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CAS Ratemaking Seminar Non Medical Professional Liability Pricing Stephen Kantor, FCAS, MAAA

CAS Ratemaking Seminar Non Medical Professional Liability Pricing Stephen Kantor, FCAS, MAAA March 7, 2002. Data Issues. Buried within Annual Statement Often controlled by producer Difficult to look at industry data Need specific filing information Impact from surplus lines.

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CAS Ratemaking Seminar Non Medical Professional Liability Pricing Stephen Kantor, FCAS, MAAA

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  1. CAS Ratemaking Seminar Non Medical Professional Liability Pricing Stephen Kantor, FCAS, MAAA March 7, 2002

  2. Data Issues • Buried within Annual Statement • Often controlled by producer • Difficult to look at industry data • Need specific filing information • Impact from surplus lines Fireman's Fund Interstate

  3. Typical Rating Factors • Step rate • Area of practice • Size of firm • State/Territory • Claims history Fireman's Fund Interstate

  4. Initial Pricing Often Shopped By Producer • Has certain price in mind • Based on current carrier • Limited data available Based on Competitor • Look at filings • Read the market Fireman's Fund Interstate

  5. On Going Pricing Premium and Loss Experience • Sparse • Green • Volatile Can you combine with other programs? Can you compare to industry data? Fireman's Fund Interstate

  6. Two Distinct Application Types • Flat Price • More complicated Fireman's Fund Interstate

  7. Flat Priced • One size fits all • “Cash with APP” • Application asks 4-5 questions which basically ask • Is this a typical risk? • Any claims? • Often Association sponsored Fireman's Fund Interstate

  8. Lawyers • State/Territory • Step rate • Area of practice • Size of Firm – number of lawyers • Claims history • Deductible • Defense outside limit • Other factors often built in to IRM Fireman's Fund Interstate

  9. Lawyers Area of Practice % of Practice Credit/Debit Entertainment 1- 10 0% 11-20 +5% Over 20 +10% Real Estate 1- 5 10% 6-20 +5% 21-50 +10% Over 50 +20% Fireman's Fund Interstate

  10. Lawyers Area of Practice % of Practice Credit/Debit Litigation Defense 1- 25 -5% 26-50 -15% Over 50 -33% Litigation Plaintiff 1- 25 0% 26-50 +5% 51-60 +10% 61-75 +15% Over 75 +20% Fireman's Fund Interstate

  11. LawyersSize of Firm Number of Lawyers Credit 1-5 0% 6-10 5% 11-15 10% 16-20 15% 21-25 20% Over 25 25% Fireman's Fund Interstate

  12. LawyersAn Example Credit/Debit Area of Practice Litigation Defense 30% -15% Litigation Plaintiff 40% +5% Real Estate 15% +5% Other 15% 0% Size of Firm 12 Lawyers 10% Limit $1,000,000/$1,000,000 1.85 Deductible $5,000 .15 Claims Experience 1.15 Step Factor Step 2 1.40 (Base Rate) X (1.85 - .15) X (.95) X (1.10) X (1.15) X (1.40) Fireman's Fund Interstate

  13. Real Estate E&O Based on Agency Revenue and Number of Licensed Agents • Some States Mandatory • Expect better experience • Usually good experience data available • No IRM • The best realtors ask the right questions • Loss only deductible work against insurers • Claims often occur when agent represents both Buyer and Seller • Mold is new claims issue – failure to disclose • Discussions occurring on mold exclusion • Still competitive marketplace Fireman's Fund Interstate

  14. Massage Therapist • Sponsored by AMTA • Insurance is automatic – part of dues • One size fits all • Certification required for membership • Few carriers Fireman's Fund Interstate

  15. Non Profit D&O • Based on Expense – how much $ Association takes in • If expenditures > revenue • Look for positive fund balance • Endowment • EPLI is important Fireman's Fund Interstate

  16. Accountants • Revenue based • Risk management drive Accounting Malpractice.com (Mark Cheffers - the Enron expert) • Competitive market • Suits for fees • Shared office space • Engagement and disengagement letters crucial Fireman's Fund Interstate

  17. Accountants Areas of practice have expanded over past 5 years • Financial planning • Management advisory • Elder care ( Financial and Healthcare) Consulting • Has made underwriting more difficult • Audits have greater exposure than bookkeeping Fireman's Fund Interstate

  18. Accountants How will Enron affect the industry? • Opinions vary • More careful underwriting Audits used in SEC Filings Consulting And Auditing Fireman's Fund Interstate

  19. Public Officials/Public Entities • Population of city • Tax revenues/Tax base • Proximity to large cities • Balance between revenue and expenses • Power plants/libraries/school districts • Lots of EPLI • Competitive market Fireman's Fund Interstate

  20. Teachers Rate is on Per Head Basis • Completely Association driven • Can cover “Failure to Educate” • Will this be the next claims black hole? • Covers extra curricular activities Fireman's Fund Interstate

  21. Title Agents • Billings/Revenue • Several large Title Companies • Mis-handling of Escrow Accounts - drives many claims Fireman's Fund Interstate

  22. Cash with App Shorthand Reporters • Association of Court Reporters Interior Designers • Most claims either wrong fabric or the couch doesn’t fit Fireman's Fund Interstate

  23. Convention Cancellations • Rated on revenues expected to be raised • Insurance covers the shortfall on revenues • Became a big issue after 9/11 Fireman's Fund Interstate

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