February 27 deadline for new California DOI mandate spells significant costs for auto insurers; QPC responds with program to ensure compliance with new mileage regulations
SAN FRANCISCO—January 29, 2007 — Quality Planning Corporation (QPC), an ISO company, has launched a program designed to assist insurers as they prepare to meet the February 27 deadline for new California Department of Insurance (DOI) regulations. The ‘Countdown to Compliance' program provides all the tools and analysis an auto insurer needs to comply with one of the most significant changes to auto underwriting in California since the passage of Proposition 103 in 1988.
The new regulation specifies the process by which auto insurers must determine annual mileage for the purpose of calculating policy premiums. Under California Insurance Code Section 1861.02(a), which was added in 1988 by Proposition 103, ‘miles driven' is the second mandatory factor in an insurer's auto rate calculation. For renewal business, the regulation establishes a mandatory policy holder contact at minimum three-year intervals. In addition, the regulation specifies the information an insurer is allowed to require or request from the policyholder to support the estimate.
“In essence, the new regulations require auto insurers to take a more proactive role in gathering accurate mileage information,” said Bob U'Ren, senior vice president of Quality Planning Corp. “Our ‘Countdown to Compliance' program ensures that our clients can comply with the regulation with minimal cost and disruption. Our clients can also gain critical insight into other key rating factors that affect premium such as missing drivers and inaccurate garaging location. Good data improves underwriting decision-making, which in turn improves bottom-line results.”
How ‘Countdown to Compliance' works
The ‘Countdown to Compliance' program helps insurers comply with the new regulation — including the requirement that policyholders provide the annual mileage figure — and potentially enables insurers to realize substantial premium uplift by obtaining accurate annual mileage estimates.
The program features QPC's unique RISK:check® and Precision Reunderwriting™ services. RISK:check identifies rating error in personal automobile insurance policy-mileage estimates. It draws upon a variety of public, proprietary and private databases to identify questionable policyholder-provided mileage information, and estimates the probability that an actual error in reported mileage has occurred.
QPC's Precision Reunderwriting service helps insurers meet the regulation's requirement that the policyholder must provide the annual mileage figure used in rating the policy. QPC verifies the annual mileage figure, and other policyholder provided information permitted by the regulation, through telephone or online contact with the policyholder.
QPC's U'Ren added: “Although the regulation is aimed squarely at annual mileage, the ‘every three years' requirement creates an opportunity to update a multitude of rating factors that, if left unchecked, seriously erode underwriting profitability. We are intimately familiar with the market because we are currently looking at close to one out of every five California auto policies. At the same time, we take great care to preserve insurers' customer relationships.”
The New Regulation — In a Nutshell
The regulation, under Section 2632.5(c) (2) (B) (i) provides that “…an insurer shall, at least every three years, request a policyholder to provide the estimated annual miles he or she expects each vehicle to be insured will be driven during the 12-month period following policy renewal. The insurer may also require or request….information from the policyholder necessary to support its estimate.”
To support a policyholder's annual mileage figure, the regulation permits insurers to require specified information, such as location of work, school or other destination if the vehicle is used for commuting purposes, and the number of miles and days per week the vehicle is used for commuting; estimated mileage for pleasure, employment or other uses; approximate mileage driven for any time period within the previous 24 months; and reasons for differences between estimates given for the upcoming 12 months and the actual mileage driven the previous 12 months; and the current odometer reading.
Insurers who take no action are left with few options for updating annual mileage estimates, leaving them with under priced policies and substantially more risk.
The regulations can be found at Title 10, California Code of Regulations, Section 2632.5(c).
About Quality Planning Corporation
A member of the ISO family of companies, Quality Planning Corporation (QPC) is focused exclusively on providing decision integrity solutions to the insurance industry. QPC works with insurance companies to identify areas of significant premium leakage using sophisticated database management, statistical analysis and modeling, customized survey design, and highly targeted customer interaction., QPC, the rating integrity solutions company, was founded in 1985 and is headquartered in San Francisco. For more information, visit www.qualityplanning.com.
ISO is a leading provider of products and services that help measure, manage and reduce risk. ISO provides data, analytics and decision-support solutions to professionals in many fields, including insurance, finance, real estate, health services, government and human resources. Clients use ISO's databases and services to classify and evaluate a variety of risks and detect potential fraud. In the United States and around the world, ISO's services help customers protect people, property and financial assets.