The growth of the commercial automobile residual market and questions relating to Private Passenger Type vehicles insured as commercial vehicles has sparked the Commercial Auto Committee of Commonwealth Automobile Reinsurers to form three subcommittees to look at various aspects of the commercial residual market’s rules to assist Servicing Carriers handling the commercial automobile residual market to follow.
At the November 17 meeting of the CAR Governing Committee, CAR’s President, Natalie Hubley, reported that Mr. Thomas Depalo the Chair of the Commercial Automobile Committee had established three separate subcommittees:
- A Servicing Carrier Service Levels Subcommittee;
- A Commercial Auto Residual Market Standards Subcommittee;
- A Commercial Classification Subcommittee.
The Servicing Carrier Service Levels Subcommittee. This subcommittee has been charged with defining overall industry expectations regarding commercial Servicing Carrier service levels, including service levels above and beyond those contemplated in the RFP process used for selecting CAR’s Commercial Servicing Carriers and the present Rules of Operation. Additionally, this Subcommittee has been directed to consider and assess potential actions and processes to address those service levels that are deemed to be extraordinary, including, but not limited to, the reimbursement of extraordinary expenses. Such as those recently sought by Arbella in relation to the Point Insurance hearings. See Agency Checklists’ article of September 26, 2017, “Arbella Seeks $585,000 From CAR For Expenses In Point Agency Anti-Fraud Effort.”
The Commercial Residual Market Standards Subcommittee. This subcommittee’s charge is to discuss opportunities to improve commercial automobile residual market results by evaluating various topics such as the establishment of various underwriting standards and other Servicing Carrier procedures, enhancement of ERP requirements, development of an information sharing forum relative to risk management, and development of an oversight program including CAR compliance audits.
The Commercial Classification Subcommittee. This subcommittee has been established to explore opportunities for the development of rating classifications to address risk factors evolving out of changes in market conditions. Initially, the Subcommittee will focus on rating classifications for Private Passenger Type risks.
The subcommittees setting agendas and scheduling meetings
On November 9, 2017, the Servicing Carrier Service Levels Subcommittee began the process of evaluating criteria for defining the commercial Servicing Carrier service levels and extraordinary requests for reimbursement from Servicing Carriers.
At the November 9 meeting, Attorney Benjamin Hincks, counsel for CAR, provided the subcommittee with several suggestions for potential deliverables that would allow the subcommittee to meet its charge. He stated that these deliverables may include but are not limited to: Developing a record through the subcommittee’s meeting discussions to provide guidance for future RFP processes; developing a specific policy statement relative to a Servicing Carrier’s anticipated level of service or the type of expenses that may be deemed as extraordinary; and proposing appropriate amendments to the Manual of Administrative Procedures and/or Rules of Operation.
The subcommittee directed CAR staff to draft procedures for the review process. The subcommittee has not scheduled their next meeting pending CAR staff completing their initial assignment.
On December 11, 2017, the Commercial Automobile Residual Market Standards Subcommittee held its first meeting to discuss:
- Underwriting Documentation–required documentation to support Massachusetts residual market eligibility and classification including principal place of business, garaging, driver licensing, etc.
- Servicing Carrier Procedures–consistency in issues such as use of composite rating, underwriting various classes of business, handling financial responsibility requests, etc.
- Exclusive Representative Producer Requirements–review of existing requirements and determination of whether the existing requirements should be amended, strengthened, etc.
- Information Sharing–a review of whether the pooling of policy and/or risk information for the Servicing Carrier community will benefit the industry relative to risk jumping and/or classification/rate evasion, etc. as well as other opportunities to share information beneficial to the administration of the program that may not be proprietary in nature or in conflict with statute and/or regulations
- Oversight and Audit Procedures–establish performance benchmarks and determine compliance audit procedures
Agency Checklists will report on this meeting when its results become available.
The Commercial Classification Subcommittee has scheduled its second meeting for 10 a.m., December 14, 2017.
At this meeting, the subcommittee will continue their discussion of a revised Private Passenger Type classification plan. At their last meeting, the subcommittee had directed CAR staff to study other filings in order to develop a list of recommended risk attributes. The subcommittee members also agreed to review data availability within their own organizations in order to be prepared to advise CAR staff with respect to the ability to respond to a data call for an initial filing and to discuss among other items:
Risk Attributes: At the subcommittee’s meeting CAR Staff will recommend considering for adoption the following risk attributes for an initial filing. The Subcommittee should be prepared to comment on the availability of the following exposure data to enable staff and its consulting actuaries to develop an initial filing. Further, the members should discuss effective date and market source (ceded vs. voluntary) parameters for the initial data collection.
- driving Experience defined as the number of years licensed;
- driving History defined as a combination of:
- number of Major Incidents;
- number of Minor Incidents;
- number of Major Convictions;
- number of Minor Convictions.
- “verifiable attributes” defined as whether the driving experience and driving history can be verified or not.
Premium Calculation Rules: The Subcommittee will also discuss anticipated premium calculation issues to enable CAR staff to draft proposed manual rules including but not limited to:
- driver assignment vs. “blended” rating;
- operator deferrals;
- other.
Related Form Issues: The subcommittee will also address form issues resulting from changes including impacts to:
- The commercial auto application
- The Policy and/or endorsements
Agency Checklists will report on this meeting when its results become available.