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MCAS
How to Prepare for an Exam
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Panelists
Moderator:
Robin Clover – AGCS
Presenters:
Roshi Fekrat – GIE
Amy Groszos – Florida
Jim Pafford – Florida
Randy Helder – NAIC
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
MCAS
Those are humongous waves, dude!
April 30, 2015
-
Adding LTC
Filings from Health Companies
One new state - Tennessee
2 more weeks until the due date
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Filing Your MCAS
Riptides and Jellyfish
-
Definitions
Data Gathering Limitations
Validation Difficulties
Ambiguities
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Definitions
Ankle Busters
Cancellations – who initiated
Dwellings – premium and renters
Complaints – types to include
Claims – final payment and closed date
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Definitions
Wipeouts
- Replacements
- Median Days
- Annuities
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Data Gathering
Long Boards
-
Coverage Parts
Claimants and Transactions
Median Days
Claims – with and without payment
Cancellations – date issued
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Validations
Riptides and Jellyfish
- Focus on high ratios and results
- Small data sets
- Cross-checking opportunities
- Balancing checks
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Ambiguities
Mushy Waves
- Residence or Issuance
- Replacements
- Comments
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Attestations
Righteous, Bro
- Accuracy, Completeness
- Audit Trail, Re-create the filing
- Comments
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Allocation of Resources
1.
2.
3.
4.
MCAS filings are required for each
company at the state level
Limitation of resources within the
Company
Degree of in-depth understanding
of the filing and definitions
Management turn over
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Allocation of Resources
Continues
5.
6.
7.
Detail review of the filings including an
evidence of prepare and review process.
Relinquishing the responsibility of the
data to IT staff without providing details
on the definitions and/or annual changes
to the filing.
Lost institutional knowledge and lack of
written P&P.
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Objective of Exam
• Set by the regulators and can include but is not
limited to the following:
• Determine Timely Filing of Market Conduct Annual
Statement Reports
• Verify Accurate Filing of Market Conduct Annual
Statement Reports
• Perform Anti-Fraud Review
• Perform Consumer Complaint System Review
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Accurate Filing of MCAS
1. The Company may not understand the
MCAS data set instructions
•
•
•
•
Evolving Process
Understanding the definitions
Taking a snap shot
Provide for a prepare review process
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Accurate Filing of MCAS
2. The Company does not have a process in place to
verify the data that is presented for MCAS reporting;
and update data requirements as reporting changes.
• Changes in legal entities, company management or
• Blocks of business administered by Third Parties
• Legacy blocks of business on other systems
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Accurate Filing of MCAS
3.
The Company is unable to produce or capture detailed
information necessary to produce the MCAS Report or relies
on Third parties to provide information.
4.
The Company may prepare the MCAS based on a live
system query and is not able to capture detailed data sets or
reproduce accurate data sets for subsequent examinations
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Accurate Filing of MCAS
5.
Reported MCAS information may indicate outliers.
Life Outliers
 Replacements issued compared to the number of policies issued.
 Replacements for insureds > 65 compared to the total number of
replacements issued.
 Surrenders compared to the total number of policies issued.
 Policies surrendered < 10 years from issue date compared to total
surrenders.
 Claims paid beyond 60 days from the date of due proof of loss compared to
total claims paid.
 Claims denied, resisted or compromised compared to the number of claims
closed.
 Complaints per 1,000 policies in force.
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Accurate Filing of MCAS
5.
Reported MCAS information may indicate outliers (cont.)
•
Annuity Outliers
 Replacements issued compared to the number of policies issued.
 Replacements for insureds > 80 compared to the total number of
replacements issued.
 Deferred annuities issued to insureds > 80 compared to total deferred
annuities.
 Policies surrendered < 10 years from issue date compared to total
surrenders.
 Complaints per 1,000 policies in force
.
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Accurate Filing of MCAS
5. Reported MCAS information may indicate
outliers (cont.)
•
Homeowners & PPA Outliers
 Claims closed without payment to total claims closed
 Percent of claims open at end of period
 Percent of claims paid beyond 60 days
 Percent of claims paid beyond 90 days
 Cancellations over 60 days to total policies inforce
 Cancellations under 60 days to policies issued
 Number of Suits opened during the period to Number
of claims closed without payment
.
.
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Anti-Fraud Plan Review
High level review is done with the MCAS
exam.
• Is the Anti-Fraud Plan accurate?
• Are there material changes made in
personnel or functions previously reported
that have not been updated?
• Can the Company document training of its
SIU staff?
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Consumer Complaint Review
High level review should be done with the
MCAS exam.
• Reconcile DOI list of consumer complaints to
Company list of complaints received from DOI?
• Does the Company maintain a log of complaints
received from all sources by calendar year and
does this log include origination and resolution?
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Exam Process
Initial Record Request
1.
2.
3.
4.
5.
Policy level detail data sets supporting the MCAS
filing.
Company’s MCAS process narratives.
Annual filings for Annual Statements, Management
Discussion and Analysis and Independent Audit
reports.
Other examination reports.
Company’s Financial Examination Planning Exhibit
C - ITPQ Systems Summary Grid.
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Sample Selection & Request
• Determine MCAS line items to be tested
• Determine Sample size
• Determine attributes of MCAS line items
that are selected for testing
• Request supporting data needed to verify
the attributes being tested for the sample
items selected
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Sample Review
• Determine Attributes to be tested
Will vary based upon MCAS line item
being tested
Refer to NAIC MCAS instructions for the
year being tested
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Sample Review
• Example- Life Replacement Attributes
 State of Residence at Issuance
Cash Value or Non Cash Value Policy
Individual Policy
Internal or External Replacement
Age of Insured at Issuance
Age of Replaced Policy
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Sample Data Request
• Will vary based upon MCAS line item
tested
• Discuss with Company prior to request
• Example- Life Replacement Attributes
 Underwriting file – Application, Info on
replaced policy
Replacement Policy Issued including Dec
Page
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Sample Data Testing
• Excel worksheet
• Attribute Columns for items being retested
• Outcome Column to summarize examiner
observations
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Common Areas of MCAS
Reporting Errors
All Companies
Data set presented does not provide
sufficient information to determine that the
Company’s reporting is correct
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Common Areas of MCAS
Reporting Errors
Life and Annuity MCAS
• Internal vs. external replacements – information is
not captured.
• Issue state vs. resident state. When did the policy
owner move?
• Location of Risk: The policy owner is a Trust sitused
elsewhere or the insured lives elsewhere. Is the
Company consistent in how they report this type of
policy/contract?
• Did the insured list his address as an express mail
service and is actually a foreign national?
• Was the policy applied for in the state being
examined? If not, is the application and policy form
approved for use in the state being examined?
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Common Areas of MCAS
Reporting Errors
Life and Annuity MCAS
• Are legacy blocks of business, managed by a TPA or
reinsurer accounted for in the MCAS reporting?
• Are surrenders and pending death claims properly
accounted for in the related schedules for issued policies,
written premium, and inforce business?
• Does the Company understand the MCAS aging buckets
and is their aging consistent with the method used in their
policy/contract?
• Are policies cancelled during the free look period included in
the policies issued count?
• Are there a substantial number of death claims that the
Company has not properly investigated and settled?
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Common Areas of MCAS
Reporting Errors
Property Casualty MCAS
• Are cancellation reasons captured and properly
reported?
• Does the Company include duplicate policies issued in
error and cancelled effective to the inception?
• Does the Company include applications uploaded in error
by agents as policies issued in error?
• Does the Company calculate the aging on company
initiated cancellations back to the original effective date
without regard to policy renewals?
• Does MCAS reporting roll forward between periods?
• Are there claims reported opened on 1/1 of the
subsequent period that are not included as opened as
12/31 of the current period?
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Common Areas of MCAS
Reporting Errors
Property Casualty MCAS
• Can the current year MCAS report been reconciled: Open
at beginning + open during the period less claims closed
equals open at the end of the period?
• For claims reopened and closed in the current MCAS
reporting period, did the Company calculate a separate
aging based on the re-opened to close date?
• For suits, are suit lines of business captured and
consistently reported?
• For claims with multiple features identified in separate
MCAS reporting?
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Next Steps for Regulators
At the conclusion of the MCAS Exam
• Evaluate Company based upon results of
MCAS Exam
• Consider target or comprehensive exam
• Regulatory actions/fines
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA
Questions
IRES Foundation 2015 National School on Market Regulation
Surfin’ the waves of Regulation | April 12-14, 2015 | Hilton La Jolla | San Diego, CA