RECORDS OF MEETING
GOVERNING COMMITTEE
A Meeting of the Governing Committee of the Commonwealth Automobile Reinsurers was held at the offices of CAR on -
WEDNESDAY DECEMBER 7, 1994 AT 10:00 A.M.
The following Members were present -
Mr. Richard W. Brewer
Mr. Donald O. Burns
*Mr. George Davis
Mr. Thomas K. Randall
Mr. Arthur J. Remillard, Jr.
Mr. Edwin J. Rinehimer
Mr. James M. Stone
Mr. Charles I. Boynton, III
Mr. James D. Doherty
Mr. Edward F. Downey, Jr.
Mr. Sumner Gilman
Mr. David J. Lane
*Mr. George Peters
*Mr. George Davis substituted for Mr. Robert Gowdy
**Mr. George Peters substituted for Ms. Nanci Peters
There were also present -
Commonwealth Automobile Reinsurers
PresidentMr. R. M. LaFontaine
Executive Vice President & TreasurerMr. M. J. Trovato
Administrative Vice President & SecretaryMr. D. I. Jewell
Vice President and General CounselMr. J. J. Maher, Jr.
Commonwealth Automobile Reinsurers (continued)
Vice President and Chief Information OfficerMr. Paul Ryan
Vice President-AuditingMr. Frank Underhill
Vice President-Financial ServicesMr. J. V. Kelly
Vice President-ClaimsMs. Valerie Gedziun
Director of CommunicationsMr. P. W. Corsetti
Administrative ManagerMr. J. D. Metcalfe
Statistical ManagerMs. Carol Bresler
Underwriting ManagerMs. Pamela Wallace
Servicing Carrier CoordinatorMr. Timothy Costain
Rep. Producer Servicing Carrier LiaisonMs. Katherine Dillon
Adm. Ass't. to Adm. Vice PresidentMs. Deborah Walsh
Massachusetts Division of InsuranceMs. Louise McCarthy
Hale and DorrMark Matuschak, Esq.
Amica Mutual Insurance CompanyMr. Peter Drogan
Mr. Frederic C. White, Jr.
Arbella Mutual Insurance CompanyMr. Ronald Cleaves
Mr. W. D. Healey
Berkshire Mutual Insurance CompanyMr. James Fleming
Boston Risk ManagementP. T. Robertson, Esq.
CNA Insurance CompaniesMr. B. A. Cregger
Commerce Insurance CompanyMr. M. J. Richards
Electric Insurance CompanyMr. N. A. Walczak
Empire Insurance CompanyMr. Richard Harris
Finnegan and UnderwoodRichard Underwood, Esq.
Hanover Insurance CompanyMr. Wayne Howard
I.S.I. Systems, Inc.Mr. P. D. Luongo
Ms. D. B. Sparrow
Ms. G. M. Stafford
John Hancock Property & Casualty Ins. Co.Mr. Charles Alley
Ms. Deborah Snyder
Liberty Mutual Insurance CompanyMr. Patrick Finckler
Lumber Insurance CompaniesMs. Laurie Stokes
Metropolitan Property & Casualty Ins. Co.Mr. Joseph Cofield
Mr. J. B. Gatlin
Mr. R. W. Harvey
Ms. Jennifer Reisig
Morrison, Mahoney & MillerMr. B. D. Ovrut
Norfolk & Dedham Mutual Fire Ins. CompanyMs. Jean Downey
Peoples Service Insurance CompanyMr. Warren McLean
Pilgrim Insurance CompanyMr. Vincent Nieroda
Plymouth Rock Assurance CorporationMr. Geoffrey Arnold
Ms. Paula Gold
Mr. Alan Hines
Ms. Linda Saunders
Policy Management Systems CorporationMs. Patricia Duffy
Premier Insurance CompanyMs. Susan Scott
Professional Independent Insurance Agents of Mass.Mr. Frank Mancini
Safety Insurance CompanyMr. David Brussard
Sentry Insurance CompanyMr. William Commette
Trust Insurance CompanyMs. C. M. Barry
Mr. Allen Lew
Chairman Arthur Remillard called the meeting to order at 10:00 a.m. and announced that the Commissioner of Insurance approved the substitution of Mr. George Davis for Mr. Robert Gowdy, and Mr. George Peters for Ms. Nanci Peters.
94.1MINUTES OF PREVIOUS MEETING
A motion was made by Mr. James Doherty and duly seconded by Mr. Sumner Gilman to accept the Records of the Governing Committee Meeting of November 16, 1994.
The motion passed on a unanimous vote.
94.5COUNSEL'S REPORT
Mr. Joseph Maher reported that the Commissioner of Insurance approved amendments to Rules 11, 14 and 17 of the Rules of Operation as submitted by CAR.
Continuing, Mr. Maher advised that CAR is awaiting a response from the Division of Insurance in the matter of the American Transportation Insurance Company.
Mr. Maher distributed the Order of the Hearing Officer regarding Amica Mutual Insurance Company's appeal relative to the distribution of Exclusive Representative Producer (ERP) exposures. The Order remands the appeal to CAR, requiring a report to the Hearing Officer no later than February 17, 1995. Mr. Maher stated that Amica Mutual filed a motion with the Division of Insurance to extend the time within which to file an appeal, and CAR Counsel has filed an opposition to that motion.
Finally, Mr. Maher advised that at its last meeting the Governing Committee voted to take action relative to Horace Mann Insurance Company's responsibilities as a Servicing Carrier. He stated that CAR Counsel forwarded the Governing Committee's recommendation to the Commissioner and has received her approval with the caveat that the new Servicing Carrier be able to retain some of the Horace Mann business. Mr. Maher advised the Governing Committee that Mr. Richard Underwood, counsel for Horace Mann, was present and wished to address the Governing Committee.
Mr. James Stone recused himself from the discussion of Horace Mann's Servicing Carrier obligations because his company is one of the bidders to provide a third party contract to service Horace Mann's ERPs.
Chairman Remillard recognized Mr. Richard Underwood, who stated that Horace Mann contacted him following approval by the Commissioner of the action taken by the Governing Committee at its meeting of November 16, 1994. Mr. Underwood advised that he had represented Horace Mann earlier this year on another petition for reassignment of Servicing Carrier, and when contacted this time, advised them that unless they agreed to be part of a comprehensive solution to their Servicing Carrier problems, his firm would be unable to represent them. Horace Mann agreed and asked Mr. Underwood to fashion such a solution. Mr. Underwood stated that he met with representatives of the Division of Insurance last week to explain the approach he wished to take on behalf of Horace Mann and then contacted both inside and outside CAR Counsel to advise them of his proposal. Mr. Underwood and representatives of Horace Mann met with the Safety and the Pilgrim Insurance Companies to negotiate a third party contract whereby either of those vendors could fulfill Horace Mann's Servicing Carrier responsibilities. Mr. Underwood advised that a Servicing Carrier Vendor Agreement with either the Safety or Pilgrim Insurance Company would be reached by the end of next week and would then be presented to the Division of Insurance and CAR Counsel for approval. Mr. Underwood specified that such an agreement would include a provision for servicing claims.
Mr. Michael Trovato stated that following the Governing Committee Meeting on November 16, 1994, CAR Staff developed a proposal concerning the reassignment of Horace Mann ERPS, but had placed its proposal on hold in light of Mr. Underwood's potentially longer-term solution.
Mr. Remillard advised that the Governing Committee might wish to review its previous action concerning the reassignment of the Alfa Insurance Company in light of the information presented by Mr. Underwood.
A motion was made by Mr. Richard Brewer and duly seconded by Mr. James Doherty that the Governing Committee reconsider its previous decision to reassign the Alfa Insurance Agency to another Servicing Carrier.
The motion passed on a unanimous vote.
Mr. Maher stated that at its meeting on November 16, 1994, the Governing Committee voted to reassign the Alfa Insurance Agency, to have its business charged back to Horace Mann, and to have that business ceded to CAR. He advised that Mr. Underwood is not proposing a reassignment, but rather a vendor contract which would encompass twelve to fifteen agencies, and which is permitted under Rule 13.
In answer to a question concerning an anticipated effective date, Mr. Underwood advised that a contract would be signed with one of the companies by the end of next week, but that such an agreement would require approval by the Commissioner and CAR before it could actually become effective. The earliest date the agreement could become operative for renewal business would be February 1, 1995.
A motion was made by Mr. Sumner Gilman and duly seconded by Mr. David Lane to rescind the previous action of the Governing Committee regarding the Alfa Insurance Agency and to authorize CAR Staff and Counsel to coordinate the efforts to review, and if appropriate, approve any vendor agreement that would be forthcoming at the earliest possible opportunity.
Mr. Maher advised that the effect of this motion would be to forestall the reassignment of the Alfa Insurance Agency.
The motion passed with Mr. Stone recused.
94.6MARKET REVIEW COMMITTEE
Mr. James Doherty, reporting on the Market Review Committee Meeting of November 29, 1994, advised that the Market Review Committee considered an appeal by the Mitchell C. Willis Insurance Agency concerning the recision of their ERP appointment to the Arbella Mutual Insurance Company for violation of Rule 14, A, 2, b, "Affiliated Producer" as a result of a determined affiliation with the Richenburg Insurance Agency. The Market Review Committee voted unanimously to uphold Staff's decision to rescind the agency's ERP appointment.
Continuing, Mr. Doherty reported that the Market Review Committee heard an appeal by Mr. Michael A. Nazzarro concerning the termination of his agency's ERP appointment by the Commercial Union Insurance Company for violation of Rule 14, C, "failure to develop and maintain a minimum book of business." Due to the agency's confirmed business plan to purchase additional business from the Richenburg Insurance Agency, the Market Review Committee voted to grant the agency an extension to February 1, 1995 to obtain the required vehicles.
Mr. Doherty advised that the Market Review Committee considered an appeal by the Rudy Christian Insurance Agency relative to the termination of its ERP appointment by the Commerce Insurance Company for violation of Rule 14, C, "failure to develop and maintain a minimum book of business." Due to extenuating circumstances involving family illness and an unsuccessful planned merger with another agency, the Market Review Committee unanimously voted to grant the agency a six month extension to obtain the required vehicles.
Finally, Mr. Doherty reported that the Records of the Market Review Committee Meetings of October 24 and November 15, 1994, have been distributed and are on file with CAR's Secretary.
94.7CLAIMS ADVISORY COMMITTEE
Mr. Joseph Conlon, reporting on the Claims Advisory Committee Meeting of November 30, 1994, advised that Deputy Commissioner Iannaco presented the Claims Committee with plans to revise the Safe Driver Insurance Plan, and at his request a subcommittee was appointed to serve as a resource for the Division of Insurance.
Continuing, Mr. Conlon reported that the Claims Technology Subcommittee directed Staff to develop a design proposal for a Knowledge Base Application to detect fraudulent PIP claims.
Mr. Conlon advised that the Claims Advisory Committee reviewed the 1994 Annual Report of Compliance with Performance Standards. He stated that Physical Damage Standards continue to exceed compliance, while the Standards for preinspections and PIP contacts were below the 80% required to achieve compliance. The report indicates that claims handling was negatively affected by the harsh weather and that six Servicing Carriers received warnings for noncompliance. Mr. Conlon advised that the Claims Advisory Committee voted unanimously to recommend that the Governing Committee accept the Report and have it forwarded to the Commissioner of Insurance.
A motion was made by Mr. James Doherty and duly seconded by Mr. Sumner Gilman to accept the 1994 Annual Report of Compliance with Performance Standards and to direct Staff to forward it to the Commissioner of Insurance.
The motion passed on a unanimous vote.
Continuing, Mr. Conlon reported that after careful consideration, the Claims Advisory Committee unanimously voted to recommended to the Governing Committee that fees charged by Preferred Provider Organizations (PPOs) on individual claims be reported to CAR as allocated expenses.
A motion was made by Mr. James Doherty and duly seconded by Mr. Sumner Gilman that fees charged by PPOs on individual claims be reported to CAR as allocated expenses.
The motion passed on a unanimous vote.
Finally, Mr. Conlon reported that subcommittees were appointed to review the Performance Standards for possible revisions in 1995 and to conduct Cost Containment Seminars in 1995.
94.8OPERATIONS COMMITTEE
Mr. John Kelly, Vice President of Financial Services, reported that the Records of the Operations Committee Meeting of September 28, 1994, have been distributed and are on file with CAR's Secretary.
95.15BUDGET COMMITTEE
Mr. Donald Burns reported that the Records of the Budget Committee Meeting of September 8, 1994, have been distributed and are on file with CAR's Secretary.
94.16COMMERCIAL LINES COMMITTEE
Mr. Ronald Cleaves, reporting on the Commercial Lines Committee Meeting of December 6, 1994, advised that the Commercial Lines Committee unanimously voted to request Governing Committee approval of the 1995 Commercial Commission Rates as follows: 6.01% for Taxis, and 9.31% for All Other. Mr. Cleaves advised that these rates will result in a slight increase in commissions to agents.
A motion was made by Mr. James Doherty and duly seconded by Mr. Sumner Gilman to accept the 1995 Commercial Commission Rates as recommended by the Commercial Lines Committee.
The motion passed on a unanimous vote.
Mr. Cleaves reported that after careful review of exhibits presented by Staff, the Commercial Lines Committee agreed to postpone action concerning commercial market issues pending the release of ERP loss ratio information in April, 1995.
Continuing his report, Mr. Cleaves advised that the Commercial Lines Committee unanimously voted to recommend to the Governing Committee that it approve modifications to Chapter V the Manual of Administrative Procedures (MAP) to reflect the continuation of a commercial cession limitation for policy year 1995 and to reflect the revised CAR ID Code structure for policy years 1995 subsequent, and to revise Chapter of VI of the MAP by adding text to exclude ceded taxicab business from the All Other motor vehicle utilization formula for policy year 1995.
A motion was made by Mr. Sumner Gilman and duly seconded by Mr. James Doherty to approve modifications to Chapters V and VI of the MAP as recommended by the Commercial Lines Committee.
The motion passed on a unanimous vote.
94.18GOVERNING COMMITTEE REVIEW PANEL
Mr. Donald Burns, reporting on the Governing Committee Review Panel Meeting of November 16, 1994, advised that the Review Panel upheld the decision of the Market Review Committee regarding the termination of the ERP appointment of the George Labutis Insurance Agency by Metropolitan Property and Casualty for "failure to maintain a minimum book of business."
Reporting on the Governing Committee Review Panel Meeting of December 7, 1994, Mr. Burns advised that Review Panel upheld the appeal brought by the Insurance Professionals of New England concerning the Market Review Committee's decision to let stand the termination of the agency's ERP appointment by the CNA and Safety Insurance Companies for "failure to develop and maintain a minimum book of business." The agency was granted an extension until August 30, 1995 to acquire the required vehicles.
Finally, Mr. Burns reported that the Records of the Governing Committee Review Panel Meetings of September 26, and November 16, 1994, have been distributed and are on file with CAR's Secretary.
94.28JOINT ACTUARIAL AND COMMERCIAL LINES COMMITTEE
Mr. David Lane, reporting on the Joint Actuarial and Commercial Lines Committee Meeting of December 6, 1994, advised that the 1995 CAR Commercial Rate Filing was approved and will result in an average statewide rate increase of 3.8%, and an average rate increase of 5.8% for Taxis.
Continuing, Mr. Lane reported that the Joint Actuarial and Commercial Lines Committee voted unanimously to request Governing Committee approval to set the Standard Loss Ratio for the Taxi Program at 121%, and that the Manual of Administrative Procedures be revised to reflect this rate.
A motion was made by Mr. David Lane and duly seconded by Mr. Charles Boynton to set the Standard Loss Ratio for the Taxi Program at 121% and to revise the Manual of Administrative Procedures accordingly.
The motion passed with Mr. Stone recused.
Mr. Lane advised that the Joint Actuarial and Commercial Lines Committee voted unanimously to recommend to the Governing Committee that it adopt modifications to the MAP to state that Taxi Program Servicing Carriers will receive expense allowances on a twelve month per-exposure basis.
A motion was made by Mr. David Lane and duly seconded by Mr. James Doherty that the Manual of Administrative Procedures be revised to state that Taxi Program Servicing Carriers will receive expense allowances on a twelve month per-exposure basis.
The motion passed with Mr. Stone recused.
Continuing, Mr. Lane advised a Public Hearing will be held on December 16, 1994 to discuss the proposed definitions of limousines and car service, and the definition of owner and non-owner operator taxi exposures.
Finally, Mr. Lane reported the Joint Actuarial and Commercial Lines Committee discussed whether rate factors for limousines (both fleet and non-fleet), should be changed in the 1995 policy year. The Joint Actuarial and Commercial Lines Committee agreed to review the rating factor applicable to limousines using the most current data available, but that such a review would be conducted with respect to developing a 1996 commercial rate filing and would not affect rates for 1995.
OTHER BUSINESS
Chairman Remillard wished everyone a Happy Holiday Season and Good Health in the New Year.
There being no further business, a motion was made by Mr. James Doherty and duly seconded by Mr. Sumner Gilman to adjourn.
The motion passed on an unanimous vote.
The meeting adjourned at 10:35 a.m.
DANA I. JEWELL
Administrative Vice President
and Secretary
Boston, December 20, 1994
Note:These Records have not been approved. They will be considered for approval at the next meeting of the Governing Committee.