Welcome!

Residual Market Audit Services

NJ AIRE

Compliance Audit Program

Jack O’Keefe

Automobile Insurance Plan

Service OrganizationAIPSO

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

AIPSO’s Mission

AIPSO’s mission is to provide high quality services for the automobile insurance

residual market at the lowest possible cost.

1 – Certified Internal Auditor (CIA)

1 – CIA candidate

8 – pursuing INS or CPCU designations

1 – 30+ years of Claims Experience

30 – Independent Consultants

11 Members of our RMAS staff‘

“Who is Residual Market Audit Services” (RMAS)

Provide on-site audits of companies for automobile insurance market mechanisms.

• CAIP NJSAIP MAIPF

• NJCAIP CALC

What Does RMAS Do?

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

Purpose of Audits

Objective of NJAIRE AuditsTo ensure that companies are submitting complete and accurate data to the NJAIRE central processor - ISO.

Operational – Company’s internal controls are effective in processing and identifying NJAIRE business.

Compliance - Data reported meets specifications in the Plan of Operations.

Audit Process

Stage 1: Planning

a. Company Selection

b. Communication with ISO

1. Call Forms

2. Statement of Compliance

3. Concerns with Companies

Audit Process

Stage 1: Planning (con’t) c. Engagement Letter – Includes

request for data

1. All private passenger BI claimants

2. All reportable claimants

3. All other claims

d. Company contact information received

Audit Process

Stage 1: Planning (con’t)

e. Receipt of company data

f. Verification of data to call forms

g. Complete sample selections

h. Confirmation Letter

Audit Process

Stage 2: Fieldwork

a. Opening meeting

b. Obtain internal procedures for reviewing data submissions

c. File review• Determination Forms

Audit Process

Stage 2: Fieldwork

c. File review

• Work-papers

Audit Process

Stage 2: Fieldwork

d. Fieldwork summary

e. Closing meeting

Audit Process

Stage 3: Reporting

1. Draft Report

2. Company’s Response

3. Final Report

2003 - 2008 Audits 64 Audits Completed

Reportable Claims

• Total claimants reviewed – 3,036

• Number of claimants over reported – 478 or 16%

• Dollar amount over reported - $8,914,271

2003 - 2008 Audits

Reasons for Over Reporting:• Claimant or Insured Incorrect Threshold

• Unverified Claimant Threshold

These two reasons account for 52% of reporting errors

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

Reporting Errors

• Incorrect Territory Codes (Accident Year 2007 and prior)

• Settlement Reported in an Incorrect Quarter or Year

• Over Reporting of the Dollar Amount

2003 – 2008 Audits64 Audits Completed

All Bodily Injury Claims:

• Total claimants reviewed – 5,340

• Number of claimants under reported – 213 or 4%

• Dollar amount under reported - $1,967,748

• Number of claimants over reported as BI claims - 224 or 4.1%

Reasons for Under Reporting

• Claimant had a Zero Dollar Threshold

• Insured had a Verbal Threshold

• Unverified Claimant Threshold

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• Settlement reported in Incorrect Quarter• Commercial Bodily Injury Claims Paid

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

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

QUESTIONS?

What? Huh?

What does it all mean?

Thank you!

Residual Market Audit Services

NJAIRE

Compliance Audit Program

Jack O’Keefe