Commonwealth Automobile Reinsurers, or its better-known name CAR, is the statutory body established by Massachusetts General Laws c. 175, § 113H that administers the Massachusetts Automobile Insurance Plan for personal motor vehicle insurance and the joint underwriting association for commercial motor vehicle insurance including taxis and limousines. In addition to this function, CAR also acts as the state’s statistical agent for motor vehicle insurance under an agreement it has with the Division of Insurance.
As for CAR’s fiscal year, it starts on October 1 of each year until September 30, of the next year. After the end of each fiscal year, it holds an annual meeting in which it issues an annual report. With respect to the facts and figures discussed below, the latest report relates to the period from October 1, 2019, to September 30, 2020. An official copy of the report can be accessed via a link at the end of this article.
For those interested in a simple synopsis of the report, however, Agency Checklists has abstracted some of the main points of interest from the report below.
Navigating the COVID-19 Public Health Crisis
As with most every other business and institution in the Commonwealth, responding to the COVID-19 Public Health crisis was far and away the most challenging aspect for CAR during 2020. In a departure from her customary Management Report, CAR President Natalie Hubley chose to highlight and commend the achievements of the entire CAR stafff in rising to the challenges resulting from the pandemic.
‘The entire staff has demonstrated commitment, initiative, and teamwork to support all committee activities, to address emerging concerns, and to maintain optimal service, while also maintaining a sense of community and caring for their friends and colleagues under difficult circumstances.”
In particular, Ms. Hubley noted that from March 17, 2020, onward the entire staff was successfully able to work remotely due to the “diligence and dedication of CAR’s IT staff, led by Peter McCabe, Vice President of Technical Operations.” In addition, she commended the work of Wendy Browne as well. As the Vice President of Business Operations, she noted that Ms. Browne “…led staff efforts to evaluate impacts of the market disruption caused by the public health emergency and provide guidance to ensure consistent handling of residual market business.”
2020 Financial Results
Overall CAR saw an improvement in its FY2020 underwriting results mainly due to the “impact on businesses of the COVID-19 pandemic and to the enhanced efforts of Servicing Carriers to evaluate residual market eligibility.” The following graph highlights CAR’s financial results and includes the projected loss ratios as of the September 2020 accounting quarter reflecting the latest estimate from the Loss Reserve Committee.
According to CAR, there was a net underwriting gain of $50.5 million. This represents a $73.9 million gain over the prior year’s net underwriting loss of $23.4 million. As a result, there was a 62.5% loss ratio for the policy year 2020, reflecting the reduction in loss frequency during COVID-19. “The policy year 2019 reduction also reflects enhanced Servicing Carrier efforts to evaluate commercial residual market eligibility…”
Commercial Automobile and Taxi/Limousine Programs
“CAR manages the commercial residual market pooling mechanism through its Commercial Automobile and Taxi/Limousine Programs. Servicing Carriers are contracted to service the ceded policies of both programs for 5-year terms, the books of business are reviewed annually to ensure an equitable distribution of the residual market. Members share in the pooled results based on voluntary commercial written premium.”
CAR continued to enhance Commercial Automobile Programs as it has done during the past couple of years. In addition, it noted the following efforts and improvements it achieved during the past year:
- Focused on oversight to ensure compliance with the requirements of the program and “on the pursuit of adequate residual market rates, particularly for those classes contributing significantly to the deficit.”
- Completed a comprehensive analysis of the commercial residual market rates culminating with a report issued in July;
- Coordinated with the AIB and Joint Actuarial Commercial Lines Committee to author a whitepaper “…describing the substantive issues contributing to the rate need among other issues and proposed solutions including “non-zone-rated vehicles garaged out of state and stand-alone non-owned coverage.”
- Completed and delivered two sets of audit reports using the 2019 re-designed Audit Program to monitor Servicing Carriers’ adherence to CAR procedure and eligibility rules and regulations.
- CAR’s Commercial Automobile Committee announced recommendations to amend the Additional Insured Endorsement which include “…to limit residual market exposure, introduce a supplemental application to gather additional information needed to properly classify each vehicle, recommended changes to producer commission rates, and incorporated approved standards into the Manual of Administrative Procedures.”
The following chart demonstrates the current trajectory of the commercial residual market. CAR notes that MF PPT and Zone-rated bus volume both saw substantial decreases.
The Private Passenger Market and the MAIP
CAR administers the Massachusetts Automobile Insurance Plan (MAIP), which provides access to private passenger motor vehicle insurance to eligible risks who are unable to obtain such insurance through the voluntary market and ensures that the risks written through the MAIP are distributed equitably based on the quota share of each Member.
2020 marked the conclusion of the private passenger pool run-off, with the MAIP now having been fully functional for more than ten years. As a result, CAR says with those books now closed, its staff is now able to administer the daily operation of the assigned risk plan, improving both efficiency and control. Other efforts this year included:
- Completion of the RMV systems conversion to allow for a prefill of driver and vehicle information into the MAIP Application;
- Amending the private passenger residual market rates for policies effective June 1, 2020 and later;
- Assisting with the withdrawal of Occidental Insurance Company from the Massachusetts private passenger auto insurance marketplace.
- Providing ongoing technical support to Assigned Risk Carriers while carriers upgrade their own systems which impacted the processing of MAIP business.
“The Private Passenger residual market fell below 1% market share while the total market continued to grow at a modest annual pace. The level of monthly assignments has decreased steadily over the past three-yearly cycles.”
Statistical Agent for the Commissioner of Insurance
As the designated statistical agent for Massachusetts automobile insurance, CAR collects, edits, analyzes, and disseminates Massachusetts motor vehicle insurance statistical data as directed by the Division of Insurance. In its role as statistical agent, CAR verifies the completeness of the statistical database and reconciles reported statistical data to company financial statements, and performs an analysis that compares each company’s distribution of data to the industry’s distribution.
“The graph below reflects the growing number of carriers reporting data to CAR. During fiscal year 2020, staff continued to enhance its statistical agent services through improvements to the statistical plan, edit packages, and website access.”
Information Technology Enhancements
Consistent with CAR’s role as the state’s statistical agent, CAR’s Information Technology Group (“IT Group”) implemented processes in order that staff could work-from-home successfully providing the needed services to CAR constituents. This included testing and implementing various web conferencing solutions to allow for secure meetings in a virtual environment,
Another major initiative undertaken this year involved migrating mainframe interactive applications to a web platform thereby improving customer experience. The first phase includes the conversion of CAR’s accounting system, followed by creating online access to data reporting errors.