This blog was last updated on March 22, 2024
On the second Wednesday of each month, Sovos experts host a 30-minute webinar, Water Cooler Wednesday, to share the latest updates on statutory filings. In March, Sarah Stubbs shared information about the many filings due after March 1, from Market Conduct Annual Statements to health supplements for P&C and life insurers writing A&H businesses and more.
This blog will serve as a revisiting of some reminders for the post-March 1 filings that many companies must contend with.
LTC Insurance Experience Reporting
Writers of long-term care (LTC) coverage need to file the LTC Experience Reporting Supplement. Forms 1 through 5 are due on April 1. Anyone who has started the form may have noticed a few interesting changes from last year.
Spoiler alert – The reporting periods on Form 2 have changed. And no, the dates haven’t simply rolled forward for the new year, but instead, the dates were never meant to change.
To better understand this change, we must remember that the purpose of this supplemental filing is to provide information to regulators on certain LTC benefits – specifically those that are subject to rating rules under the LTC Model Regulation.
The Regulation has specific disclosure requirements that customers must be given information on rating practices (pricing), rate increases and loss ratios. The loss ratio explains that for each dollar of premium earned, x% of it was spent on claims. This information can help consumers understand fluctuation in price.
Form 2 of this filing is designed to monitor changes in data over time based on the policy issue period. By focusing on specific issue periods and tracking data for policies within those periods, we can analyze trends or potential concerns. However, to conduct this analysis effectively, the periods must remain consistent. Unfortunately, this wasn’t the case.
The LTC Experience Reporting Supplement underwent revisions in 2020, resulting in the current version of the five forms. The issue arose with Form 2. While the 2020 reporting was accurate and introduced primary issue periods for tracking over time, errors occurred in the reporting for 2021 and 2022 due to human error. Consequently, the data was incorrect for two years, rendering it less useful for regulators. The issue has been addressed for the 2023 filing season.
Market Conduct Annual Statement
Another filing that many companies are going to be subject to is the Market Conduct Annual Statement (MCAS).
The Premium Exhibit, part of the March 1 Annual Statement filing, required insurers (excluding fraternal benefit companies) to indicate yes or no on a state-by-state basis regarding direct premiums in specific lines of business. Filing the Premium Exhibit served as “Step 1”, alerting regulators about potential follow-up MCAS filings.
“Step 2” involves submitting the MCAS to states where “yes” was indicated on the Premium Exhibit. Excluding New York and North Dakota, which don’t require the MCAS.
The MCAS is separate from regular Annual Statement software and is filed via a specific website, with deadlines staggered by jurisdiction and/or product type, typically falling in April, May and June.
Pet Insurance as new line of business
Despite pets being cherished family members, most states legally consider them as property, and have historically classified pet insurance under the Inland Marine line of business.
With a significant increase in pet insurance policies written, premiums in this area surged from 2020 to 2021. However, regulators had limited visibility into this growth due to how the economics were traditionally reported in the Annual Statement.
Starting in 2024, pet insurance will have its own reporting line in the Annual Statement, separate from Inland Marine. Pet insurance will be designated as line 9.2, while Inland Marine becomes line 9.1. This change affects various components throughout the Annual Statement, including the U&I exhibits, state pages and the IEE.
A new Schedule P Section U specifically for Pet Insurance will also be introduced. This requires breaking out all current and prior-year data from Inland Marine and separately reporting it on the new Pet Insurance line. This includes direct, ceded and assumed activity, both affiliate and non-affiliate activity, activity by state, and allocations and sub-allocations of expenses. Additionally, claim counts and prior-year data for Schedule P need to be disaggregated and reported accordingly.
Major P&C Schedule P change coming
In March 2023, it was decided that Pet Insurance would become its own reporting line, initially planned as a two-year reporting cycle akin to Auto Physical Damage or Special Property, representing a short-tail line of business. However, recent developments indicate that all lines of business (LOBs) will transition to a ten-year reporting cycle, starting with the 2024 annual statement.
While there’s no Schedule P in the quarterly filings, theoretically allowing time until the March 1, 2025 deadline, the crucial question is whether you have the necessary data readily available. Depending on how your Annual Statement software handles aggregation, disaggregation and year-to-year rollover, obtaining this data may not be straightforward. Recreating prior-year information might involve sourcing from historical reports, company records and older software files, potentially requiring a significant time investment.
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