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SPE-47: The Contest – Part I

SPE-47: The Contest – Part I. 2000 CAS Seminar on Ratemaking March 9-10, 2000 San Diego, California Klayton N. Southwood, ACAS Miller, Herbers, Lehmann, & Associates, Inc. Jerome E. Tuttle, FCAS St. Paul Re Stephen J. Talley, ACAS St. Paul Re

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SPE-47: The Contest – Part I

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  1. SPE-47: The Contest – Part I 2000 CAS Seminar on Ratemaking March 9-10, 2000 San Diego, California Klayton N. Southwood, ACAS Miller, Herbers, Lehmann, & Associates, Inc. Jerome E. Tuttle, FCAS St. Paul Re Stephen J. Talley, ACAS St. Paul Re Thomas L. Ghezzi, FCAS Tillinghast – Towers Perrin Katharine Barnes, FCAS Tillinghast – Towers Perrin Michael J. Miller, FCAS Miller, Herbers, Lehmann, & Associates, Inc.

  2. Background On The Contest • Purpose • For a number of reasons, the ratemaking exercise for the involuntary private passenger automobile market in Texas has proven challenging in recent years. • The purpose of the Contest was to give all interested CAS members the opportunity to offer their best solution to the ratemaking problem presented. • Contestants were to take themselves back in time to the Spring of 1998 and prepare an analysis knowing that their reports would become part of the record in an upcoming rate hearing.

  3. Background On The Contest • Background on the Plan • The Plan provides a mechanism by which BI, PD, PIP and UM coverages are assigned to authorized Texas insurers. As a condition of authority to write insurance in Texas, an insurer must be a member of the Plan. • Coverages Afforded: • Basic limits BI and PD ($20/$40/$15 limits). • Unless rejected in writing, policies must also include $20/$40/$15 UM coverage and $2,500 PIP coverage. • The Texas Insurance Code requires that rates for the Plan be: • “just, reasonable, adequate, not excessive, not confiscatory and not unfairly discriminatory” and • “set in an amount sufficient to carry all claims to maturity and to meet the expenses incurred in the writing and servicing of the business.”

  4. Background On The Contest • Primary Ratemaking Issues • Shifting Plan Population • Prior to law change, number of applicants per month averaged 13,000. Following the change, the number of applicants increased significantly. • Following a significant rate level increase in late 1995, the Plan’s population began dropping sharply. • The shifting Plan population has potential impact in a number of areas, including trend analysis, the calculation of premiums at present rates and loss development. • Impact of Tort Reforms • “The Actuarial Implications of Texas Tort Reform”, CAS Forum, Winter 1998, page 239.

  5. Background On The Contest

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