January 28, 2013 Via email to firstname.lastname@example.org James J. Donelon Chair, Casualty Actuarial and Statistical (C) Task Force President, National Association of Insurance Commissioners 1100 Walnut Street, Suite 1500 Kansas City, MO 64106-2197 RE:
Proposed Company Survey Regarding Potential Revisions to SSAP No. 65
Dear Commissioner Donelon: The Committee on Property and Liability Financial Reporting (COPLFR) of the American Academy of Actuaries1 respectfully submits the following comments concerning the proposed medical malpractice writers’ and reciprocal insurers’ survey currently under consideration by the Statutory Accounting Principles (E) Working Group (SAPWG) and the Casualty Actuarial & Statistical Task Force (CASTF). Our comments are, in part, based on a review of the January 3, 2013, memorandum from the National Association of Insurance Commissioners (NAIC) staff to the SAPWG. The SAPWG was prompted by feedback from the CASTF to design a survey intended to capture marketrelevant data and additional information regarding policyholder loyalty programs and policies offering no-cost or reduced-cost extended reporting coverage in the event of death, disability, or retirement (DDR). COPLFR’s observations are as follows: 1. The survey seems unnecessarily long and, generally, the longer the survey, the less likely a potential respondent will be to complete it; as such, its length may interfere with the SAPWG’s ultimate goal of obtaining useful information. 2. Question 1 asks if the insurer “has ever provided” policies offering extended reporting coverage at no cost or reduced cost in the event of death, disability, or retirement. This question should be narrowed to seek information only as far back as a specific date (for instance, in the last five years). Unchanged, to be answered accurately, this question would require companies to research legacy operations that have long since run off. 1
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3. COPLFR recommends making Question 1(h) more open-ended; the terminology used in the answer choices does not match the terms commonly used by companies to refer to their methodologies. The answer choices could be offered as examples of possible responses, while also allowing respondents to provide a different response. Additionally, some responses may warrant further explanation. In the context of the market withdrawal approach, for instance, COPLFR recommends asking whether the reason for the use of that method was an actual withdrawal from the market. 4. Concerning Question 1(i), COPLFR interprets this as referring to reserves for a policy benefit to be issued in the future, but it is unclear what claims payments are being referred to; this should be clarified. If intended to refer to claims payments related to previously-issued, waived-premium, extended coverage policies, it might be helpful to clarify this. Perhaps this question should ask for the cost of issuing free tail coverage during the prior five calendar years (new occurrence loss and allocated loss adjustment expense liability on issued free tails during the applicable calendar years). We assume that the years listed in the question are meant to be calendar years and not policy years. 5. Question 1(j) and 1(k) are phrased as if the DDR coverage existed outside the claims made contract. For those situations in which the DDR exposure is attributed only to policies currently in force, these two questions don’t make sense and thus are unanswerable in their current form. (In addition, the wording “at no cost or reduced cost” implies that there is no charge for this coverage in the overall claims made premium. This wording should be changed to something like “at no additional cost or only at a nominal additional cost when triggered.”) 6. The phrase in one of the answer choices for Question 1(k)ii to “recognize unearned premium” only applies to those that report the DDR reserve in the unearned premium and not the loss reserve. Should the answer choice(s) be rephrased to allow for respondents that report the DDR in loss reserves? 7. COPLFR suggests that Questions 1(j) through 1(m) include the phrase “without regulatory approval,” to clarify the context in which these questions are being asked. 8. Question 2 should begin with a definition of “loyalty program.” 9. It is not clear that the CASTF’s request for relevant payout patterns for DDR or loyalty programs is adequately addressed.
We appreciate the opportunity to comment on the proposed survey, and we hope you find these comments helpful. If you have any questions about our comments, please contact Lauren Pachman, the Academyâ€™s casualty policy analyst, at email@example.com. Sincerely, Dale Ogden, ACAS, MAAA Chairperson, Committee on Property and Liability Financial Reporting American Academy of Actuaries cc:
Joseph Fritsch, chair, Statutory Accounting Principles Working Group Julie Gann, senior manager, Accounting and Reporting