Welcome !

1. Welcome! Residual Market Audit Services NJ AIRE Compliance Audit Program Jack O’Keefe

2. AIPSO Automobile Insurance Plan Service Organization

3. Objective of NJAIRE Audits To ensure that companies are submitting complete and accurate data to the NJAIRE central processor - ISO. Compliance - Data reported meets specifications in the Plan of Operations. Operational – Company’s internal controls are effective in identifying and processing NJAIRE business.

4. Audit Process Three Stages • Planning • Fieldwork • Reporting

5. Audit Process Stage 1: Planning • Company Selection • Communication with ISO • Call Forms • Statement of Compliance • Concerns with Companies

6. Audit Process Stage 1: Planning (con’t) c. Engagement Letter – Includes request for data • All private passenger BI claimants • All reportable claimants • All other claims d. Company contact information received

7. Audit Process Stage 1: Planning (con’t) • Receipt of company detail • Verification of detail to call forms • Complete sample selections h. Confirmation Letter

8. Audit Process Stage 2: Fieldwork • Opening meeting b. Obtain internal procedures for reviewing data submissions c. File review Determination Forms

9. Reportable Claimant Determination Form The purpose of the form is to assist the claims person when determining whether a settled BI claimant is Reportable or Non-Reportable. The determination form can be found on the NJAIRE.org website under the Documentation and Forms title. Check out the training module on NJAIRE.org under the Claims Training title.

10. Determination Form IMPORTANT CHANGE Effective 1/1/2012 Claim Determination Form is Mandatory!

11. Determination Form 8. Is the claimant a person who is required to maintain PIP Insurance (i.e., does he own a private passenger auto registered in New Jersey), or is he eligible to collect PIP benefits as a result of the accident?

12. Audit Process Stage 2: Fieldwork • File review • Work-papers

13. Audit Process Stage 2: Fieldwork • Fieldwork summary • Closing meeting

14. Audit Process Stage 3: Reporting 1. Draft Report 2. Company’s Response 3. Final Report

15. Pre-Audits Instituted in 2011 for companies new to the NJ automobile market ISO determines when a company is ready for a pre-audit Pre-audit is similar to a regular audit but on a smaller scale Determines if a company is reporting correctly prior to a full audit

16. Crunching the Numbers

17. 2003 - 2012 Audits 104 Audits Completed Reportable Claims • Total claimants reviewed – 4,527 • Number of claimants over reported – 603 or 13% • Dollar amount over reported - $10,245,255

18. 2003 - 2012 Audits Reasons for Over Reporting: • Claimant or Insured Incorrect Threshold • Unverified Claimant Threshold • These two reasons account for 52% of reporting errors

19. Additional Reasons for Over Reporting • Economic Loss Payment Included • Claimant had pierced the threshold • Claimant was not a NJ Resident • Claim Occurred outside of NJ • Expense Payments Included in Reporting • Insured Vehicle was Commercial

20. Reporting Errors • Incorrect Territory Codes (Accident Year 2007 and prior) • Settlement Reported in an Incorrect Quarter or Year • Over Reporting of the Dollar Amount

21. 2003 – 2012 Audits94 Audits Completed All Bodily Injury Claims: • Total claimants reviewed – 8,034 • Number of claimants under reported – 249 or 3% • Dollar amount under reported - $2,359,098 • Number of claimants over reported as BI claims - 244 or 3 %

22. Reasons for Under Reporting • Claimant had a Zero Dollar Threshold • Insured had a Verbal Threshold • Unverified Claimant Threshold

23. Reporting Errors • Non Bodily Injury Paid Claims • Bodily Injury Claims with No Payment • Incorrect Territory Codes (Accident Year 2007 and prior) • File not Settled in Reporting Year

24. NJAIRE Claim Handling TIPS • Claims handlers should be familiar with the NJAIRE procedure manual – NJAIRE.org • Know the requirements for verification of the claimant’s threshold (Pgs 31 –32 of the procedure manual) • Use the required NJAIRE Claim Determination Form • Check the final determination after claim is settled and before it is submitted to IT

25. QUESTIONS? • What? Huh? • What does it all mean?

26. Thank you! Residual Market Audit Services NJAIRE Compliance Audit Program Jack O’Keefe