Market Analysis ~ September Series w w w .insurance.pa.gov w w w - - PowerPoint PPT Presentation

Market Analysis ~ September Series

w w w .insurance.pa.gov R b t L P tt A ti PA I C i i w w w .insurance.pa.gov

Market Analysis ~ Septem ber Series

Presented by:

The Pennsylvania I nsurance Departm ent

Septem ber 1 6 , 2 0 1 0

8 a.m . to 3 p.m . Property & Casualty focus

Septem ber 3 0 , 2 0 1 0

8 a.m . to 3 p.m . Life, Accident & Health focus

Tem ple University Harrisburg

Conference Center

234 Strawberry Square, Harrisburg, PA 17101 www.temple.edu/ harrisburg

Market Analysis ~ September Series

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• Welcoming Comments and Useful Information
• Scanning Today's Program
• Brief Overview of the Department
• Brief Overview of the PA Market
• PA Complaint Overview

Program Overview ~ Setting the Stage

Ron Gallagher, Deputy I nsurance Com m issioner rgallagher@state.pa.us

Market Analysis ~ September Series

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Our Sponsors: The Insurance Federation

• f Pennsylvania, Inc.

PA Association of Mutual Insurance Companies

Market Analysis ~ September Series

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W ho is in the audience today?

(as of 9/ 24/ 10)

• 28 Carriers
• Legislative Staff
• House of Representatives
• Senate Banking Committee
• 7 Law Firms
• 1 Trade Groups
• Maryland Insurance Administration
• PA Insurance Department Presenters, Support Staff and Legal Counsel

Useful Information

Market Analysis ~ September Series

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Scanning Today’s Program :

8 :0 0 Registration 8 :3 0 Setting the Stage Ron Gallagher, Deputy Commissioner for Market Regulation 9 :0 0 “Undressing” Market Analysis Jeff Arnold, Market Analysis 1 0 :0 0 The “4 1 1 ” for Carriers and Consultants Cindy Fillman, Director, Market Analysis and Education 1 0 :3 0 Morning Break 1 0 :4 5 Market Actions - A Year in Review Chris Monahan, Director, Bureau of Market Conduct 1 1 :1 5 Morning W rap-up/ Questions 1 1 :4 5 Lunch (on your own) 1 :0 0 W alk in the Regulator‘s Shoes Participate in a workshop and conduct a market regulation committee session 2 :0 0 Afternoon W rap-up/ Questions 2 :3 0 Roundtable Discussion w ith Deputy Com m issioners

Market Analysis ~ September Series

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In s u r a n c e C o m m is s io n e r O ffic e o f G e n e ra l C o u n s e l O ffic e o f C h ie f C o u n s e l P o lic y O ffic e C o m m u n ic a tio n s O ffic e D e p u ty In s u ra n c e C o m m is s io n e r fo r M a rk e t R e g u la tio n D e p u ty In s u ra n c e C o m m is s io n e r fo r L iq u id a tio n s , R e h a b ilita tio n s , a n d S p e c ia l F u n d s D e p u ty In s u ra n c e C o m m is s io n e r fo r C o rp o ra te a n d F in a n c ia l R e g u la tio n D e p u ty In s u ra n c e C o m m is s io n e r fo r C H IP a n d A d u lt B a s ic In s u ra n c e D e p u ty In s u ra n c e C o m m is s io n e r fo r In s u ra n c e P ro d u c t R e g u la tio n a n d A d m in is tra tio n D e p u ty In s u ra n c e C o m m is s io n e r fo r M e d ic a l C a re A v a ila b ility a n d R e d u c tio n o f E rro r (M C A R E ) A d m in is tra tiv e H e a rin g s O ffic e B u re a u o f M e d ic a l M a lp ra c tic e A d m in is tra tio n D iv is io n s : O p e ra tio n s S u p p o rt P o lic y A d m in is tra tio n D iv is io n s : P o lic y a n d P la n n in g Q u a lity A s s u ra n c e O p e ra tio n s S u p p o rt M a rk e tin g a n d O u tre a c h B u re a u o f L iq u id a tio n s a n d R e h a b ilita tio n s A d m in is tra tio n D iv is io n s : A s s e t M a n a g e m e n t S u p p o rt S e rv ic e s B u re a u o f L iq u id a tio n C la im s D iv is io n s : P ro p e rty a n d C a s u a lty L ife , A c c id e n t, a n d H e a lth B u re a u o f S p e c ia l F u n d s D iv is io n s : A u to C A T F u n d W o rk e rs C o m p e n s a tio n S e c u rity F u n d U n d e rg ro u n d S to ra g e T a n k In d e m n ific a tio n F u n d B u re a u o f C o n s u m e r S e rv ic e s R e g io n a l O ffic e s : H a rris b u rg P h ila d e lp h ia B u re a u o f M a rk e t C o n d u c t D iv is io n s : L ife a n d H e a lth M a rk e t C o n d u c t P ro p e rty a n d C a s u a lty M a rk e t C o n d u c t B u re a u o f L ic e n s in g a n d E n fo rc e m e n t D iv is io n s : L ic e n s in g S e rv ic e s In fo rm a tio n S e rv ic e s L ic e n s in g C o m p lia n c e F ie ld In v e s tig a tio n s F ra u d B u re a u O f F in a n c ia l E x a m in a tio n s B u re a u o f C o m p a n y L ic e n s in g a n d F in a n c ia l A n a ly s is D iv is io n s : F in a n c ia l A n a ly s is C o m p a n y L ic e n s in g B u re a u o f A d m in is tra tio n D iv is io n s : H u m a n R e s o u rc e s a n d E q u a l E m p lo y m e n t O p p o rtu n ity B u d g e t O ffic e M a n a g e m e n t B u re a u o f P ro p e rty a n d C a s u a lty In s u ra n c e D iv is io n s : A c tu a ria l R e v ie w P o lic y R e v ie w B u re a u o f L ife In s u ra n c e D iv is io n s : A c tu a ria l R e v ie w P o lic y R e v ie w B u re a u o f A c c id e n t a n d H e a lth In s u ra n c e D iv is io n s : A c tu a ria l D iv is io n P o lic y R e v ie w O ffic e o f th e B u d g e t C o m p tro lle r’s O ffic e B u re a u o f M C A R E C la im s A d m in is tra tio n D iv is io n s : C la im s A d m in is tra tio n S u p p o rt P h ila d e lp h ia R e g io n a l O ffic e E a s te rn R e g io n C e n tra l R e g io n W e s te rn R e g io n

IN S U R A N C E D E P A R T M E N T

L e g is la tiv e O ffic e B u re a u o f M a rk e t A n a ly s is a n d E d u c a tio n M a rk e t S u rv e illa n c e D iv is io n

Market Analysis ~ September Series

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Outreach Division Cindy Fillman cfillman@state.pa.us 783-2011 Market Analysis Division Vacant, Supervisor

Deputy Insurance Commissioner Ron Gallagher rgallagher@state.pa.us 783-2196

Bureau of Consumer Services Carolyn Morris, Director camorris@state.pa.us 783-9862 Bureau of Licensing and Enforcement Jack Yanosky, Director jyanosky@state.pa.us 705-0020 Harrisburg Regional Office Roger Lisi rlisi@state.pa.us 705-4395 Philadelphia Regional Office Leslie Pierce lpierce@state.pa.us 215-560-2630 L & H Market Conduct Yonise Paige ypaige@state.pa.us 783-3029 P & C Market Conduct Chet Derk cderk@state.pa.us 787-4373 Licensing Division Adriane Force aforce@state.pa.us 787-3842 Compliance Division Jim Krebs jkrebs@state.pa.us 705-0146 Program Analyst Christine Diep cdiep@state.pa.us 787-1683 Field Investigations Division Robert Downie rdownie@state.pa.us 772-3598 Bureau of Market Analysis and Education Cindy Fillman, Director cfillman@state.pa.us 783-2011 Fraud Division Deborah Lee dlee@state.pa.us 787-0166 Bureau of Market Conduct Christopher Monahan, Director cmonahan@state.pa.us 787-9100 Executive Secretary Lori Magaro lmagaro@state.pa.us 787-6174 Complaint Intake Unit Brenda John bjohn@state.pa.us 783-2153 Information Services Division Ann Barnett abarnett@state.pa.us 783-2186

Office of Market Regulation

Sharon Fraser Bureau Support shfraser@state.pa.us 705-0005

Market Analysis ~ September Series

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Overview of the PA Market:

• $81 billion in Annual Premium
• 5th Largest Market in US
• 12th Largest Market in World
• 288 Domestic carriers
• 1,869 licensed carriers
• 181,327 licensed producers
• 72,301 residents
• 109,026 non-resident
• $41 million to GF annually

(approx)

• $18.5 million budget annually

(approx)

• 220 positions (approx on

regulatory only)

Market Analysis ~ September Series

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Overview of the PA Market ~ State Budget:

State 2010 Rank New York $556,976,000 1 California $240,051,000 2 Florida $114,423,066 3 Texas $102,547,440 4 Ohio $94,830,371 5 Kentucky $40,532,900 6 West Virginia $40,473,933 7 North Carolina $29,863,635 8 Louisiana $29,387,018 9 New Jersey $29,198,000 10 Michigan $29,020,800 11 Maryland $27,361,093 12 Virginia $26,256,198 13 Delaware $25,087,000 14 Connecticut $24,828,742 15 Washington $23,182,000 16 Illinois $22,619,000 17 Pennsylvania $21,807,000 18 Alabama $20,404,588 19 Arizona $19,439,700 20 States in Descending Order of 2010 Budget

Market Analysis ~ September Series

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States in Descending Order of 2008 Premium Volume State 2008 Rank California $220,922,831,947 1 New York $150,859,397,709 2 Florida $105,328,277,735 3 Texas $99,037,673,043 4 Pennsylvania $81,078,728,038 5 Illinois $59,598,002,201 6 New Jersey $59,467,162,770 7 Ohio $55,366,587,161 8 Michigan $50,998,104,902 9 Massachusetts $43,551,960,738 10

Overview of the PA Market:

Market Analysis ~ September Series

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Note: The 2009 market share information came from the NAIC as

• f May 4,

2010.

Overview of the PA Market:

Groups which account for 95.05% of the Total A & H Direct Premium in PA 2009

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 Health Care Groups Complaint Index 5 10 15 20 25 30 35 Market Share (percentage)

Complaint Index 0.81 0.03 0.31 0.32 0.53 0.16 0.49 0.71 0.14 0.01 Market Share 5.61 3.07 30.81 28.35 4.86 3.1 6.01 2.37 8.47 2.4 Aetna United Health Highmark Independe nce Blue Cross Coventry Corp Geisinger Capital Blue Cross Hospital Serv Assn

• f NEPA

UPMC Health Systems Health Partners of Philadelphi

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Overview of the PA Market:

Groups which account for 50.46% of the Total Life Direct Premium in PA 2009

0.00 0.20 0.40 0.60 0.80 1.00 1.20 Life Groups Complaint Index 1 2 3 4 5 6 7 8 9 Market Share (percentage) Complaint Index 0.05 0.28 0.63 0.56 0.11 1.00 0.19 0.04 0.10 0.38 Market Share 3.44 5.12 8.35 7.01 3.52 3.57 4.61 5.48 5.49 3.87 State Farm Lincoln Natl Metropolitan Prudential of Amer Mass Mut Life Ins Aegon US Holding Grp New York Life Northwester n Mut John Hancock Axa Ins

Note: The 2009 market share information came from the NAIC as of May 4, 2010.

Market Analysis ~ September Series

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Total Assistance (Complaints, Phone calls, Hotline, Internet Requests, Walk-ins)

26,160 27,656 27,803 22,176 25,628 21,893 27,432 23,969 95,694 107,023

15,000 30,000 45,000 2008 2009 2010 2008 2009 2010 2008 2009 2010 2008 2009 2010 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Quarter

• No. of Com

plaints 20,000 40,000 60,000 80,000 100,000 120,000 2008 2009 2010 Year Cum ulative Total

PA Com plaint Overview :

Market Analysis ~ September Series

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845 905 825 740 780 1021 832 866 806 1,021 3,661

500 1000 1500 2000 2500 3000 3500 4000 2008 2009 2010 2008 2009 2010 2008 2009 2010 2008 2009 2010 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Quarter

• No. of Complaints

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2008 2009 2010 Year Cumulative Total

PA Com plaint Overview :

Market Analysis ~ September Series

w w w .insurance.pa.gov 15 Assistance: Phone Calls

19,405 20,080 18,570.0 15,622 18,619 15,090 20,644 17,519 19,465 67,636 79,908

10,000 20,000 30,000 40,000 50,000 2 8 2 9 2 1 2 8 2 9 2 1 2 8 2 9 2 1 2 8 2 9 2 1 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Quarter

• No. of Complaints

20,000 40,000 60,000 80,000 2008 2009 2010 Year Cumulative Total

PA Com plaint Overview :

Market Analysis ~ September Series

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Total Assistance: Hotline

1,690 2,158 1,800 1,952 2,393 1,614 1,719 1,722 1,653 6,789 7,735

1,000 2,000 3,000 4,000 5,000 6,000 7,000 2008 2009 2010 2008 2009 2010 2008 2009 2010 2008 2009 2010 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Quarter

• No. of Complaints

2,000 4,000 6,000 8,000 10,000 2008 2009 2010 Year Cumulative Total

PA Com plaint Overview :

Market Analysis ~ September Series

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Assistance: Walk-ins

153 170 128 175 180 101 171 168 187 703 629

100 200 300 400 500 2 8 2 9 2 1 2 8 2 9 2 1 2 8 2 9 2 1 2 8 2 9 2 1 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Quarter

• No. of Complaints

500 2008 2009 2010 Year Cumulative Total

PA Com plaint Overview :

Market Analysis ~ September Series

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Total Complaints Received

4,125 5,500 4,573 4,327 4,025 4,259 4,349 3,782 3,584 17,432 16,765

5,000 10,000 15,000 20,000 25,000 2 8 2 9 2 1 2 8 2 9 2 1 2 8 2 9 2 1 2 8 2 9 2 1 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Quarter

• No. of Complaints

5,000 10,000 15,000 20,000 25,000 2008 2009 2010 Year Cumulative Total

PA Com plaint Overview :

Market Analysis ~ September Series

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Accident and Health Complaints

1,017 1,358 1,287 1,434 1,310 2,629 1,532 1,400 1,441 1,671 1,311 1,262 5,285 6,698 5,669

1,000 2,000 3,000 2007 2008 2009 2007 2008 2009 2007 2008 2009 2007 2008 2009 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Quarter

• No. of Complaints

1,000 2,000 3,000 4,000 5,000 6,000 7,000 2007 2008 2009 Year Cumulative Total

Market Analysis ~ September Series

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Accident and Health: Complaints Category 2009

666 72 46 245 532 59 373 298 211 483 477 648 763 75 226 495

200 400 600 800 1000

Claims Handling Marketing and Sales Policyholder Services Underwriting Claims Handling Marketing and Sales Policyholder Services Underwriting Claims Handling Marketing and Sales Policyholder Services Underwriting Claims Handling Marketing and Sales Policyholder Services Underwriting 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

• No. of Complaints

`

Market Analysis ~ September Series

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Life Complaints

423 391 503 449 475 266 452 519 456 382 594 544 1,740 1,946 1,768

500 1000 1500 2007 2008 2009 2007 2008 2009 2007 2008 2009 2007 2008 2009 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Quarter

• No. of Complaints

600 1,200 1,800 2,400 2007 2008 2009 Year Cumulative Total

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Life Complaints: Total Complaints by Category 2009

361 41 29 154 42 269 45 57 74 75 70 39 114 80 38 280

100 200 300 400

Claims Handling Marketing and Sales Policyholder Services Underwriting Claims Handling Marketing and Sales Policyholder Services Underwriting Claims Handling Marketing and Sales Policyholder Services Underwriting Claims Handling Marketing and Sales Policyholder Services Underwriting 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

• No. of Complaints

Market Analysis ~ September Series

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23

Market Regulation Com m ittee:

Deputy for Market Regulation Director, Consum er Services Deputy for Product Regulation Bureau Director for Product Type Deputy for Financial Regulation Market Analysis Staff Director, Market Analysis & Education Market Analysis Chief Director, Market Actions Product Area, Division Chief,

Market Actions

Background

• Multidisciplinary

Analysis

• Decides on course of

action regarding continuum

• Review s Level 1

Analysis, Com plaint Analysis, Product Filings, Financial Health

• Meets 6 -9 tim es

annually

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2008 Market Actions

Total Projects = 94

Continuums: Interrogations, Phone Calls, Meetings 14% Market Conduct Exams 31% Studies/Education Reviews 55%

Market Conduct Exam inations:

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Market Conduct Exam inations:

2009 Market Actions

Total Projects = 152

Oversight Compliance Reviews 3% Studies/Education Reviews 58% Market Conduct Exams 17% Continuums: Interrogations, Phone Calls, Meetings 22%

Market Analysis ~ September Series

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“Undressing” Market Analysis ~ Overview of baseline, market conduct annual statement (MCAS), Level 1 data

Jeffrey Arnold, Market Analysis Exam iner jearnold@state.pa.us

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• Baseline Analysis
• Market Conduct Annual Statement
• Level 1 Review

“Undressing” Market Analysis Overview :

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• Uses data as a benchmark from which deviations and comparisons are

measured

• Systematic process whereby basic parameters are used to evaluate the

entire marketplace

• Used to identify companies that may require a more detailed and thorough

analysis

Baseline Analysis: Baseline Analysis:

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• Private Passenger Auto
• Homeowners
• Individual Life
• Individual Annuity
• Group Life
• Group Annuity
• Accident & Health
• Group Accident & Health
• Credit
• Medicare Supplement
• Long Term Care

Baseline Analysis: Baseline Analysis:

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• Market Analysis Prioritization Tool (MAPT)
• Select companies with over $100,000 in direct premiums written
• Select specific information from the report to conduct baseline analysis

Baseline Analysis: Baseline Analysis:

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• Measures a company’s performance, in terms of complaints, against

another company’s in the same market

• Measures changes in a company’s complaint performance over the analysis

period

• Complaint ratios are based on a company’s specific information and

provides a ratio of confirmed complaints per $1,000 of premium

• Complaint ratios are needed for each company to calculate the complaint

index

• Measures a company’s performance relative to other companies in the

same market

• The average complaint index is always 1.0 for a market for analysis

purposes

Consum er Com plaint Data:

Market Analysis ~ September Series

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• Find companies with significant fluctuations in premium volume
• Companies should be identified with dramatic growth (33% or more)
• Companies should be identified with dramatic decline (10% or more)

Prem ium Volum e:

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• Compare changes in losses and changes in reserves
• Identify companies with a spike in reserves without a corresponding

increase in losses paid

• Losses and reserves should be moving in the same direction at a similar

rate

Reserves:

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• Identify companies with loss ratios that are significantly higher or

lower than other companies in the same market

• Identify unusual trends or year to year variations
• Private passenger auto and homeowners

Loss Ratios:

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• Determine if companies have had a significant change in defense

costs from year to year

• Determine whether defense costs are moving in correlation to direct

losses and premium volume

• Defense costs should be rising relative to increases in premium

volume and losses

Defense Costs:

Market Analysis ~ September Series

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• Insurance Regulatory Information System (IRIS)
• Tool designed to assist insurance departments in monitoring the

industry’s financial condition

• Identify potential financial difficulties
• There is a separate series of IRIS ratios for P&C and L&H companies
• IRIS ratios are a preliminary screening tool
• IRIS ratios outside the pre-established norm do not necessarily indicate

an adverse financial condition

• The IRIS ratio merely provides a signal to follow-up to determine the

cause of the changes in the company measured by the ratio or ratios in question

I RI S Ratios:

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P & C

• Gross Premium to Surplus
• Net Premium to Surplus
• Change in Net Writings
• Liabilities to Liquid Assets

L&H

• Net Change in Capital and

Surplus

• Gross Change in Capital and

Surplus

• Change in Premium
• Change in Product Mix

Market Analysis ~ September Series

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The Market Conduct Annual Statement (MCAS) is a uniform method for states to collect key data regarding:

• Individual Life cash and non-cash value products
• Group Life cash and non-cash value products
• Individual fixed and variable annuities
• Private Passenger Auto and Homeowners

Market Conduct Annual Statem ent ( MCAS) :

(health insurers do not provide MCAS data)

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• Regulated entities may download instructions and a data collection program

from the NAIC

• Allows state regulators to compare and contrast entity-specific results with

the remainder of the industry regarding such issues as:

• Replacements
• Nonforfeitures
• Complaints
• Life Insurance Face Values
• Cancellations
• Claims taking longer than 60 days to finalize

Market Conduct Annual Statem ent:

(health insurers do not provide MCAS data)

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• Call Letter is sent by the NAIC with instructions on how to load data
• Company sends data to Insurance Department to be loaded into

Database

• Certificate of Compliance
• Data Integrity checks are performed to ensure data is correct (20%

variance in premium)

Market Conduct Annual Statem ent:

(health insurers do not provide MCAS data)

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• Statewide averages are viewed
• Company data is viewed to determine if there are company ratios that

exceed the statewide averages

• Company report cards are developed and sent to companies
• Company outliers are identified
• Outliers are analyzed and compared with companies identified as

possible outliers through baseline analysis

• Identify companies that may need to have a Level 1 Review conducted

Market Conduct Annual Statem ent:

(health insurers do not provide MCAS data)

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MCAS does not pertain to Accident and Health Insurance

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• The Division of Market Analysis uses the Level 1 review as a tool to

learn more about a company’s:

• Operations
• Financial Ratios
• Special Activities (SAD)
• Regulatory Actions
• Examinations

Level 1 Review :

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• Market Initiative Tracking System (MITS)
• Premiums
• Market Share
• Resisted or Unpaid Claims
• Complaints
• Market Conduct Annual Statement
• Conclusion

Level 1 Review :

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• Significant changes in officers, directors or trustees over last 3 years
• Changes in company’s organization, management or operations
• Mergers or consolidations
• Revocation of Certificates of Authority, licenses or registration
• Change in state of domicile

Operations:

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• Review RBC ratios for the last 5 year period
• Has the company’s RBC ratio triggered any action level events or has

the RBC ratio significantly declined during the period

• Defense costs should be rising relative to increases in premium volume

and losses

Financial Ratios:

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• Company Action
• Regulatory Action
• Authorized Control Level
• Mandatory Control Level

Level 1 Review :

Market Analysis ~ September Series

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• Entries in the NAIC’s Special Activities Database (SAD) of

substantive concern over past 5 years

• Market Activities
• Legal Actions

Special Activities:

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• Substantive regulatory actions
• Reasons for actions
• Patterns
• High dollar penalties

Regulatory Actions:

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• Review Exam Tracking System (ETS) summary
• More than 3 exams in past 12 months
• Substantive concerns
• Patterns
• Exam triggers

Exam inations:

Market Analysis ~ September Series

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• Review company’s direct premium reported on a national and state basis
• Has premium increased or decreased by 33% in any single year during

last 5 years

• Is company keeping up with growth (claims staff)
• Why is there a decrease in premiums (solvency)

Prem ium s:

Market Analysis ~ September Series

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• Significant Changes in market share for state under review over last

five years

• Specific line of business

U.S. Market Share:

Market Analysis ~ September Series

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• For the lines of business under review in all jurisdictions, are loss

and expense ratios unusually high or low as compared to industry averages?

• In the state and lines of business under review, are loss and

expense ratios unusually high or low as compared to industry averages?

Loss and Expense Ratios:

Market Analysis ~ September Series

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• Review Premium written
• Direct defense and cost containment expenses paid
• Direct Losses Incurred
• Industry averages over last 5 years

Resisted or Unpaid Claim s:

Market Analysis ~ September Series

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• Significant changes in confirmed Complaint Index current year plus

four years

• Significant changes in complete Complaint Index current year plus four

years

• Review 5 year complaint report

Com plaints:

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• Does a state participate?
• Applicable to line of business under review?
• Identified as outlier?
• What Schedules is company considered an outlier? (PPA, HO, ILCVP,

ILNCVP, GL, IFA, IVA)

• Statewide average comparisons (Ratios of concern) (MCAS)

Market Conduct Annual Statem ent:

Market Analysis ~ September Series

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• What is recommended for the

next step upon completion of the Level 1 review?

• Direct contact with the company
• Investigation is scheduled
• Examination is scheduled
• Enforcement Action may be

scheduled

Conclusion:

• Contact the Collaborative Action

Designee (CAD) of other states with similar concerns

• Proceed with another option on the

continuum of regulatory responses (develop letter to company, phone call, conference call, or meet with company)

• No further analysis is necessary
• Level 2 is scheduled

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• An internal report that shows confirmed complaints and/ or

enforcement referrals for a specified window of time for a company

COGNOS Reports:

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Reports are developed from a combination of findings from:

• Baseline Analysis
• Market Conduct Annual Statement
• Level 1 Review
• COGNOS Report

Reporting:

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Findings are presented to the Market Regulation Committee

• Deputies and Directors of the various program areas of the

Insurance Department

• Action to be taken
• Market Conduct Exam
• Monitor through future analysis
• Continuum through a meeting
• Continuum through letter or phone call
• Other

Reporting:

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The “4 1 1 ” for Carriers and Consultants

Cindy Fillm an, Director, Bureau of Market Analysis and Education cfillm an@state.pa.us & Christopher Monahan, Director, Bureau of Market Conduct cm onahan@state.pa.us

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• Educational Reviews
• Studies
• Questionnaires

I nform ing your Regulator:

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• Act 62-Autism Mandate
• Initial letter-expectations
• Reports
• Many interventions
• Follow up reports-to inform legislative report

Educational Review -A Case Study:

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• Initial letter-expectations
• Reassurance
• Full disclosure
• Purely educational
• What PA did right

Studies-clim ate Change:

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• Initial letter-expectations
• Questionnaires-not mandatory but detailed.

Usually in the insurers interest to share information.

• Informs policy and potentially legislation

Questionnaires-Healthcare Reform :

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Healthcare Reform

• Grant Applications
• High Risk Pool
• Exchange
• Consumer Assistance Program

Other Policy Issues

• Climate Change
• Autism
• Title Insurance

Division of Education:

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Market Actions ~ A Year in Review

Christopher Monahan, Director, Bureau of Market Conduct cm onahan@state.pa.us

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Nine lines of insurance and 1,283 insurance companies were analyzed through baseline analysis from 2008 data. Baseline analysis included review of:

Baseline Analysis:

• 266 individual life and annuities

insurers

• 119 group life and annuities

insurers

• 62 Medicare supplement

insurers

• 37 credit insurers
• 214 private passenger

automobile insurers

• 166 homeowners insurers
• 56 long-term care insurers
• 174 individual accident and

health insurers

• 189 group accident and health

insurers

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Baseline analysis scoring includes the use of:

• Division of Market Analysis Scoring Model
• NAIC Market Analysis Prioritization Tool (MAPT)
• MCAS Scoring Model
• All three scoring models or tools are used to create aggregate scores

for all companies in baseline analysis process

• Scores are used as primary tool to select outliers

Baseline Analysis:

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132 outliers from baseline analysis also underwent level 1 analysis in 2008. This is up from last year when 125 companies underwent Level 1 analysis for 2007 data. The number of companies undergoing Level 1 analysis for each line

• f insurance looks like this:
• 28 for long-term care and/ or Medicare supplement insurance
• 52 companies for private passenger automobile and/ or homeowners

lines

• 29 companies for individual and/ or group life and annuities lines
• 20 for individual accident & health and/ or group accident & health
• 3 companies for the credit insurance

NAIC mandates require PA to conduct a minimum of 40 level 1 reviews each data year and so, PA well exceeded its minimum requirement

Level 1 Analysis:

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From the 132 companies undergoing Level 1 analysis, a total of 68

• f them rose to the level of being presented during 6 different

MRC meetings over the past nine months.

Market Regulation Com m ittee:

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The following summarizes the dispositions of the 68 companies presented to MRC based on 2008 data findings:

• 26 companies monitored through future market analysis projects
• 14 companies had meeting scheduled with the Department to gain more

information and understanding about issues of concern

• 13 companies were contacted through interrogatories or phone calls to gain

more information and understanding about issues of concern

• 6 companies needed us to follow-up with regulators from other states to better

understand actions and initiatives involving the companies

• 6 companies had target market conduct examinations called
• 2 companies had suspended market conduct examinations re-opened
• 1 company had a comprehensive market conduct examination called

Market Regulation Com m ittee:

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During 2009, 48 market conduct examinations were closed resulting in:

• $1,063,112 in penalties
• $1,119,350 in restitution to PA consumers

The number of market conduct examinations called by the Department has been declining

• ver the past three years

Market Conduct Exam inations:

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3 Year Overview of Exams Market Conduct Exam inations:

2007 2008 2009 P & C 43 24 14 L & H 22 5 12 Oversights and Multi- State Exams Open 2 5 Total Exams Opened 67 29 31 P & C 20 31 29 L & H 21 18 16 Oversights and Multi- State Exams Closed 3 3 3 Total Exams Closed 44 52 48 Exams Opened Exams Closed

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Market Conduct Exam inations:

2008 Market Actions

Total Projects = 94

Continuums: Interrogations, Phone Calls, Meetings 14% Market Conduct Exams 31% Studies/Education Reviews 55%

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Market Conduct Exam inations:

2009 Market Actions

Total Projects = 152

Oversight Compliance Reviews 3% Studies/Education Reviews 58% Market Conduct Exams 17% Continuums: Interrogations, Phone Calls, Meetings 22%

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Morning W rap-up ~ Questions

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Lunch

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W alk in the Regulator’s Shoes

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Market Regulation Com m ittee:

Deputy for Market Regulation Director, Consum er Services Deputy for Product Regulation Bureau Director for Product Type Deputy for Financial Regulation Market Analysis Staff Director, Market Analysis & Education Market Analysis Chief Director, Market Actions Product Area, Division Chief,

Market Actions

Background

• Multidisciplinary

Analysis

• Decides on course of

action regarding continuum

• Review s Level 1

Analysis, Com plaint Analysis, Product Filings, Financial Health

• Meets 6 -9 tim es

annually

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Afternoon W rap-up ~ Questions

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Roundtable Discussion w ith Deputy Com m issioners

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Robert L. Pratter, Acting Pa Insurance Commissioner, rpratter@state.pa.us Ron Gallagher, Deputy Insurance Commissioner, Office of Market Regulation rgallagher@state.pa.us Randy Rohrbaugh, Deputy Insurance Commissioner, Office of Insurance Product Regulation and Administration rrohrbaugh@state.pa.us Steve Johnson, Deputy Insurance Commissioner, Office of Corporate and Financial Regulation stjohnson@state.pa.us Cindy Fillm an, Director, Bureau of Market Analysis and Education, cfillman@state.pa.us Carolyn Morris, Director, Bureau of Consumer Services, camorris@state.pa.us Jack Yanosky, Director, Bureau of Licensing and Enforcement, jyanosky@state.pa.us Christopher Monahan, Director, Bureau of Market Conduct cmonahan@state.pa.us