Getting Your Rate Filings Approved

Getting Your Rate Filings Approved

By Kimberley Ward

So you're an actuary or other insurance professional that needs to get those rate changes filed with the State Departments of Insurance. My goal when making rate filings is to provide enough information to the State Departments of Insurance (DOI) that they approve it outright.

STEP 1: Quantify the Overall Change

Each relativity, factor, element, base rate, etc., that is undergoing a change should be shown along with the calculation that shows how the overall rate change is calculated.

STEP 2: Provide a Rationale for all Changes

Step 2 involves the construction of a good actuarial memorandum. The memorandum should cover all elements of the line of business and clearly provide information on the rationale for all your proposed changes.

Your actuarial memorandum should cover:

1. The state, line of business, proposed effective date, overall percent change
2. A list of exhibits, with explanation if short (If explanations are longer, the description of the exhibit should be placed as a cover memo to the exhibit itself)
3. An overview of the line of business
4. A description of the elements of the line that are being reviewed and what changes are requested
5. Rationale for all proposed changes
6. Information from Step 5 below

STEP 3: Use Standard Techniques/Exhibits

The state departments of insurance see a lot of filings everyday. You can get typical exhibits:

1. From experience actuaries who may have examples they'd be willing to share
2. From past filings your company has made that were approved
3. From the Insurance Department. Ask them to suggest a filing that had exhibits that they particularly liked and you can get a copy from them or from a filing copying service
4. From actuarial textbooks/papers

STEP 4: Provide Sample Calculations

Your actuarial memo or footnotes to exhibits should include formulas of the calculations using numbered columns or lines. Complex calculations include:

1. Credibility and complement of credibility
2. Trend procedures
3. Catastrophe loads
4. Expected loss ratio
5. Loss development methodology
6. Restatement of Premiums to current level
7. Calculation of pricing of new/unique coverage’s/perils/policy provisions

STEP 5: Put the Changes Proposed into Perspective

Your company should know what its competitors are doing through the insurance industry press or by getting filings made by other companies (see Step 3). Your actuarial memorandum should put your company's activities into context with other companies' activities in the state.

STEP 6: Determine what the state requires and provide all required forms and exhibits

Since the goal is getting your filings approved quickly, you'll want to have all the forms completed with accurate information.

Some of the information requested on the forms is:

1. Name of the company, NAIC code, address, phone number, contact person
2. Effective date and change requested for this filing and the prior filing your company made for this line of business
3. 5 calendar years of written premium, earned premium, paid losses, outstanding losses, policy counts, and claim counts
4. A breakdown of the requested change and rate level indications
5. A breakdown of your expenses and investment income

State requirements can be found on the state insurance departments' websites.

STEP 7: Number your exhibits and Label all terms consistently

Actuarial rate level indications follow the business protocol of having the supporting information for an exhibit follow that exhibit in the line up. When you go through the exhibits, look for consistency in other things too:

1. The terms you use should be the same. If you call numbers "Reserves" on one page and "Outstanding" on another, you may cause unnecessary confusion
2. The exhibits refer to the right other exhibit and they are named consistently. The titles should match the titles in the Actuarial Memorandum
3. The font, formatting, and number size are the same throughout
4. Cite sources of company financial data and industry data clearly

STEP 8: Making Filings via SERFF

Many states either accept or require SERFF filings. SERFF filings are electronic insurance filings... and nearly 400,000 filings were made via SERFF in 2007. "About SERFF" site says:

The NAIC encourages states and insurers to become active in a voluntary SERFF program that offers a technological solution to address rate and form filing and approval process. SERFF offers a decentralized point-to-point, web-based electronic filing system. SERFF facilitates communication, management, analysis and electronic storage of documents and supporting information.