1992.02.19 - Records of Meeting



RECORDS OF MEETING

GOVERNING COMMITTEE

A Meeting of the Governing Committee of the Commonwealth Automobile Reinsurers was held at the offices of C.A.R, on -

WEDNESDAY, FEBRUARY 19, 1992 AT 10:00 A.M.

The following Members were present -

Mr. Craig M. Bradley Mr. James D. Doherty

Mr. Richard W. Brewer *Mr. Daniel J. Foley, Jr.

Mr. Donald O. Burns Mr. Sumner D. Gilman

Mr. J. Barry May Mr. David J. Lane

Mr. Arthur J. Remillard, Jr. Mr. Robert V. McGowan

Mr. Edwin J. Rinehimer **Ms. Nanci Peters

Mr. James M. Stone

*Mr. Daniel J. Foley, Jr. substituted for Mr. Louis M. Xifaras.

**Ms. Nanci Peters substituted for Mr. George Peters.

There were also present -

Commonwealth Automobile Reinsurers

President Mr. R. M. LaFontaine

Executive Vice President & Treasurer Mr. M. J. Trovato

Administrative Vice President & Secretary Mr. D. I. Jewell

Vice President and General Counsel Mr. J. J. Maher, Jr.

Vice President and Chief Information Officer Mr. P. P. Ryan

Vice President-Financial Services Mr. J. V. Kelly

Vice President-Claims Ms. V. B. Gedziun

Director of Communications Mr. P. W. Corsetti

Adm. Assistant for Industry Relations Mr. G. F. Monahan

Administrative Manager Mr. J. D. Metcalfe

Commonwealth Automobile Reinsurers

Underwriting Manager Ms. P. A. Wallace

Data Operations Manager Ms. W. S. Thompson

Statistical Manager Ms. M. S. Adgate

Statistical Supervisor Ms. C. J. Bresler

Senior Actuarial Analyst Mr. R. N. Nevins

Actuarial Analyst Ms. J. E. Callahan

R.P./S.C. Liaison Mr. T. R. Weymouth

Adm. Ass't. to Adm. Vice President Ms. B. A. Seminatore

Massachusetts Division of Insurance Mr. Donald Baldini

Hale and Dorr Mr. R. W. Mahoney

Amica Mutual Insurance Company Mr. J. J. Wolstencroft, Jr.

Arbella Mutual Insurance Company Mr. W. D. Healey

The Commerce Insurance Company Mr. D. H. Cochrane

Mr. Warren Ehrlich

CNA Insurance Companies Mr. A. J. Carpentier

CU Homeland Insurance Company Mr. G. E. Davis

Fitchburg Mutual Insurance Company Mr. G. R. Larson

Mr. J. B. Ryan, III

Goodwin, Proctor and Hoar Ms. M. J. Dee

The Hanover Insurance Company Mr. W. D. Howard

Independent Insurance Agts of Massachusetts Mr. E. J. Donahue, Jr.

Insurco Consulting, Inc. Mr. W. C. McLean, Jr.

I.S.I. Systems, Inc. Mr. Donald Devers

Ms. D. B. Sparrow

John Hancock Property & Casualty Ins. Co. Mr. Jerry Heberlein

Metropolitan Property & Casualty Ins. Co. Mr. R. P. Suglia

Morrison, Mahoney & Miller Mr. J. J. Moran, Jr.

National Grange Mutual Insurance Company Mr. J. R. Conlon

New Hampshire Insurance Company Ms. Anne Koeck

Norfolk & Dedham Mutual Fire Insurance Co. Mr. T. J. DelGrande

Mr. Leonard Zamansky

Plymouth Rock Assurance Corporation Mr. G. H. Arnold

Mr. Edward Ford

Policy Management Systems Corporation Ms. Jean Walsh

Quincy Mutual Fire Insurance Company Mr. W. J. Whitebone

Safety Insurance Company Mr. E. N. Patrick, Jr.

Travelers Insurance Company Mr. P. F. Reichardt

Trust Insurance Company Mr. Mark Sweeney

Worcester Insurance Company Ms. P. A. Bauckman

Chairman Brewer called the meeting to order at 10:00 A.M. and announced that the Commissioner of Insurance approved the substitution of Ms. Nanci Peters for Mr. George Peters and Mr. Daniel J. Foley, Jr. for Mr. Louis M. Xifaras.

92.1 MINUTES OF PREVIOUS MEETINGS

A motion was made by Mr. James Doherty and duly seconded by Mr. Arthur Remillard to accept the Records of the Governing Committee Meetings of January 15, 1992 and January 28, 1992.

The motion passed on a unanimous vote.

92.5 COUNSEL REPORT

Mr. Joseph J. Maher, Jr., Vice President and General Counsel, advised that a draft of the proposed amendments to Rules 11 and 17 were distributed to the Governing Committee prior to today's meeting for consideration and review (see attached). Mr. Maher advised that, at its last meeting, the Governing Committee adopted the Rules in concept. Rule 17 details certain commercial classifications that are excluded from the cession limitations calculations, while Rule 11 provides for exclusion from the commercial utilization formula, classifications that are excluded from the 1992 commercial cession limitations.

92.5 COUNSEL REPORT (Cont.)

A motion was made by Mr. James Doherty and duly seconded by Mr. Robert McGowan to adopt the proposed amendments to Rule 11, Assessments and Participation - 1989 and Thereafter and Rule 17, Expense Allowance to Servicing Carriers on Representative Producer Business, and directed Staff to submit the proposed amendments to the Commissioner of Insurance for approval.

The motion passed on a unanimous vote.

Continuing, Mr. Maher advised that certain litigation brought by Allstate Insurance Company is pending at the Federal District Court. C.A.R. has received two decisions from the Court Magistrate. These decisions are reported to the District Court Justice, who must adopt the Magistrate's opinion before it becomes an order of the Court. Mr. Maher advised that one decision remanded to the Division of Insurance the claims originally brought in an administrative complaint by C.A.R. as to Allstate's obligations under the Rules of C.A.R. and the second decision stayed the consideration of the constitutional questions that were brought before the Federal Court by Allstate, until such time as the Commissioner's review has been completed. Mr. Maher suggested that further ramifications and strategies arising out of those two decisions would be appropriate for the Governing Committee to consider in Executive Session, along with a report on a meeting that was held with Allstate's attorneys regarding their Rule 11 settlement of obligation.

In regard to United States Fidelity and Guaranty Company and Crum and Forster, C.A.R. has had additional meetings with their Counsel in regard to their withdrawal from the Massachusetts private passenger market. Mr. Maher suggested that due to relevance to pending litigation and strategies, it would be appropriate for the Governing Committee to consider this matter in Executive Session.

Continuing, Mr. Maher advised that in regard to Peerless Insurance Company and General Accident Insurance Company, there has been settlement negotiations, which raised the possible return of these companies to the Massachusetts motor vehicle insurance marketplace. Mr. Maher suggested that due to pending litigation, it would be appropriate for the Governing Committee to consider these matters in Executive Session.

Mr. Maher advised that a petition was submitted to the Commissioner of Insurance to review the terms and conditions of the settlement agreement reached between C.A.R. and CIGNA. C.A.R. has provided information to the Division of Insurance and Mr. Maher suggested that due to the pending dispute, it would be appropriate for the Governing Committee to consider this matter in Executive Session.

Also, Mr. Maher advised that in regard to discussion involving the American Transportation Insurance Company's obligation to C.A.R., it would be appropriate for the Governing Committee to consider this subject in Executive Session.

92.5 COUNSEL REPORT (Cont.)

Continuing, Mr. Maher advised that the agreement with Aetna Casualty and Surety Company has been finalized in regard to its buy-out obligations. Mr. Maher suggested that where there are terms in that agreement that require further amplification and since they would be pertinent to pending negotiations, it would be appropriate for the Governing Committee to consider in Executive Session.

Mr. Maher advised that a hearing was held at the Division of Insurance on the petition of Holyoke Mutual Insurance Company to be granted certain exemptions under the counting of exposures for purposes of physical redistribution. Holyoke and C.A.R. were present at the hearing. Mr. Maher advised that Holyoke argued primarily on the effect the counts would have with regard to certain financial ratings, particularly, Best's. Mr. Maher reported that the matter was taken under advisement by the Hearing Officer, and that C.A.R. suggested a need for a resolution as soon as possible, because of the effect that it has on the overall "ERP Physical Redistribution Plan."

Mr. Michael Trovato, Executive Vice President and Treasurer, with regard to the Physical Redistribution Plan, advised that the process is midway through the free agency period. Staff is assessing the impact that the Aetna Casualty and Surety Company's withdrawal will have on the ability to achieve the goals of the Physical Redistribution Plan. Mr. Trovato advised that C.A.R. has moved approximately 40,000 exposures to-date, noting that of the eligible participating oversubscribed Servicing Carriers, approximately 47,000 Exclusive Representative exposures remain to be redistributed. Since Aetna's filing of its withdrawal plan with the Division of Insurance, C.A.R. has received fifteen two-party requests from Aetna producers for change in Servicing Carrier appointments to an undersubscribed Servicing Carrier. These two-party transfers involve approximately 15,000 exposures. Mr. Trovato advised that the Aetna's two-party transfers to undersubscribed Servicing Carriers have a dramatic impact on the ability of the oversubscribed Servicing Carrier business to be absorbed by the undersubscribed Servicing Carriers given the timeframes established by the Governing Committee.

After discussion, it was the consensus of the Governing Committee that C.A.R. Staff continue with the physical redistribution plan and objective regardless of the April 1, 1992 date.

Continuing, Mr. Maher distributed a letter, dated February 18, 1992, from Mr. Victor Fanikos, Legal Counsel for the Division of Insurance. Mr. Maher advised that the purpose of the letter was to clarify previous correspondence distributed to the Governing Committee. Mr. Maher advised that the letter basically points out that in regard to a pollution "buy-back", it is the policyholder's option for the "buy-back" and, further, it points out that the "buy-back" for C.A.R.'s purpose is subject to the limitations on coverage availability as contained in Rule 6, B, of the Rules of Operation.

92.5 COUNSEL REPORT (Cont.)

In conclusion, Mr. Maher advised that C.A.R. has received new information relative to the Hartford cases, which would be appropriate for the Governing Committee to consider in Executive Session.

92.6 MARKET REVIEW COMMITTEE

Mr. James Doherty advised that an oral report of the action taken by the Market Review Committee, at its December 20, 1991 Meeting, was presented at the January meeting of the Governing Committee. The written Records of the meeting being available, a motion was made by Mr. James Doherty and duly seconded by Mr. David Lane to accept the Records of the Market Review Committee Meeting of December 20, 1991.

The motion passed on a unanimous vote.

Continuing, Mr. Doherty, reporting on the Market Review Committee Meeting of January 23, 1992, advised that the Committee considered an appeal by Mr. Frank J. Stout of the Stout Insurance Agency in regard to the termination of his agency's Exclusive Representative Producer (ERP) appointment by the Liberty Mutual Insurance Company for failure to develop and maintain a minimum book of business. Mr. Doherty advised that the Market Review Committee voted to deny the appeal and uphold the termination by Liberty Mutual Insurance Company.

The Market Review Committee considered an appeal by Ms. Camille Chesnick of the Camille Chesnick Insurance Agency in regard to the decision of C.A.R. Staff refusing to grant the agency a commercial ERP appointment. Mr. Doherty advised that Staff's denial was based on the subsidiary status of the agency, whereas the parent agency maintains a voluntary automobile relationship with the John Hancock Property and Casualty Insurance Company as a captive agent. Mr. Doherty reported that the Market Review Committee voted to uphold the appeal and directed C.A.R. Staff to assign the agency a commercial Servicing Carrier.

Continuing, Mr. Doherty reported that the Market Review Committee considered an appeal by Mr. Bruce E. Cluett of the Cluett Insurance Agency in regard to the decision by Aetna Casualty and Surety Company to remove the agency from the commercial direct bill program. Mr. Doherty advised that the Market Review Committee voted to uphold the appeal and directed Aetna to reinstate the agency on the company's commercial direct bill program.

Mr. Doherty advised that the Governing Committee, at its January 15, 1992 Meeting, directed the Market Review Committee to review the issues which would assure that the Physical Redistribution Plan would be a one-time occurrence as outlined in the Commissioner's Decision and Order of December 20, 1991 and to address potential compensation for expenses incurred by ERPs required to move their books of business as a result of

92.6 MARKET REVIEW COMMITTEE (Cont.)

the Physical Redistribution Plan. Mr. Doherty advised that the Market Review Committee voted five in favor, with Messrs. Cochrane, Crimmins and Ms. Fortino opposed, to recommend, for Governing Committee approval, that ERPs who participate in the Physical Redistribution Plan be properly compensated. The Committee also voted six in favor, with Mr. Crimmins and Ms. Fortino opposed, to recommend that the Governing Committee appoint either a special ad hoc committee or refer back to the Market Review Committee to analyze the specific costs involved and to make recommendations as to a dollar amount to compensate ERPs who are forced to participate in the Physical Redistribution Plan.

A motion was made by Mr. James Doherty and duly seconded by Mr. Sumner Gilman to adopt the recommendations of the Market Review Committee.

Mr. Robert McGowan expressed concern as a voluntary agent as to why there is a proposal to compensate ERPs involved in the Physical Redistribution Plan, who end up moving a book of business. Mr. McGowan advised that as a voluntary agent, he had moved books of business and had not received compensation.

After discussion, a substitute motion was made by Mr. David Lane and duly seconded by Mr. Robert McGowan that there be no expense reimbursement for Exclusive Representative Producers that as a result of the Physical Redistribution Plan have been required to move a book of business.

Mr. Sumner Gilman commented that ERPs are incurring unusual expenses which they should not be expected to absorb as a result of an imposed physical redistribution. He noted that, in his opinion, there is no similarity between an insurance carrier that on its own action withdraws from writing automobile insurance and a physical redistribution of ERPs from oversubscribed Servicing Carriers and that a voluntary agent, unlike an ERP, has the opportunity to negotiate an expense reimbursement with its company. Mr. Gilman noted that the Market Review Committee's recommendation is an acknowledgment that moving a book of business is an expensive proposition for an ERP. The Market Review Committee is recommending that an ad hoc committee or the Market Review Committee be instructed to analyze those costs associated with moving a book of business.

After lengthy discussion, a motion was made by Mr. Robert McGowan and duly seconded by Mr. James Stone to move the question. The motion passed on a unanimous vote.

The substitute motion passed nine in favor, with Messrs. Doherty, Foley and Gilman opposed.

Continuing his report, Mr. Doherty advised that the Market Review Committee considered a request by Mr. Richard B. Paquin of the Gauthier Insurance Agency that the Committee grant the agency, who is an unprotected ERP of the Travelers Insurance Company, an exemption from participation in the ERP redistribution plan. Mr. Doherty advised that the Market Review Committee unanimously voted to deny the appeal.

92.6 MARKET REVIEW COMMITTEE (Cont.)

Mr. Doherty reported that the Market Review Committee considered an appeal by the Pompeo & Sons Insurance Agency, Inc., in regard to the suspension of the agency's dual status ERP appointment for renewal business by the Aetna Casualty and Surety Company for failure to remit earned premium payments. Mr. Doherty advised that the Market Review Committee voted to uphold the appeal and to remove the suspension of the agency's ERP appointment.

In conclusion, Mr. Doherty reported that the Market Review Committee considered an appeal by Mr. Charbel A. Obeid in regard to the declination of his application for an ERP appointment by C.A.R. Staff for failure to conduct business within a credit eligible territory. Mr. Doherty advised that the Market Review Committee voted to uphold the appeal and directed Staff to assign his agency an appointment as an ERP.

A motion was made by Mr. James Stone and duly seconded by Mr. James Doherty to accept the Records of the Market Review Committee Meeting of January 23, 1992.

The motion passed on a unanimous vote.

92.7 CLAIMS ADVISORY COMMITTEE

Mr. Joseph Conlon, reporting on the Claims Advisory Committee Meeting of February 19, 1992, advised that the Committee considered a request by Liberty Mutual Insurance Company for reimbursement of an excess judgment under Facility Rules of Operation, 12, c, (2), Claim Processing. The amount being requested was $115,000, plus legal costs incurred in defense of an action. Mr. Conlon advised that a subcommittee reviewed circumstances surrounding the request that went back to a December 27, 1979 accident at which time a Liberty Mutual insured and a Utica Mutual Insurance Company insured were involved in an accident. Liberty Mutual, subsequently, denied the uninsured motorist claim and Utica Mutual paid the claim and took it to Worcester Superior Court. The Court reviewed the case and issued a judgment against Liberty Mutual in the amount of $100,000, plus interest. There was no finding against Liberty Mutual under Chapter 173A and Liberty Mutual settled with Utica Mutual in the amount of $115,000. Liberty Mutual came to C.A.R.'s Claims Advisory Committee, which appointed a subcommittee that unanimously recommends that no reimbursement of the excess judgment above the policy limits of 10/20 be made. Mr. Conlon advised that the Liberty Mutual then appeared before the Claims Advisory Committee, which unanimously agreed that there be no reimbursement for the excess judgment.

Ms. Valerie Gedziun, Vice President of Claims, advised that Liberty Mutual Insurance Company has not exercised its right of appeal under Rule 20 to-date.

92.7 CLAIMS ADVISORY COMMITTEE (Cont.)

Continuing, Mr. Conlon reported that Cost Containment Seminars on Bodily Injury Price Evaluation, Uses of Diagnostic Testing, Settlement Techniques, along with a presentation by the Automobile Insurers Bureau on its study of Personal Injury Protection claims are scheduled for June 23, 24 and 25.

Mr. Conlon advised that the Performance Standards were considered and a subcommittee was appointed to review the Standards for possible modifications. Mr. Conlon noted that periodic reviews are required by the Auto Reform Law, Chapter 273, Section 41.

In conclusion, Mr. Conlon reported that the Claims Advisory Committee held a brief discussion on the effect of the Salvage Title Law and its disposal of totaled vehicles.

A motion was made by Mr. James Doherty and duly seconded by Mr. Robert McGowan to receive the oral report of the Claims Advisory Committee Meeting of January 22, 1992.

The motion passed on a unanimous vote.

92.8 OPERATIONS COMMITTEE

Mr. Wayne Howard, reporting on the Operations Committee Meeting of January 23, 1992, advised that the Operations Committee considered an appeal by the United Community Insurance Company for reversal of a $300 statistical penalty, where C.A.R. Staff rejected the company's July, 1991, commercial liability, no-fault and physical damage premium statistical submission for high statistical error. Mr. Howard advised that the Operations Committee unanimously voted to grant the appeal based on the fact that the company attempted to correct the problem on numerous occasions. Mr. Howard noted that there was no financial impact to C.A.R. caused by the error and the company had since rectified the reporting problem.

Continuing, Mr. Howard reported that the Operations Committee unanimously recommends, for Governing Committee approval, the following recommendations of the Policy Edit/Write-Off Subcommittee:

l. C.A.R. Staff, on behalf of the industry, submit a written request to the Registry of Motor Vehicles to add commercial capability to the Registry's Uninsured Motorists System. The subcommittee believed the addition of the commercial capability would assist C.A.R. in achieving Rule 15 compliance in the future.

2. To re-affirm the error tolerances (1% and 10 policies in error) on non-critical errors for policy effective year 1992.

92.8 OPERATIONS COMMITTEE (Cont.)

3. A 1990 cession/no premium write-off amount of $850 for private passenger policies and $2,000 for commercial policies.

A motion was made by Mr. James Doherty and duly seconded by Mr. Robert McGowan to adopt the recommendations of the Operations Committee.

The motion passed on a unanimous vote.

Mr. Howard reported that the Operations Committee considered cession reporting rules and procedures regarding the modification of C.A.R.'s Manual of Administrative Procedures. The discussion was a result of a Governing Committee recommendation, at its December, 1991, meeting to develop criteria which would allow for cession backdates based upon intent. The Operations Committee requested C.A.R. Staff to prepare a written proposal as agreed upon by the Operations Committee for the Governing Committee's consideration and review at its next meeting.

Continuing, Mr. Howard reported that the Operations Committee unanimously recommends, for Governing Committee approval, the following recommendations of the Statistical Subcommittee:

1. That the 1992 Statistical Edit Package Rating Modification Factor (S14) be updated to allow for proper editing of the two modification factor fields, the Experience Rating and All Other Modification factors.

2. The Pollution Liability-Broadened Coverage (S48) edit was introduced in the 1992 Statistical Edit Package as a new edit to be effective March 1, 1992.

3. Change the Private Passenger and Commercial Statistical Plans for the reporting of allocated loss adjustment expenses. These changes would include the addition of new loss transaction codes to uniquely identify paid legal expenses and paid medical expenses. The Operations Committee voted unanimously to approve this recommendation effective January 1, 1993.

4. That new statistical plan pages related to Public Auto classifications be adopted to be effective January 1, 1993.

5. The turnaround time commitment outlined in both the Private Passenger and Commercial Statistical Plans be made a permanent part of the statistical plan, subject to modification by the Operations Committee.

A motion was made by Mr. James Doherty and duly seconded by Mr. James Stone to adopt the recommendations of the Operations Committee.

The motion passed on a unanimous vote.

92.8 OPERATIONS COMMITTEE (Cont.)

In conclusion, Mr. Howard advised that C.A.R. Staff presented its proposed cession reporting extension, retroactive to effective date January 1, 1992 policies, relative to those policies excluded from the commercial utilization formula for policy year 1992. Mr. Howard advised that the Operations Committee unanimously recommends, for Governing Committee approval, that this proposal, dependent upon the Division of Insurance's approval of the changes to Rule 11, be adopted.

A motion was made by Mr. James Doherty and duly seconded by Mr. Robert McGowan to adopt the recommendation of the Operations Committee.

The motion passed on a unanimous vote.

A motion was made by Mr. James Doherty and duly seconded by Mr. Barry May to receive the oral report of the Operations Committee Meeting of January 23, 1992.

The motion passed on a unanimous vote.

92.14 AUDIT COMMITTEE

Mr. Robert McGowan, reporting on the Audit Committee Meeting of February 12, 1992, advised that Financial Statements for the fiscal year ending September 30, 1991 and 1990 and the annual Management Letter were presented to the Committee by Coopers & Lybrand. Mr. McGowan advised that these documents, together with Staff's response to the Management Letter, were discussed in detail. After considerable discussion, the Audit Committee unanimously voted to recommend, for Governing Committee approval, Coopers & Lybrand's Financial Statements and Management Letter.

A motion was made by Mr. Robert McGowan and duly seconded by Mr. Craig Bradley to adopt the recommendation of the Audit Committee.

The motion passed on a unanimous vote.

Continuing, Mr. McGowan reported that Mr. Brooks, Coopers & Lybrand, also discussed with the Audit Committee their "special" review evaluating the reasonableness of C.A.R.'s participation ratio process and calculations. Mr. Brooks indicated that except for one relatively minor exception, no adjustment was required. Mr. McGowan advised that the Audit Committee unanimously voted, for Governing Committee approval, to accept Coopers & Lybrand's "special" review.

A motion was made by Mr. Robert McGowan and duly seconded by Mr. David Lane to adopt the recommendation of the Audit Committee.

The motion passed on a unanimous vote.

92.14 AUDIT COMMITTEE (Cont.)

A motion was made by Mr. Barry May and duly seconded by Mr. David Lane to receive the oral report of the Audit Committee Meeting of February 12, 1992.

The motion passed on a unanimous vote.

92. 16 COMMERCIAL LINES COMMITTEE

Mr. Edwin Rinehimer advised that an oral report of the action taken by the Commercial Lines Committee, at its January 8, 1992 Meeting, was presented at the January meeting of the Governing Committee. The written Records of the meeting being available, a motion was made by Mr. Craig Bradley and duly seconded by Mr. James Stone to accept the Records of the Commercial Lines Committee Meeting of January 8, 1992.

The motion passed on a unanimous vote.

92.18 GOVERNING COMMITTEE REVIEW PANEL

Mr. Robert McGowan advised that an oral report of the action taken by the Governing Committee Review Panel, at its December 17, 1991 Meeting, was presented at the December meeting of the Governing Committee. The written Records of the meeting being available, a motion was made by Mr. Robert McGowan and duly seconded by Mr. James Doherty to accept the Records of the Governing Committee Review Panel meeting of December 17, 1991.

The motion passed on a unanimous vote.

92.19 PERSONNEL COMMITTEE

Mr. James Stone, reporting on the Personnel Committee Meeting of February 5, 1992, advised that the Committee unanimously approved the Records of its Meeting of November 14, 1991.

A motion was made by Mr. James Stone and duly seconded by Mr. James Doherty to accept the Records of the Personnel Committee Meeting of November 14, 1991.

The motion passed on a unanimous vote.

Continuing, Mr. Stone advised that the Personnel Committee considered new salary ranges for Officer and non-Officer positions, based on the arithmetic average of salary range movements being implemented for 1992 by the Member Companies represented on the Governing Committee. Mr. Stone advised that the Personnel Committee recommends, for Governing Committee approval, that the Officer and non-Officer positions be increased by 3.8% for calendar year 1992.

92.19 PERSONNEL COMMITTEE (Cont.)

A motion was made by Mr. James Stone and duly seconded by Mr. Robert McGowan to adopt the recommendation of the Personnel Committee.

The motion passed on a unanimous vote.

Mr. Stone advised that the Personnel Committee has proposed annual salary increases for Mr. Paul P. Ryan, Vice President and Chief Information Officer; Ms. Valerie B. Gedziun, Vice President of Claims and Mr. Joseph J. Maher, Jr., Vice President and General Counsel and recommends that the Governing Committee approve the salary increases as presented.

A motion was made by Mr. James Stone and duly seconded by Mr. James Doherty to adopt the recommendations of the Personnel Committee.

The motion passed on a unanimous vote.

In conclusion, Mr. Stone reported that, with the resignation of Ms. Mary Corbett as C.A.R.'s Vice President of Statistical and Actuarial Analysis, the Personnel Committee considered Senior Management's recommendation to reunite the Statistical/Actuarial functions with the Financial Services Department, under the direction of Mr. John V. Kelly, Vice President of Financial Services. Further, Management recommended that the recruiting effort to fill the vacant positions of Actuarial Manager, Actuarial Supervisor and Actuarial Analyst commence in order to provide the necessary technical support to Mr. Kelly. Mr. Stone advised that at least one Committee Member was concerned that the Statistical/Actuarial/FinancialServices Departments are too great a load for one person. Mr. Stone advised that, after considerable discussion, the Personnel Committee voted seven in favor, with one abstention, to recommend, for Governing Committee approval, Senior Management's recommendations. He noted that, if the load proves too heavy, the subject of hiring another officer could be reopened at a later time.

A motion was made by Mr. James Stone and duly seconded by Mr. Robert McGowan to adopt the recommendations of the Personnel Committee.

The motion passed on a unanimous vote.

A motion was made by Mr. James Doherty and duly seconded by Mr. Robert McGowan to receive the oral report of the Personnel Committee Meeting of February 5, 1992.

The motion passed on a unanimous vote.

92.21 LOSS RESERVING COMMITTEE

Mr. John Kelly, Vice President of Financial Services, advised that an oral report of the action taken by the Loss Reserving Committee, at its December 10, 1991 Meeting, was presented at the December meeting of the Governing Committee. The written Records of the meeting being available, a motion was made by Mr. James Doherty and duly seconded by Mr. Robert McGowan to accept the Records of the Loss Reserving Committee Meeting of December 10, 1991.

The motion passed on a unanimous vote.

Mr. Stone questioned when the Governing Committee would receive a reconciliation of the estimates of ultimate policy year deficits with the fiscal year numbers. Mr. Kelly noted that at the December, Loss Reserving Committee meeting, it set an ultimate projection for the 1991 and 1990 policy years and the Loss Reserving Committee reviews its projections on an annual basis.

After discussion, it was the consensus of the Governing Committee that the feasibility of reviewing the ultimate projections on a quarterly basis be considered by the Loss Reserving Committee and the published quarterly financial statements include a reconciling exhibit of the policy, fiscal and accident year deficits.

92.28 JOINT ACTUARIAL AND COMMERCIAL LINES COMMITTEE

Mr. David Lane, reporting on the Joint Actuarial and Commercial Lines Committee Meeting of January 29, 1992, advised that the Committee considered the procedures and issues to be considered for the upcoming Commercial Rate Filing. Tillinghast had not prepared an engagement letter for completion of the project, because there were several issues that needed discussion and clarification so that they would know what their task would be. Mr. Lane advised that the proposal will be presented at the next Joint Actuarial and Commercial Lines Committee meeting.

Continuing, Mr. Lane advised that the Joint Committee discussed the general approach that should be taken regarding the development of the proposed filing. The Committee agreed that the Joint Actuarial and Commercial Lines Committee should focus on the technical issues and that the direct policy issues should be covered by the Commercial Lines Committee.

Mr. Lane advised that the issues which arose out of the process for approval of the Commercial Rate Filing effective January 1, 1992, were the basis of the Joint Committee's discussions. The issues are profit provisions, development of rates for additional commercial classes and additional expense loading.

92.28 JOINT ACTUARIAL AND COMMERCIAL LINES COMMITTEE (Cont.)

In addition, the Joint Committee reviewed the following issues that arose out of the January 1, 1992 Commercial Rate Filing: (1) data adjustments for company reporting problems, (2) frequency trend and projections, (3) company expenses and commission pure premiums, (4) frequency adjustment to the commission pure premium component, (5) additional expense loading for ID 3 expense allowances (to be considered by Commercial Lines Committee), (6) rate level index factors (consensus of Joint Committee to have the calculations done both ways for cross-checking), (7) cession rate projections considered low by State Rating Bureau (consensus of Joint Committee to ask the Commercial Lines Committee to investigate alternative methods), (8) Joint Committee decided to submit the C.A.R. Commercial Rate Filing with an effective date of November 1, 1992 (any disruption for renewals in November and December will be one-time only) and (9) State Rating Bureau questioned the timing of current procedures requiring companies and agents to provide insureds notification of cession (consensus of Joint Committee was to refer this issue to the Commercial Lines Committee).

Continuing, Mr. Lane advised that the Joint Committee is considering an interim rate filing with a July 1, 1992 effective date for zone-rated trucks, garage physical damage and out-of-state garaged vehicles.

In conclusion, Mr. Lane reported that in August, 1991, the Automobile Insurers Bureau adopted a revised class plan for public vehicles. That plan has been adopted by many companies for their voluntary business. Mr. Lane advised that it was the decision of the Joint Committee to adopt a similar plan to coincide with the November 1, 1992 C.A.R. Commercial Rate Filing.

Concern was expressed that C.A.R. could be in conflict with the State Rating Bureau in regard to the filing, placing it in an adversarial role with the Division of Insurance. It was noted that where C.A.R. is the Division of Insurance's designated statistical agent, its role should be an impartial statistical agent and an advisor to the Division of Insurance on public policy, and not be put into a situation where it is forced to defend its position on a rate filing before the Division of Insurance.

Mr. Lane believed that C.A.R. has an obligation to deal with the commercial deficit, which is to depopulate. C.A.R. can only depopulate its commercial pool by making policy decisions. An important policy decision is to have adequate C.A.R. rates. Mr. Lane advised that the policy decision making is the element which might cause a conflict with the State Rating Bureau or Division of Insurance. Mr. Lane advised that the technical aspects would not cause a problem. Mr. Lane's opinion is that this responsibility should not be delegated to another organization.

After discussion, it was the consensus of the Governing Committee that this issue was informational.

92.28 JOINT ACTUARIAL AND COMMERCIAL LINES COMMITTEE (Cont.)

motion was made by Mr. James Doherty and duly seconded by Mr. Robert McGowan to receive the oral report of the Joint Actuarial and Commercial Lines Committee Meeting of January 29, 1992.

The motion passed on a unanimous vote.

92.33 C.A.R. BANK

Mr. Michael Trovato, Executive Vice President and Treasurer, recommended, for Governing Committee approval, that John V. Kelly, Financial-Services, be authorized to replace Mary L. Corbett, Vice President, Statistical and Actuarial to sign C.A.R. checks.

A motion was made by Mr. Sumner Gilman and duly seconded by Mr. Robert McGowan to adopt Mr. Trovato's recommendation.

The motion passed on a unanimous vote.

OTHER BUSINESS

On a motion by Mr. James Doherty and duly seconded by Mr. David Lane, it was unanimously voted to consider as other business C.A.R.'s settlement disbursement procedure and the impact of pending company withdrawals on participation.

Mr. John Kelly, Vice President-Financial Services, referred to his Memorandum of February 19, 1992 (see attached) which provided a description of the process used to disburse withdrawal settlements paid to C.A.R. After a brief explanation, a question rose as to the difference in the disbursement of settlement monies for a total market withdrawal (i.e. Fireman's Fund) and a Rule 11, B, 3 withdrawal (i.e. CIGNA).

Mr. Mahoney advised that Fireman's Fund Insurance Company was a total market withdrawal, C.A.R. has never had a Rule strictly setting the terms of such a total buy-out.

After further discussion, it was the consensus of the Governing Committee to follow the same procedure for Fireman's Fund for other withdrawals from the marketplace.

Continuing, Mr. Kelly distributed, for informational purposes, a Memorandum dated February 19, 1992 in regard to the impact of pending company withdrawals on participation (see attached).

OTHER BUSINESS (Cont.)

After brief discussion, it was the consensus of the Governing Committee to have Staff prepare a Memorandum describing the procedure followed by Staff in calculating participation ratios and funding balances for companies who have withdrawn from the automobile market and have not executed a withdrawal agreement with C.A.R. The Governing Committee requested that Staff use Peerless Insurance Company as an example.

There being no other business to come before the Governing Committee in open session, the Chairman announced that he would accept a motion to convene into Executive Session.

A motion was made by Mr. James Doherty and duly seconded by Mr. James Stone to convene into Executive Session to consider matters previously outlined by Counsel.

On a roll call vote, the following Members unanimously voted in favor of the motion:

Mr. Craig M. Bradley Mr. James D. Doherty

Mr. Richard W. Brewer Mr. Daniel J. Foley, Jr.

Mr. Donald O. Burns Mr. Sumner D. Gilman

Mr. J. Barry May Mr. David J. Lane

Mr. Arthur J. Remillard, Jr. Mr. Robert V. McGowan

Mr. Edwin J. Rinehimer Ms. Nanci Peters

Mr. James M. Stone

Immediately following the Executive Session of the Governing Committee, the open session of the Governing Committee reconvened.

There being no further business, a motion was made by Mr. James Doherty and duly seconded by Mr. Robert McGowan to adjourn.

The meeting adjourned at 1:10 P.M.

DANA I. JEWELL

Administrative Vice President

and Secretary

Attachments

Boston, March 10, 1992

Note: These Records have not been approved. They will be considered for approval at the next meeting of the Governing Committee.

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