Texas Department of Insurance · Withdrawal Plan = Market Exit Plan TEXAS DEPARTMENT OF INSURAN E...

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Property and Casualty FilingsTexas Department of Insurance

2018 Compliance Conference – P&C Filings

TEXAS DEPARTMENT OF INSURANCE • 2018 2

J’ne Byckovski, FCAS, MAAADirector and Chief ActuaryP&C Actuarial OfficeJne.Byckovski@tdi.texas.gov

Jeff Hunt, CPA, AFEDirectorCompany Licensing & RegistrationJeff.Hunt@tdi.texas.gov

Kim Donovan, CPCU, AIC, LPCSManagerP&C Lines OfficeKimberly.Donovan@tdi.texas.gov

David Muckerheide, JDManagerP&C Lines OfficeDavid.Muckerheide@tdi.texas.gov

Withdrawal and Restriction Plans

Presented By: Jeff Hunt

Withdrawal and Restriction PlansTopics

Withdrawal plan = market exit plan (not license cancellation)

Purpose of Withdrawal plan filings

When is a plan required?

Exemptions and exclusions

What constitutes a line of business?

Withdrawal plan contents

Five year restriction

Withdrawal plan vs a restriction plan

Withdrawal Plan = Market Exit Plan

TAC 7.1801-7.1809 - recently amended to reflect modernization of statute and address restriction plans.

Withdrawal plan does not mean license cancellation. The term “withdrawal” is used in many jurisdictions to address license cancellation.

A withdrawal plan may be the first step in the process of winding down, but an insurance company license cannot be cancelled until all policyholder obligations have been met or taken care of in a manner approved by TDI.

Purpose of Withdrawal Plan Filings

Exiting the market in a compliant and solvent manner; meeting all applicable statutory obligations.

Compliant – is the withdrawal plan constructed to protect the interests of its TX policyholders? Is the appropriate notice, timing of non-renewals, etc. granted to both policyholders, potential claimants, agents, and any other relevant stakeholders in a manner compliant with statute and regulations?

Solvent manner – Does the applicable regulated entity have the financial wherewithal to meet its contractual obligations and continue providing services to its policyholders and claimants.

Not creating market availability issues.

When is a Plan Required

Sec. 827.003. WITHDRAWAL PLAN REQUIRED. An insurer shall file with the Commissioner a plan for orderly withdrawal if the insurer proposes to:

(1) reduce the insurer's total annual premium volume by 50 percent or more;

(2) reduce the insurer's annual premium by 75 percent or more in a line of insurance in this state; or

(3) reduce in this state, or in any applicable rating territory, the insurer's total annual premium volume in a line of personal automobile or residential property insurance by 50 percent or more.

Exemptions and Exclusions

Transfer of business to an affiliate.

Certain business written by a stipulated premium company.

The line of insurance from which an HMO is withdrawing is Medicare, a Medicare+Choice plan, or a Medicaid contract.

If an applicable regulated entity comes within an exception, such notification must be sent to the department simultaneously with any notification required to be provided to any other state or federal agency.

What Constitutes a Line of Business

The lines of business are categorized by Property and Casualty, Life and Health, and HMO in TAC 7.1803.

The lines of business for licensing and the lines of business in TAC 7.1803 are not the same. The lines of business noted in TAC 7.1803 are more product specific versus risk specific.

Not limited to just those lines, but may include a separate line noted in the NAIC financial reporting blank.

Withdrawal Plan Contents

(1) be constructed to protect the interests of the people of this state;

(2) indicate the dates on which the applicability regulated entity intends to begin and to complete the plan; and

(3) provide for:

• (A) meeting contractual obligations;

• (B) providing service to policyholders and claimants in this state;

• (C) meeting any applicable statutory obligations, such as payment of assessments to the guaranty fund and participation in an assigned risk plan or joint underwriting arrangement.

Five Year Restriction

Any applicable regulated entity withdrawing from writing all premium in all lines of insurance in this state and required to file a plan of orderly withdrawal, may not resume writing the withdrawn lines in this state before the fifth anniversary of the date of the withdrawal without complying with all applicable statutory and regulatory provisions governing authorization to write such lines of insurance in this state and receiving the written approval of the Commissioner to resume such writing.

The five-year ban under Insurance Code §827.006, for the resumption of writing insurance after a withdrawal, takes effect the later of the date the applicable regulated entity intends to begin its withdrawal as stated in the plan approved by the Commissioner or discovery by the department of the applicable regulated entity’s failure to file a withdrawal plan.

Withdrawal Plan vs A Restriction Plan

Before an insurer, in response to a catastrophic natural event that occurred during the preceding six months, may restrict writing new business in a rating territory in a line of personal automobile or residential property insurance, the insurer must file a proposed restriction plan with the Commissioner for review and approval.

Withdrawal plans are driven by material reduction in premium possibly creating availability issues vs restriction plans are driven by ceasing to write new business possibly creating market availability issues.

Withdrawal plans are more broad whereas restriction plans are limited to personal lines impacted by a catastrophic natural event.

Form and Rate Filings

Presented By:

Kimberly Donovan, David Muckerheide, and J’ne Byckovski

Filings in General – “Texas Sized”

2017: Another busy year

• 5,600 form filings with 29,000 forms

• 3,000 rate filings

Filings in General – All Shapes and Sizes

Filing Type All Lines *

Policy Forms Prior Approval

Endorsements Prior Approval

Rates/Rules File and Use

Credit Scoring Models File and Use

Underwriting Guidelines Use and File

Certificates of Insurance Prior Approval

*See TIC Chapter 3502 for filing modes for mortgage guaranty and mortgage guaranty pool.

Filings in General – No Mistake at Intake

Common problems

• Incorrect company name

• Incorrect line of business

• Incorrect filing type

• Missing or incorrect TDI file number for previous filing

• Excess information in reference filings for forms

• Entire filing marked confidential

• Form name and number do not match form schedule

Filings – The Basics

Know what’s required

• Statutes and rules

• Filings Made Easy Rule

• Filings Made Easy Guide

• Filing review checklists

• SERFF General Instructions

Check the TDI website

Ask for guidance

Form Filings – The Next Level

Coherent

Informative

Responsive

Collaborative

Form Filings – The Inside Scoop

Consult current checklist requirements and update provisions if based on older filings.

Explain endorsements

• Describe the endorsement

• Detailed explanation of reasons for the filing

• What policy does it attach to?

• Does the name match the intent and effect?

• Mandatory, conditional mandatory, or optional?

Form Filings – More Inside Scoop

Include side-by-side or red-line versions for ease of review.

Withdrawn forms – Remove the .pdf attachment from the form schedule.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Filings Fun – Alphabet Soup

A – Advisory Organizations

Advisory organizations do not submit filings for their members.

Insurers must make a reference filing to use an advisory organization’s approved or accepted filings.

Do not submit filings to notify TDI of your company’s intention not to adopt an advisory organization filing.

B – Black Font

Use black, 10-point font unless your document is a red-lined version showing changes.

C – Checklists

Follow filing review checklists to reduce review time and objections.

C – Claims Not Paid or Payable

Insurers may not assign a rate consequence or cause premiums to increase based solely on a claim not paid or payable.

Applies to residential property

• TIC 551.107

• 28 TAC 21.1004

Applies to personal auto

• TIC 1953.051(b)

Solely – Violation if the rate or premium increases when all rating variables held constant and the sole thing that changes is the claim not paid or payable.

D – Disallowed Expenses

In setting rates, an insurer must exclude disallowed expenses.

These include such items as:

• Lobbying expenses

• Advertising expenses, other than those related

• Fines

• Contributions

• Administrative expenses, other than acquisition, loss control, and safety engineering expenses, that exceed 110 percent of the industry median.

TIC 2251.002(1-a), 2251.052(a)(5)

E – Effective Dates

If the effective date changes, notify TDI on or before the effective date in the filing.

F – Fees

Must be filed.

Information concerning policy fees, service fees, and other fees that are charged or collected by the insurer under TIC 550.001 or 4005.003.

Any other amounts collected by the insurer in connection with a policy, other than the premium.

• Automobile Burglary and Theft Prevention Authority

• Rural/volunteer fire protection

• FAIR Plan, TWIA assessments

F – Filings Made Easy Rule

Rule that provides the filing requirements for:

• Forms

• Rates and rules

• Credit scoring models

• Underwriting guidelines

• Certificates of Insurance

G – Geographic Location

Commonly referred to as territories.

You may not charge a different rate based on geographic location unless the “charge is based on sound underwriting or actuarial principles reasonably related to actual or anticipated loss experience.”

G – Grandfathering

May be unfairly discriminatory if it results in different amounts, benefits, or any terms or conditions of a policy being offered to individuals of the same class and of essentially the same hazard.

H – Help

If you have questions about the filing process or your filing, please ask us.

We’re here to help.

I – Imminent

We want to help you meet your timing needs. Please reach out to us before a deadline is imminent.

J – Actuarial Joke

Infinitely many actuaries walk into a bar.

The first says, "I'll have a beer."

The second says, "I'll have half a beer."

The third says, "I'll have a quarter of a beer."

The barman pulls out just two beers.

The actuaries say, "That's all you're giving us?“

The bartender says, "Come on guys. Know your limits."

K – Kent C. Sullivan

Insurance Commissioner

L – Large Risk Exemptions

Forms do not need to be filed for large risks.

• Large risk qualifications – TIC 2301.004

Rates DO need to be filed.

M – Multiple Rating Programs

Lawful for a county mutual meeting requirements of TIC 912.056(d).

Otherwise, may be unfairly discriminatory.

• Example – ABC Ins. Co. introduces new by peril rating program with all new bells and whistles.

Nothing else changes.

Current book of business continues to be renewed on old rating plan.

New business written in new rating plan.

Results in similar risks being charged different premiums.

N – Non-sufficient Funds

Max amount of fee $30

Business and Commerce Code 3.506

O – OPIC

Office of Public Insurance Counsel

OPIC represents the interests of Texas consumers in regulatory matters involving auto, residential property, and title insurance.

May appear or intervene in matters involving rates, rules, and forms.

P – Personally Identifiable Information (PII)

Do not put PII in filings.

State specific tab in SERFF asks you to confirm you didn’t include any.

P – Plain Language

Make sure your policy is easy to read and understand.

• Choice of words

• Formatting

• Organization

Q – Quality

Double check your filing.

R – Refer to Company Rates

All rates must be filed.

Do not put the following in your filings:

• Refer to company

• Refer to reinsurer

• A-rates

• Consent-to-rate

For certain lines, ranges of rates may be acceptable.

Bulletin B-0022-95

R – Reference Filings (Forms)

References the use of previously approved policy forms or endorsements.

Must include:

• Name of the insurance company or advisory organization whose filing is being referenced

• TDI file number of the filing being referenced

Do not include a copy of the referenced forms.

Typically must relate to only one line of insurance.

Filings that amend a previously approved form are notreference filings.

S – Schedule Rating

Limit to +/- 40 percent.

S – SERFF

System for Electronic Rate and Form Filing

T – Form Usage Table

Form filers must submit a form usage table that indicates whether each form or endorsement is optional, mandatory, or conditional mandatory.

Optional – Form will be used only if the insured chooses to add it to the policy.

Mandatory – Form is required on all policies.

Conditional mandatory – Form is required in certain situations.

T – Tax Assumptions

Congress passed H.R. 1, the Federal Tax Cuts and Jobs Act, in December 2017.

TDI expects insurers to update the tax assumptions in their ratemaking methodologies and rate filings.

U – Underwriting Guidelines

Insurers required to file for:

• Personal automobile

• Residential property

• Workers’ compensation

Must file a full copy every three years by March 1.

Must file any changes within 10 days of use.

Must be sound, actuarially justified, or otherwise substantially commensurate with the contemplated risk.

May not be unfairly discriminatory.

V – Volunteer Firefighter Assessment

Applicable to homeowners, fire, farm and ranch, auto physical damage, and commercial multi-peril.

Insurers assessed the lesser of the total amount in the General Appropriations Act or $30 million.

Recovery of assessment permissible.

Policyholder notice required if insurer assesses.

Assessment charged to policyholders must be included in a rate/rule filing.

W – Waiver of Premium Refund

Insurers must refund the appropriate amount of unearned premium to policyholders.

For de minimis amounts, insurers must still refund premium unless they give the policyholder the option to waive the refund.

W – Workers’ Compensation Rate Basis

Workers’ compensation carriers must use:

• TDI classification relativities,

• NCCI loss costs, or

• Their own independently filed rates.

If carriers use the relativities or loss costs, they must use the latest set, and must adopt them in a rate/rule filing.

Insurers may not revise rates more than once every six months.

X – Do NOT Mark the Entire Filing Confidential

Y – You

You, as the insurer or advisory organization, are responsible for making sure your filings are compliant with all statutes and rules.

Z – Zealous Correlations

Just because it is correlated, doesn’t mean it makes sense.

Thank you!

Texas Department of Insurance · Withdrawal Plan = Market Exit Plan TEXAS DEPARTMENT OF INSURAN E...

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