Welcome !

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

2. Automobile Insurance Plan Service Organization AIPSO

3. AIPSO is… • A management organization and service provider for the residual market with a home office in Johnston, RI • A non-profit organization • A national organization of about 400 employees • An organization with 10 regional offices located throughout the country

4. AIPSO’s Mission AIPSO’s mission is to provide high quality services for the automobile insurance residual market at the lowest possible cost.

5. “Who is Residual Market Audit Services” (RMAS) ‘ 11 Members of our RMAS staff 1 – Certified Internal Auditor (CIA) 1 – CIAcandidate 8 – pursuing INS or CPCU designations 1 – 30+ years of Claims Experience 30 – Independent Consultants

6. What Does RMAS Do? • Provide on-site audits of companies for automobile insurance market mechanisms. • CAIP NJSAIP MAIPF • NJCAIP CALC MJUA

7. Purpose of RMAS To support Board of Directors (Governing Boards) in their management of Residual Market Automobile Programs

8. Purpose of Audits Audits are a management tool to ensure companies are handling and reporting policies and claims in compliance with a mechanism’s plan of operations.

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

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

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

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

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

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

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

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

19. 2003 - 2007 Audits (54 Companies Reviewed) Reportable Claims • Total claims reviewed – 2,667 • Number of claims over reported – 400 or 15% • Dollar amount over reported - $8,018,078

20. 2003 - 2007 Audits Reasons for Over Reporting: • Claimant or Insured Incorrect Threshold • Unverified Claimant Threshold • These two reasons account for 52% of reporting errors

21. 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

22. Reporting Errors • Incorrect Territory Codes • Settlement Reported in an Incorrect Quarter or Year • Over Reporting of the Dollar Amount

23. 2003 – 2007 Audits(54 Companies Reviewed) All Bodily Injury Claims: • Total claims reviewed – 4,593 • Number of claims under reported – 175 or 3.8% • Dollar amount under reported - $1,641,298 • Number of claims over reported as BI claims - 222 or 4.8%

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

25. Reporting Errors • Non Bodily Injury Paid Claims • Bodily Injury Claims with No Payment • Incorrect Territory Codes • File not Settled in Reporting Year • Settlement reported in Incorrect Quarter • Incorrect Insured Threshold • Commercial Bodily Injury Claims Paid

26. TIPS • Plant your corn early • “Easy Sleazy” in the third race at Monmouth Park • Don’t say “Hi Jack” if you see me at the airport

27. 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 NJAIRE recommended Claim Determination Form • Check the final determination after claim is settled and before it is submitted to IT

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

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