One of the most common challenges that compliance professionals face is how to justify rates for a new program or coverage to the state insurance department’s satisfaction.
Ideally, an insurer will have written the new program in another state, or states, so it can analyze its own loss experience or other available data. Many times, however, this is not the case. An insurer may be introducing a new program in all states with rates based on similar programs already in place, on those of competitors, on discussions with underwriting and actuarial staff, or perhaps a combination of several different elements. So what does one submit to regulators when there is no actual data to provide?
The best course of action is to provide as much detailed narrative explanation as possible, including any competitor comparisons if applicable. Walk the regulator through the company’s thought process, step by step, leaving any ambiguity out. If a particular section of a competitor’s filing was considered and/or used, specify that company and provide a comparison. If a similar program in another state was used as the basis, point out the similarities and differences in coverage and how the rates were derived from that. As long as the regulator can follow the company’s rationale and assumptions it made and it is explained in sufficient detail so that the regulator would reach a similar conclusion, nearly all states will find the rates acceptable. Sometimes, more is, indeed, better.