Transcript Download Handout 2

COM5:
Pricing Program Business
Presented by:
Letitia Saylor
Vice President, American Re-Insurance Company
2005 CAS Ratemaking Seminar
New Orleans, LA
July 26, 2016
Pricing Program Business
© Copyright 2005 American Re-Insurance Company. All rights reserved.
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Agenda
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What are Programs?
Who are the Players in Program Business?
Why are Programs Formed?
Product Traits
Pricing Challenges
Overcoming Pricing Challenges
Regulatory Considerations
Market Cycle
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Pricing Program Business
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What are Programs?
Insureds who believe they can secure a
better insurance product as a group rather
than as individuals
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Pricing Program Business
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Who are the Players in Program
Business?
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Insured
Program Administrator
Third Party Administrator
Insurer
Reinsurer
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Why are Programs Formed?
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Market Displacement (short-term)
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Trucking
Workers Comp
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Managed Care
California
Niche (long-term)
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Logging
Camps
Condo Association D&O
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Product Traits
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Often proprietary
Tailored to target market’s need
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Pricing Challenges
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Limited program-specific data
Applicability/availability of bureau data
Simplified rating plan
Product differences
Expertise/specialty credit
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Pricing Challenges
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LCM adequacy
Common policy effective dates
For E&S programs, low retention ratios
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Overcoming Pricing Challenges
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Thorough understanding of qualitative
factors
Competitor information
Multiple approaches
Multi-party risk participation
 MONITOR!
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Regulatory Considerations for
Admitted Programs
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Program rate need vs. insurance company
rate need vs. rate need likely to be
approved
Program-specific expenses vs. statutory
entity expenses
Rate filings are available to the public 
Program administrator may be reluctant to
file proprietary rating plan
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Regulatory Considerations for
Admitted Programs
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Workers Compensation
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For a single statutory entity, program-specific filings
are not allowed
Some states (MI and MD, for example) allow classspecific deviations, BUT these deviations then apply
to all business written in those classes
Non-Workers Compensation
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Program-specific filings allowed with limitations
Programs must be mutually exclusive to eliminate
possibility that a single company could quote exact
same risk at different rates
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Pricing Program Business
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Market Cycle
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E&S programs lead the market cycle
Admitted programs may lead or follow the
market cycle
Key considerations for market cycle impact
to programs
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Pricing cycle
Availability of insurance paper
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Questions?
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