
Mr. David McCormick
Mr. Joseph CofieldMetropolitan P&C Insurance Company
Mr. James J. Moran, Jr.Morrison, Mahoney & Miller
Mr. U.F. FlorianNew England Fidelity Insurance Company
Mr. Myron S. SteereNew Main Street Insurance Agency
Mr. Allan Zagami
Ms. Pam WoodhullNorfolk and Dedham Mutual Fire Ins. Co.
Ms. Marietta PaquettePaquette Insurance Agency
Mr. Warren McLeanPeoples Service Insurance Company
Mr. Barry TagenPilgrim Insurance Company
Mr. Ed Walleston
Mr. John Delano
Mr. Bert LaChancePlymouth Rock Insurance Company
Ms. Paula Gold
Mr. Steve PacePolicy Management Systems Corporation
Ms. Kathleen DevericksPremier Insurance Company
Ms. Susan Scott
Ms. Michaela HildrithPricewaterhouseCoopers
Mr. Alan Hines
Peter T. Robertson, Esq.Law Offices of Peter T. Robertson
Mr. Richard WholleyRoche, Heifetz, Murphy & Wholley
Mr. James T. Scamby
Mr. John G. SmithSafety Insurance Company
Mr. David Brussard
Mr. Stanley ShumanShuman Insurance Agency
Ms. Laurel Shuman
Mr. Eoin CannonThe Standard
Mr. G.C. BradleyTrust Insurance Company
Mr. Donald HolyroydUSAA Casualty Insurance Company
Governing Committee Chairman Sumner Gilman called the meeting to order at 10:00 a.m.
98.1Records Of Previous Meeting
A motion was made by Mr. Andrew Carpentier and duly seconded by Mr. Charles Boynton to accept the Records of the Governing Committee Meeting of July 15, 1998.
The motion passed on a unanimous vote.
98.5Counsel’s Report
Mr. Joseph Maher reported that the Massachusetts Appeal’s Court has been briefed on two matters regarding Trust Insurance Company and CAR and that the parties are awaiting the assignment of hearing dates. The first matter references Trust Insurance Company’s appeal involving settlement disbursement issues. The second matter is an appeal from the ERP subscription methodology employed by CAR.
Mr. Maher also noted that CAR is in receipt of an appeal from Trust Insurance Company to the Governing Committee Review Panel relative to a September 3, 1998 determination by the Market Review Committee.
Commenting on Trust’s appeal of the Market Review Committee’s decision, Attorney Richard Wholley, representing the aggrieved Trust ERP’s, commented from the floor that Trust has not complied with the Market Review Committee directive of September 3, 1998. Chairman Gilman stated this would be an appropriate matter to be brought up during the Market Review Committee’s report.
98.5Counsel’s Report (Continued)
Concluding his report, Mr. Maher indicated that since the Joint Actuarial Commercial Lines Committee report on the 1999 Commercial Rate filing involves matters likely to result in administrative litigation, it is an appropriate subject for consideration in executive session in order to discuss the litigation strategies to be pursued.
98.6 Market Review Committee
Mr. Charles Boynton reporting on the Market Review Committee meeting of July 20, 1998 noted that the Shuman Insurance Agency appealed the action of the Trust Insurance Company for the company's alleged failure to, "Assure that a policy has been issued for each RMV-1 and/ or RMV-3 certificate…" and to "Maintain effective communications with Representative Producers by scheduling meetings when necessary and conducting whatever educational/training sessions as may be required to assure that Representative Producers provide quality service to the motoring public," as well as Trust’s alleged noncompliance with CAR Rule 15, Premium Collection Standards. Trust returned ten applications for coverage to the agency due to insufficient down payments, pursuant to a new company requirement that 100% of the premium be remitted on previously canceled policies.
In consideration of the failure of Trust to properly notify the agency of its change in company underwriting policy until June 26, 1998, the Committee voted to uphold the appeal and require Trust to provide coverage for the seven applications submitted to the company on or before June 26, 1998. As the Committee voted, Trust agreed to provide coverage for all ten of the applications in question.
Mr. Boynton reported that the Gene Dvorkin Insurance Agency appealed the action of the Trust Insurance Company in rejecting automobile insurance applications for coverage that the agency had already bound. The agency alleged that Trust rejected seven applications due to insufficient down payments after the company arbitrarily changed rating classifications, resulting in higher premiums.
In the interests of protecting the insureds who had properly applied for coverage through the agency and had subsequently registered vehicles, the Committee voted to uphold the appeal and require that Trust provide coverage for the seven applicants in question.
Mr. Boynton reported that the Committee accepted a status report from the Citywide Insurance Agency and the Pilgrim Insurance Company relative to their attempts to resolve a dispute arising out of the insuring of taxicab business. The matter had previously been continued for forty-five days to afford the parties an opportunity to resolve their differences. Both parties reported that progress has been made, but requested additional time to see their efforts through.
The Committee voted to continue the matter for another sixty days with a report expected from the parties at that time.
Mr. Boynton reporting on the Market Review Committee meeting of August 12, 1998 advised that the Ernest Scott Insurance Agency had appealed the actions of the Trust Insurance Company for rejecting applications for coverage which have already been bound, refusing to reinstate polices cancelled for non-payment of premium, failing to properly notify the agency of changes in company
98.6 Market Review Committee (Continued)
underwriting policy, demanding 100% down payment on polices with no earned premium due another carrier, and failing to provide proper SDIP credits for drivers with out of state or foreign driving experience.
In light of Trust's willingness to meet with the appellant and address the issues noted in the appeal, the Committee voted to continue the matter until its meeting of September 3, 1998, to give the parties an opportunity to meet and work toward a resolution. Trust was directed to provide a written report to CAR Staff prior to the next Market Review Committee meeting detailing its underwriting policies and procedures on the issues listed in the preceding paragraph and the manner in which those underwriting policies and procedures are made known to Trust's producers. Trust agreed to submit its responses to those questions to CAR Staff on or before Friday, August 28, 1998.
Mr. Boynton reported that the Committee voted to uphold the appeal of the Shuman Insurance Agency vs. Trust Insurance Company for failing to recognize payments accepted by the agency and refusing to hold pending non-pay cancellations. The Committee directed Trust to rectify the matter within twenty-one days and to report back to the Committee at its next meeting.
Mr. Boynton reported that the Committee voted to grant an extension of six months to the G.L.K. Insurance Agency’s termination of its ERP appointment by the Liberty Mutual Insurance Company for violation of CAR Rule 14, C, Production Criteria due to the appellant's intention to sell the agency. The agency is required to develop and maintain a minimum book of business of 250 vehicles and currently maintains a book of business of 150 vehicles.
Mr. Boynton reported that the Market Review Committee at its September 3, 1998 meeting resumed consideration of the matter between Trust Insurance Company and Ernest Scott Insurance Agency, et al which had been continued from its August 12, 1998 meeting. Trust had been directed to provide a written response to CAR Staff on or before Friday, August 28, 1998 detailing its underwriting/policy processing procedures and the manner in which those procedures are communicated to the company's producers.
In light of Trust's refusal to provide a complete response in accordance with the Committee's directive, the Committee voted, pursuant to CAR Rule 13, B, 3, j, that Trust be ordered to provide on or before September 11, 1998, to each Representative Producer, copies of all procedures necessary to effectively service policies issued through CAR. These procedures were to be in writing with a copy to CAR. The motion further ordered that CAR audit Trust, their ERPs and other agents assigned to Trust, to determine compliance with this order, and whether any violations of CAR Rules exist, and to report its findings to the Market Review Committee. The motion also provided that a written chronology will be gathered of all complaints pending at CAR relative to the activities of the Trust Insurance Company in regards to their ERPs. Mr. Boynton indicated that this was an action item for the Governing Committee.
A motion was made by Mr. Charles Boynton and duly seconded by Mr. Thomas Randall, that in light of Trust’s refusal to provide a complete response in accordance with the Market Review Committee’s directive that Trust be ordered to provide to each Representative Producer, copies of all procedures necessary to effectively service policies issued through CAR, in writing, with a copy to CAR, that CAR audit Trust, their ERPs and other agents assigned to Trust, to determine compliance
98.6Market Review Committee (Continued)
with this order and whether any violations of CAR Rules exist, and report its findings to the Market Review Committee. Further, a written chronology will be gathered of all complaints pending at CAR relative to the activities of the Trust Insurance Company in regards to their ERPs.
The motion passed on a unanimous vote.
Attorney Richard Wholley of Roche, Heifetz, Murphy & Wholley, representing the aggrieved ERP’s noted that the order of an audit of Trust Insurance Company is long overdue, and after his review of the results of the audit, he will take appropriate action at that point on behalf of his clients.
Chairman Gilman commented that Trust has long ignored and defied all requests of the Marketing Review Committee noting that CAR Rules are specific as far as requirements for ERPs and Servicing Carriers.
Mr. Maher reported that in a recent written communication from Trust’s Counsel, that Trust indicated that it is appealing certain actions taken by the Market Review Committee. Mr. Maher noted that it is unclear as to what actions are being appealed by Trust and that he would be in contact with Trust’s Counsel for clarification.
Concluding his report, Mr. Boynton reported that the Market Review Committee voted to deny the appeal of Ramon Vasquez’s termination of his agency's ERP appointment by the New England Fidelity Insurance Company following the company's presentation of a series of incidents which led to the appointment termination, and the appellant's desire for a mutual termination.
Mr. Boynton reported that the Records of the Market Review Committee meetings of July 20 and August 12, 1998 have been distributed and are on file with CAR’s Secretary.
98.7 Claims Advisory Committee
Ms. Kathleen Devericks reported that the Claims Advisory Committee at its August 26, 1998 meeting received a report on the Automobile Damage Appraisers Licensing Board Subcommittee meeting of August 19, 1998. Representatives from the three major estimating systems attended the meeting and discussed paint and material costs. A report was provided on the Automobile Damage Appraisers Licensing Board meeting of August 25, 1998, at which time the Board agreed to hear complaints about paint and material which predated their recent Advisory Ruling clarifying the tax issue even though they had previously agreed not to consider these complaints. The Committee discussed its concern that the Board is inconsistent in its rulings and that the absence of detailed records makes it difficult for companies to challenge decisions which conflict with prior actions of the Board. Following discussion of various actions that could be taken, the Claims Advisory voted fifteen in favor with one opposed to recommend to the Governing Committee that CAR videotape the meetings of the ADALB, similar to Massachusetts Auto Body Association and some other insurers. Ms. Devericks noted this was an action item.
A substitute motion was made by Mr. Charles Boynton and duly seconded by Mr. Thomas Randall that the detailed information be obtained from a source other than through video secured by CAR itself.
98.7Claims Advisory Committee (Continued)
It was noted that video taping of the ADALB meetings are currently being performed by other industry entities who have indicated a willingness to share the video for a fee. It was further noted that where CAR does not have any matters that would be addressed by the ADALB, any member company wanting a video of the ADALB proceeding should either arrange for their own taping or contact one of the parties currently taping the meetings for a copy.
The motion passed on a unanimous vote.
Concluding, Ms. Devericks stated that CAR Staff reported that the Fraud Bureau has indicated that their investigators utilize the information on the Comprehensive Claims notice reported to the Merit Rating Board. Other members agreed that their SIU’s consider this a valuable resource and the Committee agreed that the information is useful and should continue to be reported.
Ms. Devericks reported that the Records of the Claims Advisory Committee meeting of August 26, 1998 have been distributed and are on file with CAR’s Secretary.
98.8 Operations Committee
Ms. Wendy Browne reporting on behalf of the Operations Committee regarding a Staff recommendation for Model Year Century reporting. She indicated that members of the Statistical Subcommittee and Operations Committee were surveyed relative to Staff’s recommendation for reporting Model Year Century. Since some of the members of the Operations Committee disagreed with Staff’s recommendation, this issue will be discussed in more detail at the October meeting of the Operations Committee.
98.11Actuarial Committee
Mr. Arthur Remillard reporting on the Actuarial Committee meeting of September 15, 1998, indicated that a Subcommittee of the Actuarial Committee was established to analyze the Rule 12 class and territory credit indications. The Actuarial Subcommittee met on July 2 and September 14, 1998.
Mr. Remillard stated that at the July 2, 1998 Actuarial Subcommittee meeting, Plymouth Rock proposed developing credits for SDIP steps. However, it was the consensus of the Subcommittee not to develop SDIP credits for policy year 1999 because the market is currently doing so well, the cession rate is less than 10%, and there are changes being proposed for the SDIP system.
Mr. Remillard then noted that at the September 14, 1998 meeting of the Actuarial Subcommittee, the discussion of the credit indications and parameters for policy year 1999 continued. Since the Division of Insurance had not yet announced a decision regarding the 1999 territory assignments, Staff had prepared indicated territory credits based upon both AIB’s and the State Rating Bureau’s (SRB’s) 1999 territory filing. Given the insignificant difference in potential credits resulting from the AIB and SRB’s territory proposals, the Subcommittee agreed to recommend a methodology for calculating territory credits and applying it to whichever 1999 territory filing is approved.
98.11Actuarial Committee (Continued)
Mr. Remillard noted that after further discussion, the Subcommittee unanimously voted to recommend to the Actuarial Committee that the policy year 1999 “k-factor”, excluded classes, and miscellaneous private passenger exposure weight remain the same as the 1998 policy year. The Subcommittee also recomended a 1999 Rule 12 credit offer of:
- $130 value of a credit
- 9.0 cap on indicated credit levels
- Use of the same four parameters as was approved in the 1998 credit offer
- Territory credits resulting from the final 1999 territory assignments
The above results in a change in potential credits of:
AIB ProposalSRB Proposal
Class 7.8%Class7.8%
Territory 0.4% Territory1.5%
Total 4.4%Total4.9%
Mr. Remillard stated that after further discussion, the Actuarial Committee unanimously voted to recommend to the Governing Committee that the policy year 1999 “k-factor”, excluded classes, and miscellaneous private passenger exposure weight remain the same as the 1998 policy year. The Actuarial Committee also recommends the adoption of the Rule 12 credit offer as recommended by the Actuarial Subcommittee.