BULLETIN NO. 476 September 17, 1993
PROPOSED CHANGES
RULES OF OPERATION
RULE 11
At its Meeting of September 15, 1993, the Governing Committee voted to amend Rule 11, Assessments and Participation - 1989 and Thereafter. A copy of the Filing Letter, which contains an explanation of this Rule change, is attached for your information.
This Bulletin, with a copy of the proposed Rule 11 enclosed, is being furnished to every Member Company as required by Article X, of the Plan of Operation. Any Member Company may request a public hearing within five days of receipt of this Bulletin and Filing Letter as provided by ArticleX, of the Plan of Operation.
A proposed Rule shall become effective either upon the written approval of the Commissioner or upon the expiration of thirty days after filing, providing the Commissioner has not previously disapproved the Rule in writing.
DANA I. JEWELL
Administrative Vice President
and Secretary
Attachment
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September 17, 1993
Honorable Linda Ruthardt
Commissioner of Insurance
Division of Insurance
280 Friend Street
Boston, Massachusetts 02114
Dear Commissioner Ruthardt:
Rules of Operation
In accordance with the provisions of Article X, of the Plan of Operation, I hereby file, at the request of the Governing Committee, the following changes to Rule 11, of the Rules of Operation.
RULE 11 - ASSESSMENTS AND PARTICIPATION - 1989 AND THEREAFTER
Amend Rule 11, B, 1, b, by inserting the underlined language contained in the following:
B. PARTICIPATION -- UNDERWRITING RESULTS
1. Private Passenger Motor Vehicles
b. Formula for Calculating Utilization Ratios for
Policy Years 1990 and Subsequent
For policy years 1990 and subsequent, a company's utilization ratio shall be determined as a function of the company's utilization of the residual market, with a "grossing-up" process to be applied for those companies which were not Servicing Carriers for private passenger business during the entire period from January 1, 1989 through December 31, 1989.
Exposures from ceded risks meeting the following criteria shall be excluded from the calculation of the utilization ratio, where noted in subsequent paragraphs:
Policy YearExclusion Criteria
1991 - 1994Ceded exposures for risks at S.D.I.P. step 20 and above, and ceded exposures for Inexperienced Operators (0-3 years) - Rate Classes 20, 21, 25, and 26.
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Honorable Linda Ruthardt - 1 -September 17, 1993
RULE 11 - ASSESSMENTS AND PARTICIPATION - 1989 AND THEREAFTER (Cont.)
B.PARTICIPATION--UNDERWRITINGRESULTS (Cont.)
1.Private Passenger Motor Vehicles (Cont.)
b. Formula for Calculating Utilization Ratios for
Policy Years 1990 and Subsequent (Cont.)
The formula for determining the utilization ratio shall be as follows:
(1)For each company, separately for liability and physical damage, determine the company's voluntary written exposures from voluntary agents or direct written (CAR ID codes 0 and 2,) voluntary written exposures from Exclusive Representative Producers (CAR ID codes 1, 7, and 8), voluntary-ceded (C.A.R. I.D. codes 4 and 6) written exposures, and ceded exposures written through Representative Producers with whom the company has no voluntary relationship, (C.A.R. I.D. codes 3, 5, and 9), for the calendar year corresponding to the policy year whose participation ratios are being calculated. Note that if a company has bought out of its Servicing Carrier responsibilities, the exposures serviced on this company's behalf by another entity will be counted as if they were written by the buying-out company. Note also that voluntary-ceded and Exclusive Representative Producer (E.R.P.) ceded exposures meeting the exclusion criteria in paragraph B, 1, b, above, should be separately identified, to enable their exclusion where specified in subsequent paragraphs.
For the following Miscellaneous Rated as Private Passenger classifications, the exposures used in the calculation of a company's private passenger liability participation ratio, including Rule 12 credit calculations, will be adjusted by the following factor for the indicated policy year:
PolicyAdjustment
Year Classification Factor
19940400 - Electric Cars.33
0426 - Snowmobiles.33
0483 - Antique Vehicles.33
0495 - Golfmobiles/.33
Lawnmowers
0408-0416 - Motorcycles.33
0608-0616
RULE 11 - ASSESSMENTS AND PARTICIPATION - 1989 AND THEREAFTER (Cont.)
B.PARTICIPATION -- UNDERWRITING RESULTS (Cont.)
1.Private Passenger Motor Vehicles (Cont.)
b. Formula for Calculating Utilization Ratios for
Policy Years 1990 and Subsequent (Cont.)
The liability voluntary-ceded exposures with the specified classifications noted above which meet the exclusion criteria in paragraph B, 1, b, above should be separately identified, to enable their exclusion where specified in subsequent paragraphs.
For policy year 1994, note that all other Miscellaneous Rated as Private Passenger classifications are included in the liability participation ratio calculations without adjustment. Additionally, no adjustment is made to the Miscellaneous Rated as Private Passenger exposures used in the calculation of the 1994 private passenger physical damage participation ratios.
Rule 11, B, 1, b, sections (2)-(5) remain unchanged.
(6)(a)For policy years 1990 and 1991, for each company, determine the pre-credit utilization ratio by combining 30% of the ratio from (4) above and 70% of the ratio from (5) above.
(b)For policy years 1992 and later, for each company and for the industry, determine the following:
-Voluntary retained exposures from all sources, from (1) and (3) above.
-Ceded exposures from all sources, from (1), (2), and (3) above.
Determine each company's pre-credit utilization ratio as:
(Company Voluntary Retained Exposures) + (Company Ceded Exposures x K).
(Industry Voluntary Retained Exposures) + (Industry Ceded Exposures x K).
In the above formula, for policy years 1992 through 1994, the value of the K factor will be 4.0.
For subsequent policy years, the value of the K factor will be reexamined based upon existing market conditions.
The remainder of the Rule is unchanged.
Explanation:The current private passenger exclusion criteria has been extended to include policy year 1994. The current value of the K Factor (K = 4.0) has been maintained for policy year 1994.
The Miscellaneous Rated as Private Passenger classifications will now be included in the calculation of policy year 1994 private passenger liability and physical damage participation ratios. However, the liability ratio calculation will include an exposure adjustment for the specifically indicated Miscellaneous Rated as Private Passenger classes. No adjustment is made to the physical damage ratio calculations.
A copy, of the proposed amendment to Rule 11, is being furnished to every Member Company, the three associations of insurance producers, and to the Public Protection Division of the Office of the Attorney General as required by Article X, of the Plan of Operation.
Very truly yours,
Dana I. Jewell
Administrative Vice President
and Secretary
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Copies to:Massachusetts Automobile Insurance Agents Association
Professional Independent Insurance Agents of Massachusetts
Professional Insurance Agents of N.E.
Public Protection Division - Office of Attorney General