Whole IF Presentation2014

Insurance Regulatory Issues in a Shared Economy

Managing Conflicts of Interest in Corporate Governance

Election 2014 and What It Means for Insurance

ORSA/Form F and ERM

Insurance Strategy and Analytics

Long Term Care Industry Issues

JVP PARTNERS, INC

Program Sponsors

Supporting Sponsors

Thursday, December 4, 2014

8:00 a.m. – 5:30 p.m.

2014

2014 INSURANCE FORUM DECEMBER 4, 2014

Table of Contents

Tab

Insurance Forum Agenda 1

Insurance Regulatory Issues in a Shared Economy 2

Managing Conflicts of Interest in Insurance Company Corporate Governance 3

Changing of the Guard - Election 2014 and What It Means for Insurance 4

ORSA/Form F and ERM 5

Insurance Strategy and Analytics 6

Long Term Care Industry Issues and NAIC Initiatives 7

Speaker Biographies 8

Sponsor Information 9

Registered Attendees 10

Welcome to the Sidley Austin LLP Conference Center. WiFi Wireless network: SidleyGuest Password: sidleygw1473837


AGENDA

© 2014 Insurance Forum 1

Speakers Include: (8:00 – 8:15) Market Update and New Regulations You Must Know Kenneth Weine – President, JVP Partners, Inc (8:15 – 9:30) Insurance Regulatory Issues in a Shared Economy Michael P. Goldman (Moderator) – Partner, Co-Chair - Insurance and Financial Services Group, Sidley Austin LLP Andrew Holland – Partner, Sidley Austin LLP Martin Jackson – Partner, Sidley Austin LLP Robert Passmore – Senior Director - Personal Lines, Property Casualty Insurers Association of America (PCI) Kate Sampson – Vice President, Insurance Solutions, Lyft (9:30 – 10:45) Managing Conflicts of Interest in Insurance Company Corporate Governance Lawrence Smith (Moderator) – Partner, SmithAmundsen Eric Fogel – Partner, SmithAmundsen Michael D. Miller – President and Chief Operating Officer, Scottsdale Insurance Company (10:45 – 11:00) Break (11:00 – 11:30) Changing of the Guard - Election 2014 and What It Means for Insurance Dan Cotter – General Counsel, Fidelity Life Association (11:30 – 12:00) New Regulatory Issues Ted Nickel – Commissioner, Wisconsin Office of the Commissioner of Insurance and Secretary-Treasurer, National Association of Insurance Commissioners (NAIC) (12:00 – 1:00) Lunch (1:00 – 1:30) Regulation and Coordination of Efforts Sharon P. Clark – Commissioner, Kentucky Department of Insurance and Vice President, National Association of Insurance Commissioners (NAIC)


AGENDA

© 2014 Insurance Forum 2

(1:30 – 2:45) ORSA/Form F and ERM Al Bottalico, CFE, CPA – Deputy Commissioner, Financial Surveillance Branch, California Department of Insurance Amy Pinkerman Condo – Assistant General Counsel, Health Care Service Corporation Timothy V. Kemp – Partner, Locke Lord LLP (2:45 – 3:00) Break (3:00 – 4:15) Insurance Strategy and Analytics Jeff Zych – Senior Managing Consultant, IBM Global Business Services – Insurance Practice (4:15 – 5:30) Long Term Care Industry Issues and NAIC Initiatives Thomas E. Hampton – Senior Advisor, Dentons US LLP Al Schmitz – Principal and Consulting Actuary, Milliman Brian Wegner – President and Chief Executive Officer, Senior Health Insurance Company of Pennsylvania (SHIP) and Fuzion Analytics

1

Insurance ForumDecember 4 2014

Transportation Network Companies: Insurance Issues

1

December 4, 2014Chicago, Illinois

Insurance Challenges

Wh t d ll thi ?• What do we call this?• Not “sharing”, not car pooling

• Nature of Risk• Different policies for different types of risks

• Policy Language• “Livery” and Business Use

• Duty to Defend • Broader than duty to indemnify

• Subsidization 2

2

TNC Essential Elements

• Support Innovation• Support Innovation• Transportation

• Insurance: Commercial, personal and surplus lines

• Insurance Product Certainty• Policy language• Policy language

• Rating and underwriting for risk

• Fill coverage gaps

• Primary not contingent

• Mirror drivers coverage 3

TNC Essential Elements

N ti d Di l• Notices and Disclosures• Drivers on coverage issues

• Drivers personal insurer on participation

• Notice of potential dispute• TNC duty to defend until resolved

• Access to records and data

4

3

2014 TNC Activity

5

Illinois HB 4075 & 5331:

2014 State Legislative Activity

California AB 2293: Signed by Governor

Vetoed by Governor

C l d SB 125

Arizona HB 2262: Vetoed by Governor 6

Colorado SB 125: Signed by Governor

4

Other 2014 Activity

I R l t• Insurance Regulators

• Public Utility Commissions• CA Regulations (2013)

• PA, NM (2014)

• Cease and desist orders

• Cities• Seattle, Chicago, Columbus, Milwaukee

• RICO, other lawsuits

7

2015 and beyond

D f t t t d t b• Dozens of states expected to be battlegrounds• Arizona and Illinois again?

• Everywhere???

• Market responding• Surplus Lines

• Lyft/MetLife partnership

8

5

Sharing Economy What Else Is Out There?

• Places to Stay or WorkPlaces to Stay or Work• Air Bnb, Share Desk

• Money• Kickstarter, Lending Club, Bitcoin

• Goods• Etsy Bag Borrow and Steal Craigslist• Etsy, Bag, Borrow and Steal, Craigslist

• Food• Feastly, Kitchen Surfing

• Services• Freelancer.com, Task Rabbit 9

Questions?

Transportation Network Company (Ride Sharing) Issue Status

11-24-14 Update

Hot Spots: Illinois Lawmakers let veto stand, seek new compromise legislation for 2015

Michigan HB 5951 Bill introduced to regulate Transportation Network Companies North Carolina Study Committee holds hearings to discuss TNC regulations Tennessee cities Memphis and Nashville move closer to adopting TNC regulations

Alabama Regulatory Body: Birmingham City Council and Tuscaloosa City Council Status: Ordinance and Cease and Desist The battle between Tuscaloosa city government and Uber continues to intensify with the police cracking down on TNC activities and Uber waging a grassroots campaign targeting the Mayor’s office. Earlier this year the Birmingham City Council approved changes to its transportation code to address mobile apps. However, Uber has opposed the existing regulations and expressed displeasure with the new changes. In addition to concerns about being classified as a taxi service and regulations on fees charged, Uber opposes the requirement of full-time, commercial insurance coverage.


11-24-14 Update

2

Alaska Regulatory Body: Insurance Division Status: Consumer Alert The Alaska Division of Insurance (DOI) issued a consumer alert warning about the risks of rideshare and vehicle-sharing programs and urges Alaskans to be informed of the risks before participating in these type of programs. The Division noted that these programs may result in a denial of insurance for participating vehicle owners, drivers, and passengers. Personal auto insurance is not intended to cover individuals who use their vehicles for commercial purposes. Most personal auto policies will not cover an accident that occurs when someone uses their personal vehicles for commercial purpose. Regulatory Body: Municipality of Anchorage Status: Considering Regulations The Anchorage Assembly approved ordinance, AO-127(S), November 18 that temporarily exempts Uber from the city’s Anchorage municipal taxi codes. However, city officials will be working with Uber to develop a pilot program that will address issues such as insurance, background checks for drivers, and vehicle inspections. The Assembly will have to approve the memorandum of understanding that is negotiated before Uber will be allowed to operate in Anchorage as a paid service. Earlier this year Anchorage banned Uber from doing business in the city. However, the courts allowed Uber to offer free promotional rides while regulations were under consideration.

Arizona Bill Number: HB 2262 Status: Vetoed Comments/Actions: PCI opposed HB 2262, which specifically limited an insurer's ability to exclude commercial activity in its contract by stating an exclusion for “commercial, fee or livery activities” is only applicable during a transportation network “trip” but not while the driver is looking for passengers. Governor Brewer vetoed HB 2262 on April 25, 2014 stating that, “Customer safety must not be sacrificed for the sake of innovation.” It is anticipated that this issue will be debated by the 2015 Legislature.

http://commerce.alaska.gov/pub/PR-14-017-DivisionOfInsuranceIssuesWarning.pdf

http://publicdocs.muni.org/sirepub/cache/0/auipcl55nfkama45poj55fi1/57245311182014054411296.PDF


11-24-14 Update

3

California Bill Number: AB 2293 Status: Signed by Governor California Gov. Jerry Brown signed AB 2293. This well-balanced bill provides protection for the public by establishing reasonable insurance limits and creates a firewall protecting personal auto insurance from subsidizing commercial activities. The primary insurance coverage requirement in the timeframe formerly known as, “App On to Match,” is $50,000/$100,000/$30,000 with excess coverage of $200,000. It also provides the California Public Utilities Commission oversight of TNCs. Insurers and TNC firms were on record supporting the bill. Other states examining how to balance insurance and TNCs can look to AB 2293 as a great starting place. Regulatory Body: Public Utilities Commission Status: Regulatory: Hearing Scheduled for Nov. 4 The California Public Utilities Commission held public testimony and discussed their modified decision to Regulation 13- 09- 045 regulating Transportation Network Companies’ (TNCs) insurance requirements. The PUC did not take a vote on their modified decision and will consider the issue in their August meeting. The PUC is expected to hold a hearing Nov. 4 to consider issues associated with AB 2293.

Colorado Bill Number: SB 125 Status: Signed by the Governor SB 125 addresses one of PCI’s critical priorities; it sets up the framework for TNCs to provide primary insurance coverage for all commercial activity including when the driver logs onto their app and is available for hire through the time period when they have a passenger in the vehicle and until the driver logs off the app and is no longer available to accept rides. The bill also requires an interim study by the Division of Insurance to examine whether or not the coverage limits currently prescribed in SB 125 are appropriate.

Connecticut Bill Number: SB 235 Status: Signed by Governor This legislation among other things, requires the state departments of Transportation and Motor Vehicles to conduct a study of the regulation of for-hire transportation services by Feb. 1, 2015. The study shall (1) review how emerging technologies, such as smartphone applications, currently fit into the regulatory scheme, and (2) offer recommendations as to how and if such technologies and the businesses offering them should be regulated to ensure the safety of the riding public. Such recommendations shall include, but need not be limited to, mandatory insurance coverage, licensing and background checks on drivers and vehicle safety and maintenance.

http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M098/K126/98126852.PDF


11-24-14 Update

4

Regulatory Body: Insurance Department Status: Consumer Alert The Connecticut Insurance Department issued a consumer advisory May 6, 2014 advising drivers who work for transportation network companies (TNC) that they may not be covered by their personal automobile insurance policies while driving for hire.

District of Columbia Bill Number: B20-753 Status: Ordinance Passed The D.C. City Council approved regulations for TNCs that are in synch with many of the PCI essential elements and requires them to provide primary coverage during the prearranged ride and during the app on/off period outside of the prearranged ride; essential disclosures; carve out for PPA policies; and allows flexibility of coverage such as a PPA endorsement and surplus lines. Regulatory Body: Insurance Department Status: Consumer Alert As private auto for hire companies, such as uberX, Lyft and Sidecar, become more popular in the District of Columbia, the D.C. Department of Insurance, Securities and Banking issued this consumer guide to make drivers aware of the insurance implications of using their personal cars to offer these services.

Regulatory Body: Taxi Cab Commission Status: Regulatory Comment Period The DC Taxi Cab Commission has issued proposed rules to regulate Transportation Network Companies so that their commercial insurance coverage would be the primary coverage.

Florida Bill Number: HB 1389/SB 1618 Status: Failed Uber pushed for legislation that would remove the minimum charge requirement for Uber Black and meet minimum commercial insurance responsibility requirements. Major cities across Florida continue to explore TNC regulations. City officials in St. Petersburg recently formed a task force and plan to draft new rules that would allow TNCs to operate within the city. Meanwhile Jacksonville officials are issuing citations and may impose tougher penalties to force TNCs to follow city laws.

Georgia Bill Number: HB 907 Status: Failed HB 907 originally sought to prohibit TNCs such as Uber, Lyft, and Sidecar, from operating in Georgia. However it was amended to regulate such companies in a way that takes into account their current business practices. PCI sought to address insurance gaps in the legislation. Ultimately the bill died but it is expected to be reintroduced next year.

http://www.ct.gov/cid/cwp/view.asp?Q=544450&A=3299

http://disb.dc.gov/node/829512

http://disb.dc.gov/node/829512


11-24-14 Update

5

Hawaii Regulatory Body: Department of Transportation Status: Consumer Alert The Hawaii Department of Transportation sent letters to TNCs stating that their drivers were not allowed to provide rides to and from Honolulu International Airport without obtaining permits and paying applicable fees.

Illinois Bill Number: HB 4075 and HB 5331 Status: Vetoed by the Governor Illinois lawmakers announced November 18, that they would not seek to override Gov. Quinn’s veto but work to develop compromise legislation that could be introduced in January. Insurance issues remain among the key topics for discussion and efforts to provide a uniform statewide approach to regulating TNCs and closing their gaps in insurance coverage will continue. The TNC legislation (HB 4075 and HB 5331) became highly politicized during the governor race and was vetoed.

Regulatory Body: Chicago City Council Substitute Ordinance 2014-1367. Status: Approved by City Council With the vetoes of Illinois HB 4075 and HB 5331, Chicago’s ordinance will go into effect. It requires TNCs to provide 1 million of “primary noncontributory coverage The TNC has $1 million in liability coverage for itself, and $1 million for the drivers from acceptance to the end of the ride, then drops down to provide the minimum while logged in but not involved in a ride. By having two levels of coverage and stating that the TNC coverage “applies regardless of other insurance” could promote legal disputes and expenses that could be borne by all drivers.

Iowa Regulatory Body: Iowa Insurance Division Status: Consumer Alert The Iowa Insurance Division issued a consumer alert July 29 cautioning drivers who enter into services that connect drivers, riders, and vehicle owners for car-sharing and ride-sharing that they may not be covered if their vehicle is damaged or someone is hurt.

Kansas Regulatory Body: Kansas Insurance Department Status: Consumer Alert The Kansas insurance commissioner issued a consumer alert urging consumers to check with their insurance companies before riding with or becoming a driver for ride-sharing services

Kentucky Legislative Activity: The Kentucky Interim Joint Committee on Transportation discussed TNC issues September 2. At the hearing the Department of Vehicle Regulation indicated it plans to issue emergency regulations in October that would regulate the companies the same as taxi companies.

http://www.iid.state.ia.us/node/8898736

http://www.ksinsurance.org/gpa/alerts/2014/consumer_alert_ridesharing.pdf


11-24-14 Update

6

Regulatory Body: Department of Transportation, Department of Insurance, Attorney General Status: Consumer Alert The Department of Insurance issued a consumer alert June 25 answering common questions associated with TNCs. With TNC firms operating in Louisville and Lexington, the issue is being reviewed by a multiple state agencies with the Department of Transportation taking the lead. PCI has briefed the Department of Insurance commissioner and the multi-agency meetings will continue with an eye toward legislation for the 2015 “short” (30 day) session.

Louisiana Regulatory Body: Department of Insurance Status: Consumer Alert Insurance Commissioner Jim Donelon issued a consumer alert July 24 advising consumers to be aware of potential gaps in insurance coverage for TNCs. Regulatory Body: Cities of Baton Rouge and New Orleans Status: Proposed Ordinance The Baton Rouge Metropolitan Council voted to allow TNCs to operate without having to abide by rules of the Taxicab Control Board on June 25. The New Orleans City Council approved rule changes to address Uber’s limousine service.

Maryland Bill Number: HB 1160 and SB 919 Status: Failed PCI opposed HB 1160 and SB 919 which would have exempted TNCs from regulation and oversight that taxicab companies and drivers must adhere to in Maryland. Regulatory Body: Maryland Insurance Administration Status: Consumer Alert Maryland Insurance Commissioner Therese M. Goldsmith issued a consumer advisory encouraging anyone who drives for a transportation network company to contact his or her insurance agent, broker or company to identify potential gaps in coverage. Regulatory Body: Maryland Public Service Commission Status: Examining Regulations The Maryland Public Service Commission ruled that Uber Technologies Inc. is a common carrier and, as a result, is subject to the same regulations as all other passenger-for-hire services. The ruling does not directly impact UberX.

Massachusetts Regulatory Body: Department of insurance Status: Issue Under Review TNCs are operating in Boston and Cambridge and drawing some concerns. The Insurance Commissioner is reviewing the issue

http://insurance.ky.gov/Documents/CARidesharing062514.pdf

http://www.ldi.louisiana.gov/public_affairs/Press_Releases/2014_Press_Releases/7-24-14_Commissioner_Donelon_Urges_Potential_Rideshare_Drivers_To_Review_Auto_Insurance.pdf

http://www.mdinsurance.state.md.us/sa/news-center/ride-sharing-services.html


11-24-14 Update

7

Michigan Bill Number: HB 5951 Status: House Energy & Technology Committee The House Energy & Technology Committee is considering HB 5951 which would create new regulations for TNC ridesharing activities. Regulatory Body: Michigan Department of Insurance and Financial Services Status: Consumer Alert Michigan Department of Insurance and Financial Services (DIFS) issued a consumer alert reminding drivers to double-check their auto insurance policies before signing up as a TNC driver. Regulatory Body: Ann Arbor Status: Cease and Desist Order The city of Ann Arbor issued cease and desist letters to Uber-X and Lyft and after rejecting a proposed city ordinance, an alternative solution is now being considered.

Minnesota Regulatory Body: Minnesota Department of Commerce Status: Consumer Alert The Commerce Department issued consumers tips informing Minnesotans that there may be gaps in auto insurance coverage for both the drivers and passengers using TNCs. Regulatory Body: City of Minneapolis Status: City ordinance The Minneapolis City Council approved an ordinance July 18 that allows TNCs to operate and establishes regulation addressing licensing and inspections. The essential insurance requirement is app on/off, but it does not provide proactive notice or include duty to defend. Regulatory Body: City of St. Paul Status: City ordinance The St. Paul City Council is considering an ordinance based on the one adopted in Minneapolis.

Missouri Regulatory Body: Cities of Kansas City, St. Louis and Columbia Status: City Ordinances and Cease and Desist Letters Columbia city officials have drafted new regulations for TNC ride-sharing services that are expected to be considered by the City Council in December. Earlier in Kansas City, Lyft agreed to temporarily stop operations. Several months ago Kansas City placed a temporary restraining order on Lyft and ticketed drivers. Earlier this year the St. Louis Taxi Commission also issued cease and desist letters.

http://www.michigan.gov/difs/0,5269,7-303-13222_13250-327601--,00.html

http://mn.gov/commerce/media/newsdetail.jsp?id=206-128467


11-24-14 Update

8

Nebraska Legislative Activity: The Transportation and Telecommunications Committee heard testimony from the Nebraska Public Service Commission, the Omaha City Council and Uber, Lyft, taxicab and the insurance industry at its interim study hearing Sept. 11 on alternative transportation options. PCI testified on its key concerns regarding the insurance issues involved in commercial ridesharing. Lawmakers are expected to consider the issue in the next legislative session that begins in January Regulatory Body: Nebraska Departments of Motor Vehicles and Insurance Status: Consumer Alert The Nebraska Departments of Motor Vehicles and Insurance issued a consumer advisory notice to consumers warning on insurance issues. Regulatory Body: Nebraska Public Service Commission Status: Cease and Desist Letter Nebraska Public Service Commission issued cease and desist letters for Lyft and Uber.

Nevada Regulatory Body: Nevada District Court Status: Hearing Nov. 14 A Nevada District Court Judge denied the state attorney general’s suit to temporarily stop Uber from operating. However, the AG’s bid for a preliminary injunction will be heard by the judge on Nov. 14. Regulatory Body: Department of Insurance Status: Consumer Alert The Nevada Division of Insurance has issued a warning to the public that TNCs might put them at financial risk of being underinsured if they are involved in an accident and are injured.

North Carolina Regulatory Body: City of Charlotte Status: Ordinance under Review The Charlotte City Council Community Safety Committee is exploring if and how to regulate TNCs. Bill Number: HB 272 Status: Signed by Governor The Revenue Laws Study Committee held a hearing in November to study the registration requirements, fees, and penalties applicable to for-hire passenger vehicles, including for-hire passenger vehicles directed by digital dispatching services. As a result of HB 272, the Committee was charged with conducting the study and shall report its findings, together with any recommended legislation, to the 2015 Regular Session of the 2015 General Assembly upon its convening.

http://www.dmv.ne.gov/dvr/countyinfo/Ride%20Sharing%20Alert_04-28-2014.pdf

http://doi.nv.gov/News_Notices/Press_Releases/Nevada_Division_of_Insurance_Informs_Consumers_about_Insurance_Issues_Surrounding_Ride-Sharing_Technology_Companies/


11-24-14 Update

9

New Jersey Bill Number: AB 3401, SB 2274, SB 2307 and AB 3362 Status: In Assembly and Senate So far four bills have been introduced that would attempt to license and regulate TNC companies. PCI has shared our model legislation with committee staff and key legislators Regulatory Body: Department of Banking and Insurance Status: Consumer Alert New Jersey Department of Banking and Insurance Commissioner Ken Kobylowski alerted consumers to the potential loss of insurance coverage in connection with popular business activities known as car-sharing or Transportation Network Companies (TNC)

New Mexico Regulatory Body: Public Regulation Commission Status: Issued Cease and Desist Letter The Public Regulation Commission (PRC) has instituted the rulemaking process that is expected to continue for several months. The open comment period ends Aug. 29. There will be a hearing on October 1. Regulatory Body: Office of Superintendent of Insurance Status: Consumer Alert Superintendent John G. Franchini issued a consumer alert urging New Mexico residents to use caution before participating in a car ride share programs stating that the services may pose hidden risks if the rider, driver or vehicle does not have specific insurance coverage that covers these activities.

New York Regulatory Body: Department of Financial Services Status: Judge allows Lyft to begin operations in NYC A New York judge is requiring Lyft to meet certain conditions, including providing information regarding its insurance coverage to state officials in order to be allowed to maintain operations upstate in Rochester and Buffalo and begin operations in New York City. If all of the conditions are not met, the judge can issue a temporary restraining order against the company. Regulatory Body: Buffalo Common Council Status: Holding Hearings PCI has prepared written comments for the council regarding our support for responsible innovation that addresses the potential gaps in insurance coverage.

Ohio Regulatory Body: Department of Insurance Status: Consumer Alert The Lieutenant Governor and Ohio Insurance Director issued a consumer alert highlighting potential insurance implications of ride sharing.

http://www.state.nj.us/dobi/pressreleases/pr140527.html

http://www.osi.state.nm.us/docs/Consumer%20Alert-Ride%20Sharing.pdf

http://www.insurance.ohio.gov/Newsroom/Pages/04162014TransportationNetworkingCompanies.aspx


11-24-14 Update

10

Regulatory Body: Cities of Columbus and Cincinnati Status: Ordinances Approved The Cincinnati City Council approved regulations for TNCs that require them to carry $100,000 in liability insurance. In July, Columbus adopted regulations that require TNCs to carry $1 million liability coverage and $1 million for uninsured and underinsured motorist coverage, and match whatever comprehensive and collision coverage a driver carries on a personal policy.

Oklahoma Bill Number: SB 1703 Status: Failed PCI opposed this bill which failed to close important insurance coverage gaps and would have exempted ride-sharing drivers from commercial operator requirements. Regulatory Body: City of Oklahoma City and Tulsa Status: Ordinances Approved The Oklahoma City council approved a new ordinance that will regulate TNCs in much the same manner as taxis and it will require TNCs provide primary coverage during all periods. Earlier this year Tulsa approved an ordinance that sets regulations on TNCs.

Oregon Regulatory Body: Department of Insurance Status: Consumer Alert The Department of Consumer and Business Services, Insurance Division issued a news release Sept. 20 advises Oregonians to consider their insurance needs when engaging in new apps and websites that facilitate car rides, vacation rentals, and other services – known as the “sharing economy.”

Pennsylvania Regulatory Body: Public Utility Commission Status: Commission Hearings The Public Utility Commission extension of temporary operating licenses for Uber and Lyft comes on the heels of PUC administrative law judges recommending that the TNCs not be granted a permanent licenses. While granting temporary licenses the PUC is still requiring TNC drivers to notify their insurance companies in writing of their activity. Legislative Activity: Legislation introduced this session did not advance. However, this issue is expected to be considered in 2015. Regulatory Body: Department of Insurance Status: Consumer Alert Insurance Commissioner Mike Consedine issued a consumer alert noting that participating drivers and riders face insurance risk with new ride- sharing services. He said, “Learning too late of gaps in insurance coverage can have serious financial consequences for participants in these programs.”

http://www.oregon.gov/DCBS/insurance/news/Pages/2014/sept192014.aspx

http://www.portal.state.pa.us/portal/server.pt?open=512&objID=17319&PageID=502655&mode=2&contentid=http://pubcontent.state.pa.us/publishedcontent/publish/cop_hhs/insurance/news_and_media/news___media/articles/june_2__2014.html


11-24-14 Update

11

Rhode Island Bill Number: HB 8298 Status: Passed Legislature Joint resolution to create an eleven (11) member special legislative commission, which includes PCI, to make a comprehensive study of the Public Motor Vehicle Act and the impact of innovative technologies on the market for transportation services. It would report back to the general assembly no later than March 31, 2015.

South Carolina Regulatory Body: Office of Regulatory Staff Status: Consumer Alert and Request of the Public Service Commission to Review Uber’s hearing with the South Carolina Public Service Commission scheduled for this week was canceled after it applied for a certificate to operate as a motor passenger service in the state. The Office of Regulatory Staff had filed a petition to review the legality of TNCs operations in South Carolina with the Public Service Commission to determine if they should be regulated as motor vehicle carriers. In June the Office of Regulatory Staff (ORS) issued a consumer alert advises of potential safety and insurance issues that could affect both customers and drivers participating in ridesharing services. The ORS recommends consumers and drivers carefully select transportation services that operate in compliance with South Carolina laws and thus have the proper safeguards in place such as commercial insurance, driver background checks, and vehicle safety inspections.

Tennessee Regulatory Body: Department of Insurance Status: Consumer Alert and Bulletin Commerce and Insurance Commissioner Julie Mix McPeak issued a consumer alert warning Tennesseans of potential auto insurance gaps for individuals working as drivers for Transportation Network Companies (TNC), such as Lyft, UberX, and Sidecar. The Commissioner also issued Memorandum 2-24-14 warning about gaps in insurance coverage provided by TNC's and that personal policys likely provided no coverage and urged potential drivers to have discussion with their agent. Regulatory Body: City of Memphis and Nashville Status: Proposed Regulations The Memphis City Council is close to passing regulations for TNC activities and revising its taxi ordinance. The TNC ordinance would require primary insurance coverage of at least $1 million and uninsured/underinsured motorist coverage of at least $1 million when transporting passengers. The council could approve the matter at its January 6, 2015 meeting. The Nashville-Metro Council is advancing regulations that require TNCs to have their drivers licensed by the Metro government, meet insurance requirements and submit their vehicles to a yearly inspection. The Council is expected to consider the proposal again Dec. 2.

http://www.regulatorystaff.sc.gov/Documents/News%20Archives/6-24-14%20Transportation%20Consumer%20Advisory%20-%20final.pdf

https://news.tn.gov/node/12367

http://www.tn.gov/insurance/documents/memo022414.pdf


11-24-14 Update

12

Texas Regulatory Body: Austin, Dallas, Houston and San Antonio City Councils Status: Austin City Council Considers Ordinance The Austin City Council TNC approved an interim TNC ordinance Oct. 16 until final rules are drafted. The ordinance requires TNC coverage to be primary from app on to app off. In other Texas cities, Houston’s city council approved regulations for TNCs. Discussions are ongoing in Dallas, and San Antonio. Each of the cities have issued a cease-and-desist orders for drivers of ride sharing programs.

Utah Regulatory Body: Department of Insurance Status: Consumer Alert Utah Insurance Commissioner Todd E. Kiser issued a consumer alert to ride share drivers and their passengers. Kiser encourages anyone who drives for a transportation network company to contact your insurance agent or broker, or insurance company to discuss insurance needs when driving for a TNC and identify any potential gaps in coverage. A follow up new release was issued for drivers highlighting the insurance implications of driving for TNCs Regulatory Body: Salt Lake City Status: Issuing Fines and working on Regulations Salt Lake City is issuing fines and warnings to TNC drivers for operating unlicensed taxi services. Additionally, Salt Lake City is exploring regulations that would permit TNC to operate legally.

Vermont Regulatory Body: Burlington City Council Status: Considering Regulations The Burlington Mayor and City Attorney have informed Uber that they are operating illegally and city may take enforcement action, but officials are open to working on regulations that will allow TNCs to operate legally.

Virginia Bill Number: HB 908 and SB 531 Status: Carry Over PCI opposed HB 908 and SB 531. These bills relaxed regulations that would apply to TNCs but failed to address insurance gaps. The bills were carried over until 2015. Regulatory Body: Department of Motor Vehicles Status: Cease and Desist Orders and DMV Fines After months of issuing fines, the Department of Motor Vehicles granted Uber and Lyft Temporary Operating Authority for six months. The insurance provisions in the operating guidelines require TNCs to provide $1 million in primary coverage from "app match" to passenger drop off and 100/300 UM/UIM coverage and 50/100/25 contingent liability coverage for the period that the driver is logged in to the app but hasn't accepted a ride. This contingent coverage leaves the door open for coverage disputes between insurers and TNCs.

https://insurance.utah.gov/news/documents/PR-RideShare5-20-2014.pdf

https://insurance.utah.gov/news/documents/PR-RideShare5-20-2014.pdf


11-24-14 Update

13

Washington Bill Number: HB 2782 Status: Failed House Bill 2782 would have directed the Joint Transportation Committee to study TNCs provide a report to the Legislature examining issues such as insurance coverage requirements, safety regulations, and the unique barriers faced by taxicab companies. Regulatory Body: Seattle City Council Status: New Agreement The Seattle City Council passed new rules regulating rideshare companies July 13. Previously, the council repealed an ordinance it passed in March. The new rules address the number taxi licenses insurance other licensing requirements.

Wisconsin Legislative Activity: PCI and industry partners have briefed state legislators interested in the issue and will work with key stakeholders with the goal of advancing legislation in the 2015 session. Regulatory Body: Milwaukee Status: Ordinances Approved The Milwaukee Common Council approved an ordinance July 22 to completely lift the cap on the number of taxi cabs that are allowed to operate, allows TNCs to operate and be licensed, and establishes basic health and safety requirements such as inspections and minimum insurance coverage. Regulatory Body: Madison Status: Proposed Ordinances The Madison Common Council is expected to address ordinances regulating TNC activities proposed by Mayor Paul Soglin and Alder Scott Resnick later this fall.

1

December 4, 2014

Managing Conflicts of Interest in Insurance Company Corporate Governance

Lawrence R. Smith (Moderator) – Partner, SmithAmundsen, LLC

Eric M. Fogel – Partner, SmithAmundsen, LLC

Company Corporate Governance

Michael D. Miller – President and Chief Operating Officer, Scottsdale Insurance Company

2

Managing Conflicts:

1. Minority Investments in other Insurance Companies2. Investments in Insurance Companies with Publicly Traded

Shares3. Merger and Acquisition Transactions4. Lift Out Transactions5. Compensation6. Corporate Governance of Property and Casualty Mutuals

Minority Investments in Other Insurance Companies

1. Should you sit on the Board of Directors?

2. Fiduciary Duties

3. Valuationsa) Independent Committeesb) Independent Third Party Appraisers

3

Publicly Traded Affiliates1 Fid i D ti1. Fiduciary Duties

2. Timing

3. “Pros” of Public Company Subsidiaries or Affiliates

4. “Cons” of Public Company Subsidiaries or Affiliates

5. Independent Committees

Insurance M&A Activity

4

Insurance M&A Activity

Merger & Acquisition Activity

1. Explicit Agendas and Hidden Agendas

2. Establishment and Role of the Special Committee

5

Lift Out Transactions

1. Non-Competition/ Non-Solicitation Provisions

2. Confidentiality/ Trade Secret Provisions

3. Financing Lift Outs

Compensation

1. Individual Goals/ Entity Wide Goals

2. Short-Term Objectives/ Long-Term Objectives

3 Incentives vs Risk Management3. Incentives vs. Risk Management

6

Corporate Governance of Property & Casualty Mutuals

1. Self-Perpetuating Corporate Governance

2. Policyholder Meetings and Disclosure

3. Policyholder Activism

1

December 4, 2014

Effect of The Election on the Insurance Industry

Daniel Cotter – Vice President, General Counsel & Secretary, Fidelity Life Association

2

Presentation Outline/OverviewDid thi h N b 4th?- Did something happen on November 4th?

- Few elections at state and federal level- What does it mean for the insurance

industry in the years to come?

Federal Impact? Senate changed to R

- 54-44-2 House added +11 R

- 244-188-3 undecided

3

Federal Effect Affordable Care Act? TRIA? FIO?

State – Action at this level Twenty governors who

appoint were reelected, so no change likely: AL, CO, CT, FL, ID, IA,

ME MA MI NV NH

PA- incumbent lost- Impact on Commissioner

KS – Commissioner Praeger did not run againME, MA, MI, NV, NH,

NY, OH, OR, SC, SD, TN, VT, WI and WY.

again.- State picked the

Republican, Seizer- Praeger had supported

the Democrat

4

State Impact States with Changes in

Party in Govs’ offices:- AK, AZ, AR, HI, IL, MD,

MA, NE, PA, RI, TXThese states appoint their

Areas impacted:- Medicaid Expansion?- NAIC leadership?- International matters

i t d?- These states appoint their director/commissioner

- Changes likely?

impacted?

Summary

5

Conclusion

Questions?

1

December 4, 2014

ORSA/Form F and ERM

Al Bottalico – Deputy Commissioner, Financial Surveillance Branch, California Department of Insurance

Amy Pinkerman Condo – Assistant General Counsel, Health Care Service CorporationHealth Care Service Corporation

Timothy V. Kemp – Partner, Locke Lord LLPChicago and Washington, DC

2

Presentation Outline/Overview

FSAP ProgramNAIC Regulatory InitiativesORSAEnterprise Risk ManagementForm FCorporate Governance Model LawModel Holding Company ActGlobal Capital Standards

FSAP ProgramTh FSAP d th i t ti l d l t d i f thThe FSAP program and other international developments drive many of the changes in U.S. regulation

• The Financial Sector Assessment Program (FSAP), a joint International Monetary Fund (IMF) and World Bank program that assesses a country’s financial system including insurance and each country’s compliance with International Standards.

• Supported by experts from a range of national and international agencies and standard setting bodies, the FSAP has the following aims:

• (i) to identify the strengths and vulnerabilities of a country’s financial system; • (ii) to determine how key sources of risk are being managed; • (iii) to ascertain the financial sector’s developmental and technical assistance needs

and • (iv) to help prioritize policy responses.

• In order for the U.S. insurance sector to do well on the FSAP review we must adopt as much as possible international standards as set by the IAIS.

• If U.S. insurance regulation does not implement IAIS standards, it may not be deemed “equivalent,” which could have an impact on U.S. companies operating overseas.

• The U.S. is currently undergoing an FSAP review with a report due early next year which will likely drive additional changes based on recommendations from the report.

3

FSAP Program

NAIC Regulatory Initiatives(Compliance requirements designed to help regulators identify insurer(Compliance requirements designed to help regulators identify insurer risks – some key initiatives underway)

• Governance and Risk Management Initiatives (upcoming regulatory filings for insurers)

• ORSA Report (1st filing due in 2015)• Model Law • Guidance Manual • 19 states have passed the Legislation

• Corporate Governance Annual Filing (target date 2016). Model Law and Regulation just adopted by the NAIC at the fall national meeting.

• Model Law • Model Regulation

• Enterprise Risk Report (Form F) (1st filing was due in 2014)

4

U.S. ORSA Annual Filing

Insurers meeting certain premium level requirements will have to file with their lead regulator an annual ORSA report beginning in 2015.

ORSA stands for Own Risk and Solvency Assessment.

ORSA Definition in Guidance Manual

The ORSA, which is a component of an insurer’s enterprise risk management (ERM) framework, is a confidential internal assessment appropriate to the nature, scale and complexity of an insurer conducted by that insurer, of the material and relevant risks identified by the insurer associated with an insurer’s current business plan and the sufficiency of capital resources to support those risks. Insurers subject to ORSA will have to file an annual ORSA Summary Report with regulators beginning in 2015.

5

Goals of ORSA

The ORSA has two primary goals:

1. To foster an effective level of ERM at all insurers, through which each insurer identifies, assesses, monitors, prioritizes and reports on its material and relevant risks identified by the insurer, using techniques that are appropriate to the nature scale and complexity of the insurer’s risk in a manner that isthe nature, scale and complexity of the insurer’s risk, in a manner that is adequate to support risk and capital decisions; and

2. To provide group-level perspective on risk and capital, as a supplement to the existing legal entity view.

ORSA Summary Report

6

Guidance Manual-Section I(ERM Framework)(ERM Framework)

Risk Culture and Governance

Risk Identification and

Prioritization

Risk Appetite, Tolerances and

Limits

Risk Management and

Controls

Risk Reporting and

Communication

Risk Culture

7

ERM for insurers (a continuum)

What is ERM for insurers?

• Previously risk management only facilitated the identification of risks but did not provide satisfactory methods for measuring and managing risks or for determining related capital requirements to cover those risks.

• ERM involves the self assessment of all reasonably foreseeable and relevant material risks that an insurer faces and their interrelationships between risk management and capital allocation.

P i f th ti th t i t k t it i k i b i• Primary focus on the actions that an insurer takes to manage its risks on an ongoing basis and to manage those risks to ensure that the insurer stays within its risk tolerance.

• Rigorous enforcement of risk standards, policies and limits.

• ERM is an acknowledged practice and has become an established discipline, and a separately identified function, assuming a much greater role in many insurers everyday business practices.

8

What is ERM for insurers? (continued)

• ERM processes used today increasingly use internal models and sophisticated risk metrics to translate risk identification into management actions and capital needs.

• ERM provides a link between the ongoing operational management of risk and longer term business goals and strategies.

• Not one size fits all but ERM is based on the nature, scale and complexity of the organizationorganization.

• The objective of ERM is not to eliminate risk but rather to manage risks within a framework that includes self-imposed limits.

• Insurers should integrate their ERM framework into their overall Corporate Governance framework.

Enterprise Wide Risks

I f tiLife Health P&C

ILLUSTRATIVE

Market Strategic Operating Financing InformationLife

Insurance Insurance&C

InsuranceCredit

Equity

Interest Rate/

Spreads

Capital Markets

Trading

Default and

Migration

Other Counter-

party

Rein-surance

External

Internal

Process

Compliance

People

Funding/ Treasury

Credit Downgrade

Liquidity

Financial

Operational

Technology

A&H Morbidity

Expense

Longevity

Accident & Health

Liability

Motor

Property

Protection*

Annuities/ Savings**

Trading Risk

Property

Risk Identification and PrioritizationThis is an illustrative diagram of typical risks faced by a multi line insurance company. While risk classification diagrams are common, they are typically custom to each firm based on the risks they take.

9

Risk Identification• Develop a list of risks that represent a collective view of the company’s overall risk

exposures. Risk identification should occur at multiple levels in the organization

• Risk classifications generally include but are not limited to Market, Strategic, Operating, Life, P&C, etc. Risk identification and prioritization will be different for Life and P&C companies and will also be different depending on particular business and product strategy

• Sources of risk can be generated externally internally from legal regulatory change• Sources of risk can be generated externally, internally, from legal, regulatory change, weather patterns, economic conditions, etc

. • Focus is on major risks that are inherent to the Corporation and should include

known and emerging risks

• The risk identification and assessment process should cover all major risk categories and all business units by using a common set of risk metrics

Risk Prioritization

Risk Prioritization: Once risks have been identified, risk prioritization should take place

•Prioritization is based on both quantitative and qualitative criteria and is used to guide the allocation of risk management and other internal resources

•For risks that are known, focus is on ongoing prioritization and on tactical assessment. Evaluate whether and how to accept, avoid, mitigate or offset risk

•For risks that are emerging, there should be an ongoing effort to identify, evaluate and develop plans to get in front of the risk and / or develop contingency response plan

•Risk correlations should be considered as well as risk diversification. In other words if risk A happens, will risk B also happen or will risk B offset risk A and provide a diversification benefit?

10

Risk Appetite, Tolerance and LimitsCapital risk

• Material loss of capital• Ratings downgrade

Earnings risk• Income volatility• Failure to meet plan• Underperformance versus peers

Liquidity risk• Extraordinary need for cash to fulfill liabilities• Extraordinary need for cash to fulfill liabilities• Illiquidity of assets; market failure• Poorly designed, inadequate liquidity facility

Franchise risk• Damage to reputation• Loss of customers and top-line revenue• Loss of employees/talent/capabilities

The focus is on the aggregate level/amount of risk to be accepted by the enterprise

Risk Management within the Organization

Board of Directors/ Board Risk Committee:•Overall responsibility for monitoring risk-reward decision-making

Board of Directors (Risk/Audit Committee)

Executive Management (CRO)

Executive Management Team:•Overall responsibility for risk-reward decisions

Enterprise Risk Management:•Risk culture & governance•Risk identification & prioritization

Enterprise Risk Management

Lines of Business

Lines of Business

Lines of Business

•Risk identification & prioritization•Risk appetite & limits•Risk management & controls•Risk reporting & communication

Lines of Business:•Creation and ongoing ownership of risk-taking•Identification and underwriting of risk•First line of defense in risk management•Implementing corrective action and controls to address risks

11

Risk Management and Controls

•Risk management actions and controls should be regularly updated based on actual performance

•A “feedback loop” ensures that management actions and controls are well attuned to the organization’s current and new risk exposures

•Clear and regular communication is necessary to ensure that risk information is discussed and built into decisions/controls

Risk Management and Controls (continued)

• The importance of communication stems from the number of parties that may be involved in risk management

– Typical areas that perform assessments of risk controls and risk management effectiveness include:

• External audits• Corporate areas• Internal Audit• Internal Compliance• Sarbanes-Oxley or “Model Audit Rule” units• Business areas• Actuarial experience studies

• In addition, specific “lessons learned” studies supplement risk control and audit activities

12

Risk Reporting and Communication

• The objectives of risk reporting are to provide key constituents with transparency into the risk management processes and facilitate active, informed decisions on risk taking and managementtaking and management.

Risk Reporting and Communication (continued)

• Typically, risk reporting will occur on both regular and exception cycles; and will occur at all levels within the organization — Board, executive, and operating management

• Just like any other management process, risk reporting should act to ‘bring the process to life”, by providing clear scorecards on the performance of the risk management function

• Reports do not need to be extensive; level of detail depends on audience; key is to communicate critical information

• In addition to reporting “up the chain of command”, there should be downward communication to provide feedback

• Education on risk and risk-management processes is often a key element in communicating to the Board and management

• In reporting to external parties, confidentiality is extremely important given the strategic importance of risk information

13

Guidance Manual-Section IIInsurer Assessment of Risk Exposures

Risk ExposureEach Material

Risk Category

Insurer Assessment of Risk Exposures

Quantitative and

Qualitative Assessment

Normal (Expected)

EnvironmentStressed

Environment

25

U.S. ORSA Section 2:Q tit ti & St T tQuantitative & Stress Tests

For each major risk:

• Quantify risk exposure– Under Normal Environment

Under Stressed Environment– Under Stressed Environment• Reverse stress test

(level of stress which could cause the insurer to fail)

Expect no standard stress tests but some regulatory input on the level of stress (e.g. a 5% increase).

14

Guidance Manual Section 3 - Group Risk Capital and Prospective Solvency AssessmentProspective Solvency Assessment

Financial Needs

Policy Quantification

Needs

Section 3 combines the qualitative elements of risk management policy with the quantitative measures of risk exposure to determine the level of financial resource needs

U.S. ORSA Section 3:P ti S l A tProspective Solvency Assessment

A feedback loop…

Do you have the necessary financial capital or quality of capital to…Execute a 3-5 year business plan?…under normal and stressed situations?What are your Contingency plans?

15

Confidentiality

Section 1 of the Model Act provides, in part:

The Legislature finds and declares that the ORSA Summary Report will contain confidential and sensitive information. This information will include proprietary and trade secret information that has the potential for harm and competitive disadvantage to the insurer or insurance group if the information is made public.

Enterprise Risk Report (Form F)

• In 2011, changes were adopted to NAIC Model #440, NAIC Model #450 (Holding Company Act). One of the changes was to “Expand the ability to evaluate any entity within an insurance holding company system that may or may not directly affect the holding company system, but could pose reputational risk or financial risk to the insurer.”

• As part of the Holding Company filing requirements is a new Enterprise Risk Report (Form F) that will allow regulators to more clearly identify risks to the U.S. insurers posed by non-insurers within the holding company system. With Form F, holding companies will confidentially report on enterprise risk, including reporting of any material developments in strategy, risk management, litigation, etc., affecting the enterprise

16

Enterprise Risk Report (Form F)(first filing was due April 30 2014)(first filing was due April 30, 2014)Form F includes the following types of disclosure requirements:

• Identification of material concerns of the insurance holding company system raised by supervisory college, if any, in last year;

• Business plan of the insurance holding company system and summarized strategies for next 12 months;

• Identification of insurance holding company system capital resources and material distribution patterns;

• Identification of any negative movement or discussions with rating agencies which may• Identification of any negative movement, or discussions with rating agencies which may have caused, or may cause, potential negative movement in the credit ratings and individual insurer financial strength ratings assessment of the insurance holding company system (including both the rating score and outlook);

• Information on corporate or parental guarantees throughout the holding company; and the expected source of liquidity should guarantees be called upon; and

• Identification of any material activity or development of the insurance holding company system that, in the opinion of senior management, could adversely affect the insurance holding company system.

Corporate Governance Model Law Development ( )(new)

• The NAIC Corporate Governance (E) Working Group has developed a new model law to facilitate the annual collection of confidential information on insurers' corporate governance practices. After several years of studying issues related to the corporate governance of insurers including a review of existing

i t d i t ti l t d d th W ki G id tifi d drequirements and international standards, the Working Group identified a need to collect and review corporate governance information of insurers in the period between onsite examinations.

17

Why a new model law for corporate ?governance?

• The development of an "Annual Reporting of Corporate Governance Practices of Insurers Model Act" will provide a means for regulators to get a better understanding of the governance practices of their domestic insurers. The development of this model law will also ensure the confidentiality of governancedevelopment of this model law will also ensure the confidentiality of governance information collected from insurers and assist U.S. regulators in achieving greater consistency with international standards.

Corporate Governance Annual Disclosure Eff ti 2016Effective 2016

The CGAD must include a description of a company’s:

• Governance framework and structure

• Policies and practices of the most senior governing entity and significant itt th fcommittees thereof

• Policies and practices for directing Senior Management

• Processes by which Board, its committees, and Senior Management oversee critical risk areas.

18

Potential future Model Holding Company Act changes

• Clear legal authority and delineated powers to act as the group-wide supervisor for an IAIG and other large insurance groups;

• Direct legal authority over the insurance holding company, including the authority to set group capital requirements;

• Group-wide financial reporting requirements for the insurance group.

These issues are just now being discussed by NAIC working groups but result from international pressures and IAIS standards.

Development of Global Capital Standards

In 2010, the IAIS began developing ComFrame as a comprehensive framework for the supervision of IAIGs (Internationally Active Insurance Groups). The IAIS has now agreed to develop a risk-based global ICS and to include it within ComFrame, which has always included a capital component within its solvency assessment. This component will be used as a starting point for development of the ICS. In 2014, the IAIS will also develop the BCR, which is planned to be finalized and ready for implementation by G-SIIs in late-2014. The BCR will serve as the foundation for HLA requirements for G-SIIs, which are to be implemented in 2019; it is anticipated that their development and testing will also inform development of the ICS.

19

Global Capital Standards (continued)

While we recognize the role and importance of group supervision, legal entity capital requirements are necessary to protect U.S. policyholders and promote a stable market, particularly given the structure of U.S. financial regulation. As U.S. insurance regulators work within the IAIS to develop and consider implementing the various capital proposals we will be mindful of the cost/benefit of the proposedthe various capital proposals, we will be mindful of the cost/benefit of the proposed standards, the impact on insurance product availability and affordability or other market impacts, and the compatibility of the proposed standards with the U.S. insurance regulatory system.

Capital Standards: Points to consider

U.S. state insurance regulators support the need to assess capital adequacy as part of coordinated solvency oversight and recognize that insurance supervisors in emerging markets are calling for basic international capital standards or benchmarks of some kind; however, a single uniform capital standard is not the silver bullet solution.The business model for insurance is significantly different than the business model for banking and even the business models and risk management approaches

t i i Th t k d i th b ki t f liamongst insurers are unique. The track record in the banking sector of a reliance on capital standards did not prevent a system-wide banking collapse during the recent financial crisis. Development of an ICS needs to reflect the distinct characteristics of the insurance business model and its supervision.The risks inherent in insurance products, even for the same business line, can be very different jurisdiction to jurisdiction. A single risk charge for that business line may well lead to incorrect assessments of the relative capital strength of IAIGs.

20

Capital Standards: Fungibility

U.S. state insurance regulators are also concerned with a reliance on the assumption that capital can be freely moved within an insurance group. It is critical that the free flow of capital (i.e. assets) across a group should not jeopardize the financial strength of any insurer in the group. As such, the flow of capital out of an insurance legal entity within the group should remain subject to required approvals by that entity’s regulator. Ultimately, whatever is implemented at the group level should be in addition to jurisdictional capital requirements For the U S it will be inshould be in addition to jurisdictional capital requirements. For the U.S., it will be in addition to, and not a replacement for, the U.S. Risk-Based Capital (RBC) that applies at the legal entity level.

Regulators see this as an uphill battle for U.S. regulators and the NAIC.

Summary

In summary the U.S. insurance regulators with the adoption of many changes to regulatory oversight, hope to be more in line with international standards and comply with FSAP requirements. If state regulators are not successful there could be a shift to more federal regulation of the insurance industry. The state based system has worked well but is under scrutiny from many sides. While industry is impacted by all these new requirements they realize the alternative of possible more federal involvement in the future is not something they necessarily want andmore federal involvement in the future is not something they necessarily want, and therefore are working with state regulators through the NAIC process on these initiatives.

21

Conclusion

Questions?

1

December 4, 2014

Strategy & Analytics in Insurance

Jeff Zych – Senior Managing Consultant – Insurance - IBM Global Business Services

2

Trends in 2014 indicate new uses and new models for the Cloud

Cloud is not only about cutting costs but also is about innovation & competitive edge

Cloud is an evolving distribution channel for insurance solutions & related services – “not just about the Geico app”

Cloud marketplaces are evolving to further enable the rapid development and deployment of Cloud applications

Demand for Cloud security is increasing tremendously

Private Cloud Forecast – Cloudy!! Delays in implementation of private Clouds has opened doors to public Cloud adoption

Hybrids Cloud Forecast – Partly Sunny!! Analysts predicted that 2014 would be a great year for hybrid Clouds - it was!

Mobile Cloud Forecast – Sunny!! A whole new generation of Cloud apps designed for a mobile work force is out there

Cloud Brokerage Services: A crucial need exists. Capabilities to manage the different Cloud environments with a consistent management framework are difficult to acquire

Cloud Skills are in Demand and educational institutions need to step up to fill this skills gap

Key drivers & benefits for Cloud adoption by insurers

Pressure to decrease costs Need for business agility Call for fast solution deployment Expanding global footprint Intense competition from others already in the Cloud

Key Drivers

Better Economies of scale Scalable storage and processing Increased productivity and collaboration Process and data standardization Reduce time to market Lower cost of ownership and maintenance

Benefits

3

Cloud is last on the priority list for insurers current & future investment

Source: Kable report Oct 2013 n=119 & Gartner Report 2013 n=116

Cloud preferences by insurers in mature markets

4

Cloud investment to date has been non-strategic

Insurance CXO’s strong focus on private Cloud limits their options

What is being done ?

Virtualized data centers are not "private Clouds" as they do not leverage Cloud benefits such as rapid scalability or “pay per use”

Private Clouds require greater initial infrastructure investment compared to public Clouds and they lead to higher recurring maintenance costs. Don’t forget the IT spend approval process!!.

Private Clouds enable the status quo of existing IT architectures. Barrier to innovation!

There are options other than public Clouds — for example, hybrid or community Clouds — whose potential benefits are not accurately evaluated because of the need to have control of the Cloud

Private Clouds set up and run by internal IT departments may inhibit insurers from focusing on their core Private Clouds set up and run by internal IT departments may inhibit insurers from focusing on their core competencies. “If IT votes for anything other than a private Cloud, they enable their demise”

What can be done ?

Conduct a segmented cost-benefit analysis of all potential Cloud computing models for your CXO. Include private, public, hybrid and community Cloud (including combinations)

Create a hybrid Cloud services portfolio that will allow you to match different Cloud models against different levels of risk appetite within your organization. Find a way to force the discussion!!

5

Major Challenges faced by Insurers in Cloud Adoption

Data Privacy/ Security Concerns - Insurers are apprehensive about the possibility of their customers’ sensitive personal data being compromised on a public Cloud – “It is MY data and YOU can’t use it”

Compliance - Compliance requirements from local regulators are a challenge because there are questions about ownership and management of Cloud-based services – “If I don’t fully understand it, there MUST be a risky compliance issue somewhere”

Lack of Integration - Integrating applications hosted on the Cloud with an enterprise management system is critical to leverage the full potential of Cloud based solutions – “How much of my organization is integrated right now? BE HONEST!!”

Lack of Standardization - P&C insurance firms generally have too many IT applications and lack a high degree of data and business process standardization to be able to take full advantage of the scalability promised by Cloud computing – Standardization? What’s Standardization?

Lack of Competency - The small size and limited experience of inexpensive vendors that offer Cloud-enabled core solutions increases insurers' implementation risk and slows adoption of Cloud solutions within the industry – “We DON’T have the budget, unless we all don’t want a bonus, and I am NOT going to be the executive whose legacy is adoption of the Cloud.”

“Cloud is a challenge for our organization because we never did it this way before”

Opportunity areas for Insurers in Cloud domains

Business support applications: including office suites and sales and service management applications. These are usually highly standardized and require no industry expertise and VERY limited customization

Enterprise applications: such as financial management (Workday), HR (learning, recruiting, candidate management) and procurement solutions may lead to Cloud adoption in the Insurance industry—especially when organizations are changing their operations models by implementing shared services

Vertical applications: highly standardized processes such as billing and collections, are anticipated to become increasingly attractive to insurers that are being forced to modernize their IT legacy environments because they are finally breakingH i l b l li ti I th t i t t d i di th i hi d Housing global applications: Insurers that are more interested in expanding their geographic presence and need to become more agile to compete with “new players in the industry” are likely to be among the early adopters of Cloud computing due to the IT infrastructure savings realized almost instantly

Community Clouds: that are operated by industry associations to exchange non-proprietary data for underwriting purposes (ex. IoT information from subscriptions to sensors in smarter cities, weather data from NOAA, unstructured stock market data, surveys, etc.) Data is not the secret sauce. It is your process to extract intelligence that is your secret.

Infrastructure services: such as storage and servers

6

When building a Cloud strategy the Insurer should………..

IBM’s Cloud strategy is based upon experience gained from our own transformation

IBM IT transformation

In a five-year period, IBM's own Cloud investments delivered a cumulative benefit yield of approximately $4.1 billion.

IBM data center efficiencies achieved

Consolidation and virtualization of thousands of servers leveraging IBM System z, System p, System x and storage virtualization Substantial savings achieved in multiple dimensions: energy, software and system

management and support costs.

Project Virtualized environment uses 80 percent less energy and 85 percent less floor spaceProject Big Green

p gy p p Two-fold increase in existing function capacity Dramatically decreased carbon footprint and cost.

Cloud-enabled on-demand IT delivery

Reduced configuration time, capital and operating costs for development and test. Environments are stood up FAST and tested faster. Worldwide automation of development and test environments in a Cloud has resulted

in >80% around-the-clock hardware utilization

7

Use cases from Banking & Financial Markets

Cloud Efficiency: A Swiss Investment Banking client needed to streamline and automate their sourcing, contracting, risk & compliance processes.- Implemented IBM’s Cloud-enabled SaaS solution. Estimated savings: $159M

Cloud Risk Management: A French client wanted to adapt to Regulatory & Compliance requirements.- Client implemented IBM’s Algo FIRST on Cloud with access to 11,000+ operational risk loss events to drive compliance process and control improvements

Cloud Revenue / Financial Markets’ Ecosystem: A British client wanted to overcome the latency barriers in high-frequency trading: Implemented high-performance Cloud trading infrastructure-as-a-service for 130+ global investment banks, exchanges, hedge funds, broker/dealers, proprietary trading firms and private equity houses.

Cloud Desktop, Security & Business Continuity: A Japanese Client intended to mitigate risks in security and business continuity if Asian Flu spread to pandemic levels. This 34,000-employee client deployed an IBM private Cloud to centralize management of desktops via enterprise-class data center rather than at the user stations. Gained greater remote flexibility without losing control.

From 4-months to 29-minutes: A Global Bank wanted Service desk analytics to improve Customer Service: Soft Layer enabled the y p ydeployment of the client’s service-desk analytics solution in 29 minutes versus 4 months. The service desk solution lowers call volumes, reduce help desk ticketing and provides better self-help capabilities to clients.

Cloud Ecosystem for Revenue Growth: Large Greek Bank wanted to initiate new business. IBM created a Cloud-based multi-lateral trade offering between Greek businesses and their international trading counterparts across 180 countries.

Cloud Storage Cost Savings: A Chinese Client wanted to manage growth 2+ Billion customers. Created a Cloud-based storage system that reduced system management costs, sped up deployment for resource requests, standardized software configuration for each deployment and simplified system management and maintenance.

Conclusion

Questions on Cloud?

8

Part 2: Transforming Insurance with Cognitive Computing

Agenda

What is Watson?

Watson in Action

Watson in Insurance

Next Steps

© 2014 International Business Machines Corporation

9

What is Watson?

What is Watson?

Watson is a cognitive technology that processes information more like a human than a computer—by understanding natural language, generating hypotheses based on evidence and learning as it goes.


10


The new era of cognitive computing will transform our future

TabulatingSystems Era

ProgrammableSystems Era

CognitiveSystems Era

11

Cognitive systems expand the problems we can address

Programmable Systems• Deterministic• Leverage traditional data sources• Follow pre-defined rules (algorithms)

Cognitive Systems• Probabilistic• Are taught, not programmed• Improve based on experience


Watson has graduated from a startup to a full business

IBM WatsonInternalJeopardy!Research atsoGroup

2014 – present

te aStartup Division

2011 – 2013

Jeopa dyGrand Challenge

2011

esea cProject

2006 – 2010

$1B Investment

$100M for Ecosystem

NYC HQ – Astor Place

Commercialization

Validation

Demonstration

R&D

12

Watson enables Transformations in a way that was not possible before

Perceiving:Perceiving:Watson understands the world as we do.

Reasoning:Watson thinks through complex problems: it deepens our analysis and inspires creativity. Not only thinking through questions, but synthesizing information, evaluating pros and cons, and creating inferences… types of thinking that traditional systems cannot perform

Relating:Watson understands how we communicate, and personalizes its interactions with each of us. Adapting its interaction to the user, not only in understanding how they communicate, but also customizing its interactions to what we know about them

Learning:Watson learns from every interaction, scaling our ability to build experience


Watson in Insurance

13

The Financial Services industry is undergoing a major transformation

E Disco er D id

Emboldened, digitally-savvy customers expect rapidly evolving new services and offerings, available 24/7

Fierce competition for customers spawns non traditional competition

The explosion of data creates opportunities to develop deeper insight into customer/client needs/behaviors

Insight and Intelligence was identified as key focus by Financial

Core systems are being upgraded to improve operational agility and efficiency. Increase in data challenges and decision making.

Regulations such asDodd Frank, Basel III, and

Engage Discover Decide

traditional competition from “new” firms entering the market

focus by Financial Industry CEOs over the next 3-5 years

, ,RMORSA are introducing complexity and new costs

© 2014 IBM Corporation

We see cognitive computing & analytics fundamentally transforming how insurance business is conducted

TRANSFORMED INTERACTIONS

EMPOWERED ADVISORS

OPTIMIZED OPERATIONS

Direct-to-consumer digital virtual agents that leverage analytics and cognitive capabilities to serve, guide, and advise on the web or mobile devices

• Conversational style of interaction using a combination of text and speech

Employee-facing applications designed to help agents, producers, call center representatives or other customer-facing advisors provide guidance to customers

• Front office applications that allow customer advisors to readily find relevant information pertinent to a customer interaction

Employee-facing applications designed to aid knowledge workers in the execution of specific business processes to create optimal business outcomes

• Back office applications that allow knowledge workers to leverage prior experience and analytics to help make better decisions• The ability to create a

differentiated experience based on customer insights and to make analytically driven recommendations

• The ability to invoke processes or transactions specific the appropriate business process

customer interaction

• Integration with CRM and other applications to provide a “total view of the customer”

• The ability to make analytically driven recommendations for the customer advisor to present during customer interactions

help make better decisions

• Shift time spent finding information to making decisions.

• Access to data within disparate business applications to provide the knowledge worker with a a “total view of the situation”

• The ability to make analytically driven recommendations for the knowledge worker to consider

© 2014 IBM Corporation

14

Insurance Use Cases Categories

Use Case Value PropositionUse Case Value Proposition

Customer Self Service Empower customer with answers to questions on specific content

Digital Virtual AgentEmulates a prospect or insured interacting and conversing with a human agent. Provides guidance. Drives new business and transaction processing

Call Center Rep Assist Empower call center representative with answers to questions. Enables consistency, best practices.

Wealth Advisor Empower wealth advisor with answers to questions, recommend asset allocation etc.

TRANSFORMED INTERACTIONS

EMPOWERED ADVISORS

asset allocation etc.Discovering Relationships and Impacts

Identification of connections between chains of events and entities.

Underwriting & ClaimsAssist underwriters & adjusters with analysis of complex cases and decision making. Increases productivity, quality of decision making and decreases expenses.

Regulatory Policy Compliance Helps evaluate compliance of a decision to multiple, complex, overlapping external regulation and internal policies

OPTIMIZED OPERATIONS

Example of the Watson Digital Virtual Agent


15

Discovering Relationships and Impacts• Initial application was for pharmaceutical research

– Watson analyzed more than 70,000 scientific articles related to p53, a protein that has been linked to many cancers.

– Automated analysis carried out by Watson helped Baylor biologists and data scientists identify SIX proteins that modify p53 and that should be targeted for new research. (Validation in progress – 2 already validated)

– Watson did this in a matter of WEEKS

– Teams of Researchers typically come across ONE of these target proteins per year.

• Sample applications for Insurance– Equity Research for Asset Management: Assist asset managers and equity analysts

researching markets and companies for trends and risks.

– Supply Chain Research: Exploring the impact that some event has on products and services linked to that event through multiple, non-obvious steps.

– Exposure Analysis: Identifying the aggregate exposure to an event


Underwriting Advisor (P&C)PDF’s U/W

GuidelinesLoss

ExperienceRating Criteria

Underwriting Notes

Adjuster Notes

Previous Submissions

Previous Policies …

Internal Information

Underwriting Advisor (P&C)

mis

sion

Doc

umen

ts Spread Sheets

Loss Runs

emails

Guidelines Experience Criteria Notes Notes Submissions Policies

Underwriting Guidance

Provide key information and guidance to underwriter with

supporting reasoning.

Sub

m

Acord Forms

…Financial

DataDunn &

BradstreetGeo-spatial information

Social MediaNews

ServicesInsurance

PublicationsOSHA

Reports …

External Information

16

Internal Information

Underwriting Advisor (Life)

ApplicationU/W Reinsurance Rating Underwriting Mortality Previous Other

tion

Doc

umen

ts

Underwriting Guidance

Provide key information and guidance to underwriter with

supporting reasoning.

Medical Records

Prescription Drug History

Financial Data

Guidelines Guidelines Criteria Notes Tables Submissions Policies …

App

lica

External Information

Blood work

QuestionnairesFinancial

DataDriving

RecordsCriminal Records

Social MediaNews

ServicesIndustry

PublicationsMedical

Research …

…

Steps to Explore Watson

17

Watson is a journey which starts with the Cognitive Value Assessment and expands into business domains

A vision starts the journey Train Watson in one LOB Expand to other LOBs

Identify Opportunities

Develop Benefits Case

Core Watson System Training

Business Domains Lines of Business

Business Functions Customer Support Field Support Cross Sell / Up Sell Semantic Discovery

Develop Roadmap

Semantic Discovery

Users Underwriters, Claims Service Center Agents Customers

Regulatory Applications Research & Change mgmt.MUST engage best experts!!!


ibmwatson.com

facebook.com/ibmwatson

@JeffZych or @ibmwatson© 2014 International Business Machines Corporation

1

Long Term Care Industry Issues

And NAIC Initiati esAnd NAIC Initiatives

Allen J. Schmitz, FSA, MAAA, Milliman Consulting

Brian Wegner, President and CEO Senior Health Insurance Co. of Pennsylvania and Fuzion Analytics

Thomas E. Hampton, Senior Advisor, Dentons, US LLP

Agenda LTC Insurance Regulatory Proposals Discussion of the Evolution of LTC Market Key LTC risks and their impact on profitability Industry Attempts to Manage LTC Risks

Ri k i l d ith Cl d LTC Bl k Risks involved with a Closed LTC Block Conclusion and Questions

2

2

LTC Insurance Regulatory Proposals Insurance Regulation Depends on Point of View

- Regulator Point of View Company Solvency Rate Stability

- Industry Point of View Financial Viability

- Sales, Rate Stability- Consumer Point of View

Affordability Affordability Rate Stability

- Policy Maker Point of View People covered Affordability

Finding the Balance is Important!

3

LTC Insurance Regulatory Proposals NAIC Model Regulation on Initial Filing Requirements

- Adopted August 2014 - Contains new provisions for new business and rate increases

Bulletin for rate increases on pre-rate stability policies- Requirements with some provisions from post-rate stability plansRequirements with some provisions from post rate stability plans

Model Regulation for LTC Premium Increases

4

3

Model Regulation Initial Filing Requirements 2001 Rate Stability Regulations

A statement that the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium

2014 Rate Stability Regulations (Additions)

A statement that the premiums contain at least the minimum margin for moderately adverse experience defined in (i) or the specification of and justification for a lower margin as required by (ii).

(i) and (ii) next slidethe life of the form with no future premium increases anticipated;

(i) and (ii) next slide.

5

Model Regulation Initial Filing Requirements A statement that the premiums contain at least the minimum margin for

moderately adverse experience defined in (i) or the specification of and justification for a lower margin as required by (ii).

(i) A composite margin shall not be less than 10% of lifetime claims.(ii) A composite margin that is less than 10% may be justified in uncommon circumstances. The

proposed amount, full justification of the proposed amount and methods to monitor developing experience that would be the basis for withdrawal of approval for such lowerdeveloping experience that would be the basis for withdrawal of approval for such lower margins must be submitted.

(iii) Combination Products – Potentially lower margin.(iv) Credibility of experience may lead to greater margins.

6

4

Model Regulation Initial Filing Requirements 2001 Rate Stability Regulations

Initial filing Actuarial Memorandum requirements in “Loss Ratio” Section.

- Basis of rates- Description of reserves- Summary of Benefits- Description and table of actuarial assumptions

2014 Rate Stability Regulations (Additions)

Actuarial Memorandum- Policy Design and Coverage- Underwriting and Claims Adjudication- “A complete description of pricing assumptions”- Sources and levels of margins- Demonstration of minimum marginDescription and table of actuarial assumptions

- Average Premium- Underwriting

7

Model Regulation Reporting Requirements 2001 Rate Stability Regulations

Annual reporting- Lapse and replacement

2014 Rate Stability Regulations (Additions) Annual Rate Certification

- Sufficiency of current schedule- If not sufficient, plan must be filed within 60 days to re-

establish

Actuarial Memorandum to Support Certification- Data sources

Experience assumptions and relationship to pricing- Experience assumptions and relationship to pricing assumptions

- Credibility- Explanation of analysis and testing

Due May 1st of each year

8

5

Bulletin on Rate Increase Filing Requirements Pre-Rate Stability Policies Actuarial Assumptions for Establishing Rate Increase Requests:

- Department to review reasonableness Approval of Rate Increase

- Single rate increase – no future increases for three years- Series of increases – three year monitoring

Requirement of Contingent Benefit on Lapseq g p- 20th policy duration – without regard to trigger percentages

Policyholder Notification Requirements Loss Ratio Requirements

- 60% on initial- 80% on increase (75% for group)

9

Model Regulation Premium Increases 2001 Rate Stability Regulations

Certification: If the requested premium rate schedule increase is implemented and the underlying assumptions, which reflect moderately adverse conditions, are realized, no further premium rate schedule increases are anticipated

2014 Rate Stability Regulations (Additions) The insurer may request a premium rate

schedule increase less than what is required under this section and the commissioner may approve such premium rate schedule increase, without submission of the certification in Subparagraph (a) of this paragraph if the actuarial memorandumare anticipated paragraph, if the actuarial memorandum discloses the premium rate schedule increase necessary to make the certification required under Subparagraph (a)

10

6

Model Regulation Premium Increases 2001 Rate Stability Regulations 2014 Rate Stability Regulations (Additions)

Actuarial Memorandum with - Expected Claims- Projections- Other Assumptions

If rate greater than 200% of original rate –projections filed every five yearsprojections filed every five years

Commissioner can require premium adjustments if projections do not materialize

11

Evolution of the Market

12

7

Timeline of Major Market ChangesRelatively New Coverage Due To Increasing Life Expectancies & Growing # Of ElderlyRelatively New Coverage - Due To Increasing Life Expectancies & Growing # Of Elderly

1970’s - Early Generation NH Only, Following Hospital

Stay (3 Day Minimum), “Medical

Necessity”

Early 1990’s, Comprehensive

Policies With ADLs (Activities Of Daily

Living) And CI (Cognitive

Impairment) T i ALF

Early 2000’s -Federal EE

Program, Combo Products, Rate

Stability, Revised Reserve Standards

& RBC

1970 1980 1990 2000 2010

1980’s - Removal Of Prior Hospital Stay

Gatekeeper, Change To “Medically

Necessary”, Some HHC Only,

Mandatory Inflation Protection Offer &

Nonforfeiture

Triggers, ALF

Late 1990’s – Federally Tax-Qualified Policies, Improved Underwriting

& Care Management

Recently –Partnership,

Company Exodus due to Low Interest

and Lapses

13

Individual Long-Term Care Sales

14

8

Employer-Sponsored LTCI Sales

15

Total Market

16

9

Top Individual Writers (Broker World Surveys)2004 Top Writers 2012 Top Writersp p

ProductionRank Company ($millions)

1 Genworth 1532 John Hancock 1143 MetLife 864 Bankers L&C 625 MassMutual 256 Allianz 247 UNUM 208 Lincoln Benefit 199 Prudential 19

ProductionRank Company ($millions)

1 Genworth 2212 Northwestern 1183 Mutual of Omaha/United 524 MassMutual 295 John Hancock 276 New York Life 267 Transamerica 218 Bankers Life & Casualty 179 State Farm 1310 MedAmerica 10

10 Penn Treaty 1811 New York Life 1812 State Farm 1513 Physicians Mutual 1314 MedAmerica 1115 Mutual of Omaha 916 Equitable L&C 817 State Life 818 Knights of Columbus 419 Kanawha 420 AFLAC 3

0 ed e ca 0

17

Changes in Carrier LandscapeOut of market since 2004:MetLifeAllianzUNUMLincoln BenefitPenn TreatyPhysicians MutualEquitable L&C

Newly departed:PrudentialCUNA MutualAIGAmerican FidelityBerkshireAmerican GeneralHumana

Back in the market:

ThriventAegon

Equitable L&CState LifeKanawhaAFLAC

HumanaPhysicians Mutual

Source: 6th and 15th Annual LTC Insurance Surveys, Broker World Magazine

18

10

K LTC Ri kKey LTC Risks

19

Review of Primary LTC Insurance Product RisksRisk Management of Risk Comments

LTC morbidity higher than expected

Primary management lever is rate increases Critical to continuously monitorMorbidity trends positive (but not definitive)Milliman LTC Guidelines are converging

Persistency higher than expected

Primary management lever is rate increases Primary reason for most rate increase filingsCurrent pricing lapse rates very low – therefore more limited downside riskMortality becoming more known

Interest Rate Risk Hedging opportunitiesProduct design

Limited ability to receive rate increases based on interest rates different than expected (also depends on loss ratio)

Regulatory Risk Limited ability to manage Regulatory risk relative to rate increases is a major concern for many companiesConcern over limitation on product innovation and reserve and capital requirements

20

11

LTC Insurance Sample Premiums and Claims3500

1500

2000

2500

3000

3500

Dol

lars

PremiumsClaims

0

500

1000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49

Duration 21

Why the Turmoil?

Companies Leaving the Market:- Lapse rates, interest rates, & mortality: low- Morbidity - claims quite close to pricing for some, very far off for

others (depending on aggressiveness of original pricing and on underwriting)

- Concerns about profitability and being able to get rate increases- Felt that capital was better invested elsewhere (would yield more

immediate results)- Psychology (what do others know)

22

12

I d t Att t tIndustry Attempts to Manage LTC Risk

23

The Status and Challenges of LTC Closed Blocks

• LTC Insurance Challenges

• Transition to Closed Blocks

• Alternatives to LTC Insurance

• Rate Increases – Challenges and Business Impacts

• The Benefits of LTC to Policyholders

• How Do We Stabilize the Industry?

24

13

Recent LTC Headlines

March 28, 2012Long Term Care Insurance Crisis: The Failure of the Class Act

Forbes 10/4/2012

Insurers Are Getting Out Of Long Term Care 25

LTC Insurance ChallengesFi t LTC li i itt i 1970’ b l• First LTC policies written in 1970’s, became more popular in 1980’s

• Drivers of LTC insurance challenges from expectations:• Lower lapse rates• Lower mortality• Higher utilization (morbidity)• Compound inflation drives higher daily benefits• Compound inflation drives higher daily benefits• New facilities (Assisted Living Facilities, for example,

didn’t exist when original policies were written)• Lower investment yields• Increasing percentage of chronic vs. acute conditions• Claim durations lengthening 26

14

Other Factors Challenging LTC CarriersF d d b d i l i• Fraud and abuse drives up claims

• Lack of standards that exist in health care• No usual and customary rates in LTC• Med Necessity has become more subjective• Certain benefits have been inappropriately used

(Restoration of Benefit, for example)• Limits on types of investments allowed• Limits on types of investments allowed • Very high asset requirements • Many closed block policies have older, problematic

contract language• States have prohibited some of the contract terms• Rate increases drive anti-selection 27

Transition to Closed BlocksA i t l 60 i i ld LTC d t t• Approximately 60 insurance companies sold LTC products at one time

• Currently, only about 10 companies still writing policies• Remaining blocks are “closed” – no longer selling• Within active carriers, some blocks are also closed• Implication: No new premium coming in to offset older policies and

claims• Many closed block carriers have limited internal expertise, resulting y p , g

in higher claims than necessary• Higher claims drive:

• High claim reserves• High Actual to expected, resulting in higher reserves• Rate increases, which drive more claims for period of time, and

loss of healthier insureds 28

15

Medicare and Long Term Care CoverageL t C S i Skill d N iLong-term Care Services – Skilled NursingPays part of bills for up to 100 days only, must be ordered by physician•Medicare does not pay the largest part of long term care services or personal care - such as help with bathing, or for supervision often called custodial care. •Medicare will help pay for a short stay in a skilled nursing facility, for hospice care or for home health care if the individual meets all of the following conditions:

• Have had a recent prior hospital stay of at least three days• Are admitted to a Medicare-certified nursing facility within 30 days of your prior hospital stay

• Need skilled care, such as skilled nursing services, physical therapy, or other types of therapy

29

Medicaid and Long Term Care Coverage

Long-term Care Services – Nursing home, home and community services•Coverage varies state to state

•Coverage only in Medicaid qualified facilities (typically lower quality)

•Must spend down nearly all assets to qualify for Medicaid

•Low limits on income•Low limits on income

•Subject to assessment to determine functional requirements (ADLs)

30

16

Benefits of LTC to Policyholders

• Lifetime probability of seniors becoming disabled in at least 2 ADLs or cognitively impaired: 68%

• In 2013, over $6.6 billion in benefits paid to over 200,000 policyholders (average of $33,000 per claimant)

• Largest LTC claim to date: $3 million• Reduces or eliminates impact of family having to provide p y g p

care• Preserves assets of insureds

31

How Do We Stabilize the Industry• Change the policyholder tendency to go on/stay on claim• Change the policyholder tendency to go on/stay on claim

in order to collect on policy• Engage them with benefits pre-need to keep them

independent• Engage the claimant during care to help them return to

independence (when possible)• Seek creative claim approaches that benefit theSeek creative claim approaches that benefit the

policyholder and the carrier• Analyze claims

• Identify fraud• Identify signs of unexpected trends, address the root

cause 32

17

How Do We Stabilize the Industry• Engage in reinsurance to reduce the risk of any single• Engage in reinsurance to reduce the risk of any single

block• Improve long-term projections to ensure reserve

sufficiency • The earlier it is addressed, the lower the impact

• Offer options to policyholders to reduce risk and lower reserves (NFOs, benefit reductions)reserves (NFOs, benefit reductions)

• Think carefully about rate increases• Take advantage of alternative investment options to

increase yield

33

Conclusion

Questions?

34

© 2014 The Insurance Forum

2014 INSURANCE FORUM SPEAKERS

AL BOTTALICO is the Deputy Commissioner of the Financial Surveillance Branch (FSB) for the California Department of Insurance. FSB’s primary responsibility is the on-going risk focused financial oversight of companies licensed to do business in California which includes analysis, examinations and actuarial, as well as the review and analysis of various corporate affairs applications. Al also serves on numerous National Association of Insurance Commissioners (NAIC) Committees, Task Forces and Working Groups and also

Chairs the NAIC Financial Examiners Handbook Technical Group. Prior to becoming Deputy Commissioner in 2011, Al served as Chief Examiner since 2004. Al is a Certified Public Accountant and a Certified Financial Examiner and is California State Chairman for the Society of Financial Examiners and serves on the Society of Financial Examiners (SOFE) Board of Governors.

Al joined the California department in 1977 and earned his Bachelor of Arts degree in accounting from California State University, Fullerton.

SHARON P. CLARK is the Commissioner of the Department of Insurance (DOI). Commissioner Clark, a veteran of Kentucky state government, was appointed Commissioner of the Department of Insurance in July 2008 and was reappointed to the post in July 2012. Commissioner Clark was the first director of the DOI’s Consumer Protection and Education Division, a position she held for five years. Under her leadership, the Department hired its first ombudsman, added consumer education and outreach

functions, and strengthened enforcement efforts by expanding the number of consumer complaint investigators.

Commissioner Clark serves as the chair of the Kentucky Health Benefit Exchange Advisory Board and is a member of the Kentucky Group Health Insurance Board. She serves as Secretary-Treasurer of the NAIC and is a member of its Executive Committee. She is also a member of the NAIC’s Internal Administration (EX1) Subcommittee. Clark is past chair of the NAIC’s Market Regulation and Consumer Affairs (D) Committee and was an officer for the NAIC’s Southeastern Zone. She is also past Secretary-Treasurer of the National Insurance Producer Registry board and is interim chair of the Surplus Lines Multistate Compliance Compact.

Prior to being appointed Insurance Commissioner, Clark worked at the Finance and Administration Cabinet. She also held positions for the Kentucky House of Representatives, the Public Service Commission, and the former Workforce Development Cabinet.

She earned bachelor’s and master’s degrees from the University of Kentucky.


2 © 2014 The Insurance Forum

AMY PINKERMAN CONDO is the Assistant General Counsel in the Chicago Headquarters of Health Care Service Corporation, a Mutual Legal Reserve Company, which has exclusive rights to use the Blue Cross and Blue Shield names and marks in Illinois, Texas, New Mexico, Oklahoma and Montana. (HCSC) Her principal internal clients include Financial Reporting, Treasury, Tax and the Board of Directors of various HCSC subsidiaries, focusing on insurance financial regulatory and corporate governance matters.

Practicing law exclusively in-house for insurance holding company groups for over 19 years, Amy has worked for both property and casualty and life and health insurers. She has also advised health maintenance organizations, managed care organizations, fronting carriers, producers, managing general agents and third party administrators within her employer’s respective holding company group. Amy experience is primarily focused in the areas of insurance regulatory, corporate governance, mergers and acquisitions, corporate formation, re-structuring, insurance licensing, reinsurance, as well as advising on debt instruments and credit agreements. She also tracks the activities of the NAIC (E-Committee), working with external trade associations - and then with internal government relations staff once matters of interest originating within the NAIC are introduced in the state legislatures.

Amy received a Bachelor of Arts in Political Science from Arizona State University, cum laude, and a Juris Doctor from Drake University Law School. In 2001, Amy was asked to serve on Illinois Secretary of State Financial Responsibility Task Force, a partnership formed between government and industry to automate financial responsibility filings. Prior to her role with HCSC, Amy was Vice-President, General Counsel and Corporate Secretary of U.S. Operations of a publicly traded insurance group that operated internationally and included numerous insurance and reinsurance companies.

DANIEL COTTER has been the Vice President, General Counsel & Secretary of Fidelity Life Association and Efinancial, LLC and Members Mutual Holding Company since April 2013. In this role, he is responsible for all legal aspects of the organization, including regulatory, compliance, litigation, Enterprise Risk Management (ERM), Risk Management, and government relations. From 2010 until 2013, Dan was in private practice with a mix of insurance industry and other industry clients, assisting them on various aspects of litigation

and corporate work. Prior to private practice, Dan was in house at Argo Group US, Inc (2005-2010), Kemper Corporation (formerly Unitrin) (2000-2005) and CNA Financial (1996-2000). Dan began his legal career as an associate at Lord Bissell & Brook, where he was in a litigation group.

Prior to becoming a lawyer, and while attending law school at night, Dan worked at CNA as an accountant (1988-1993) and then as a paralegal in the litigation group (1993-1994).

During his career, Dan has worked on major US and cross-border M&A transactions for his clients, and has obtained Form A approvals in more than a dozen jurisdictions. He has also drafted international cost sharing agreements and has negotiated significant savings for his clients in third party negotiations. Dan has testified before a number of insurance departments on various matters, including Y2K, and has assisted in drafting of legislative changes in a number of jurisdictions.

Dan currently serves as President of the Chicago Bar Association and is a member of the Board of Trustees of Monmouth College. He personally has raised more than $325,000 for mentoring programs



through his fundraiser, Lifting to Lend-A-Hand.

Dan received his B.A. magna cum laude from Monmouth College in 1988 and his J.D. summa cum laude from The John Marshall Law School in 1995.

ERIC M. FOGEL is a strong force in the world of corporate law. With more than two decades of experience, Eric has served as lead counsel on some of the country’s largest and most complex transactions. When clients are looking for a strategy on how to get the deal done, Eric Fogel is the attorney they call.

Eric Fogel is a partner in the firm’s Chicago office and co-chair of the Corporate Practice Group. He has significant experience in federal and state securities laws, Investment Advisor Act compliance, SEC interaction, mergers and acquisitions, and financing. He closely advises chief executive officers, board members, and general counsel throughout the nation and has handled capital transactions involving hundreds of millions of dollars. He often works with his clients in an “outside general counsel” capacity and counsels, insurance companies, hedge funds, venture capitalists, and private equity firms in various transactions.

Eric has more than twenty seven years of experience and knowledge of the Chicago business market. His practice includes: corporate and board governance for public companies and private (for-profit and not-for-profit); board and corporate investigations; fund formation, investment adviser compliance and regulation; insurance regulatory compliance; domestic and global merger and acquisition activity; representation before the Securities and Exchange Commission; tender offers and proxy fights on behalf of insurgents and incumbents; securities arbitrations and hearings; and securities law compliance including the 1933, 1934 and 1940 acts; and compliance issues under Sarbanes-Oxley.

Eric received his B.A. from Pomona College, his M.A. from the University of Michigan and his J.D. from the University of Michigan Law School.

MICHAEL P. GOLDMAN is co-chair of Sidley Austin LLP’s global Insurance and Financial Services group and a member of Sidley’s Executive Committee. For more than 25 years, he has represented insurance organizations and related segments of the financial services industry in complex transactional, operational/governance and regulatory matters.

Mike advises insurance industry clients in connection with acquisitions, divestitures and corporate reorganizations (including demutualization and mutual holding company conversions); the formation, capitalization and corporate financing of insurance companies and related ventures; the regulation of insurance holding company systems; the regulation of insurance company investment practices, including the use of derivative instruments and strategies; the structure and regulation of alternative risk financing mechanisms and complex reinsurance arrangements, including insurance securitization and derivatives, loss portfolio transfers and commutations and the placement of insurance-linked securities; the structure of unique marketing and insurance distribution systems; and captive insurance companies, risk retention groups and other alternative market mechanisms.



Mike also represents investment banks, commercial banks, private equity funds, investment advisers, derivatives dealers and other sectors of the financial services industry, with respect to insurance company relationships and transactions.

Mike has been recognized by clients and fellow lawyers as a “Leading Lawyer” in the field of insurance (transactional & regulatory) nationally and in Illinois by Chambers USA (since 2003). He is also recognized in the International Who’s Who of Insurance & Reinsurance Lawyers (2003, 2010-2014), The Legal 500 U.S. (2012-2014) and The Best Lawyers in America (since 2006). In addition, Mike was named a BTI “Client Service All-Star” for 2014.

THOMAS E. HAMPTON is a senior advisor with Dentons US LLP in their Washington, DC office. Tom received his MBA from St. Johns University in New York and has over 25 years on experience in insurance company operations and regulation. Tom focuses his practice on providing advice to clients on insurance regulatory issues including product filings as well as holding company filing transactions. He also provides advice on insurance statutory accounting and financial reporting issues. Tom conducts consultations on licensing issues

as well as provides regulatory advice to captives and risk retention group clients. Tom has been involved with implementation of the principles based reserving process including working with a client and the NAIC to develop a national framework for life insurers to aggregate experience reporting loss data for insurance regulators.

Prior to his position at Dentons, Tom was Commissioner for the DC Department of Insurance, Securities and Banking where he was responsible for providing oversight and direction of the agency that regulates all financial service industries in DC. Tom has written several articles and is a frequent speaker on insurance regulatory issues such as Solvency II, Principle-Based Reserving (PBR), Own Risk and Solvency Assessment (ORSA) and Special Purpose Vehicle (SPV) Captive issues.

Prior to his tenure with the DC Department as a regulator, Tom worked in the financial departments of CIGNA and American International Group. Tom received his Masters of Business Administration from St. Johns University. He is also a Certified Public Accountant and Certified Financial Examiner.

ANDREW R. HOLLAND is a partner in the Insurance and Financial Services group in Sidley Austin LLP’s New York office. His practice is concentrated in the representation of insurance companies, insurance intermediaries and institutional investors with respect to insurance regulatory and corporate matters. He has a broad range of experience, including corporate transactions, corporate governance, licensing of insurers, insurance holding company act issues, financial examinations and statutory accounting matters, producer

compensation and non-admitted insurance. Andrew is recommended in Insurance: Non-Contentious in the Legal 500 US 2013 and 2014.

Prior to private practice, Andrew was Senior Vice President and General Counsel of Chartis U.S., Inc., a unit of American International Group (AIG).



MARTIN B. JACKSON is a partner in the Litigation group of Sidley Austin LLP’s New York office. Martin has represented clients in international and domestic arbitrations, in litigation matters in New York federal and state courts, and in litigation matters in numerous other state and federal courts throughout the United States. His insurance litigation experience includes acting as special litigation counsel for the Superintendent of Financial Services of the State of New York in an action seeking to liquidate Executive Life Insurance Company

of New York, which had been in rehabilitation for two decades, resulting in an order of liquidation that was subsequently affirmed on appeal.

Martin was called a “Future star” by Benchmark Litigation (2015) noting “he lays claim to a July 2014 victory for ride-sharing startup Lyft in which he reached a deal with New York regulators to allow the service to launch the same day in New York City, officially ending a lawsuit filed by the state Attorney General and the state’s superintendent of financial services, who sought a temporary restraining order blocking Lyft’s planned early-July entry to the New York market and asked the judge to shut down its existing Rochester and Buffalo operations.” The case generated substantial media coverage, including reports by Law360, The American Lawyer, CBS News and the Associated Press.

Martin was selected as one of The Best LGBT Lawyers Under 40 - Class of 2013 by the National LGBT Bar Association. He was also named to the New York Rising Stars list for 2011-2014 as published in New York Super Lawyers magazine.

TIMOTHY V. KEMP is a partner in the Chicago and Washington, D.C. offices of Locke Lord LLP where his nationwide practice focuses on consumer finance and insurance regulation, with an emphasis on the representation of insurance holding companies, underwriters and agents in matters before federal and state regulatory agencies, including the Consumer Financial Protection Bureau (CFPB) and all state departments of insurance. He also counsels regulated businesses on matters of compliance and corporate governance.

For regulated real estate settlement services providers, he frequently analyzes proposed or existing agreements, business models and marketing practices for compliance with Section 8 of RESPA, and other laws and regulations impacting their businesses and prepares them for examination by federal and state regulatory authorities, including the CFPB, Federal Reserve Board and state departments of insurance, financial institutions and independent auditors.

As a veteran in-house counsel, Timothy brings to his clients a client’s perspective. He prides himself on his ability to develop innovative solutions that help manage legal, regulatory and enterprise risks while keeping sight of the client’s corporate and business objectives.

During his tenure at First American, Timothy drew from his years of experience as a real estate attorney, regulatory counsel and government regulator in building and managing a comprehensive internal compliance program, developing remediation plans, designing compliant workflows and refining corporate governance practices.



He served as a legal, regulatory, legislative and political strategist for First American and for both the company and its state and national trade associations, acted as liaison to regulators, members of the press, analysts and independent auditors as to the regulatory affairs of the company. In addition, he acted as a principal officer and director of several of First American’s regulated entities.

Notably, in 2010 he coordinated the internal efforts to obtain all federal, state and international regulatory approvals to spin off First American Financial Corporation from the former The First American Corporation, a Fortune 500 company, and in 2014 managed internal efforts to redomesticate two of the company’s insurance underwriter subsidiaries.

He joined First American after having served as Senior Attorney for the Mississippi Secretary of State, where he worked as a regulator supervising the management of the state’s extensive public trust lands. For several years prior to entering the public sector, he was engaged in the private practice of law focusing his practice on civil litigation and commercial real estate transactions.

Timothy is a recognized speaker and a contributor to several industry publications and forums. He has moderated panels and provided training and continuing education nationwide to federal and state legislators and insurance industry regulators, employee and client groups, and various industry trade associations, on topics ranging from the Real Estate Settlement Procedures Act (RESPA), and other laws pertaining to regulated businesses, to regulatory compliance, changing market conditions and new insurance products and programs. In addition, he has authored and advocated for proposed legislation and testified before state legislative committees, the National Conference of Insurance Legislators (NCOIL) and the National Association of Insurance Commissioners (NAIC).

MICHAEL D. MILLER is the President & COO of Scottsdale Insurance Company, the #2 Domestic Excess and Surplus Lines carrier. The Scottsdale Insurance Company was founded in 1982. It has grown from 12 associates and $1.7 million in its first full year, to more than 1,450 associates and more than $2 billion in premium. Mike has substantial insurance industry experience and has been involved in a number of complex insurance transactions.

Mike was the Chief Financial Officer of Nationwide Insurance Company Operations and was responsible for all financial aspects and reports for the Nationwide Property & Casualty Companies where the total direct written premium was then $14 billion. Mike received a bachelor’s degree from Defiance College and an MBA from Indiana University, Kelley School of Business. He is a member of the Board of Trustees of Defiance College, Valley of the Sun United Way, and Scottsdale Chamber of Commerce.

TED NICKEL is the Commissioner of Insurance for the State of Wisconsin. Governor Scott Walker appointed Ted Nickel of Merrill, Wisconsin, as Commissioner of Insurance for the State of Wisconsin on January 3, 2011. The Office of the Commissioner of Insurance regulates the business of insurance in Wisconsin. The office has a staff of 153 and is responsible for examining industry financial solvency and market conduct, licensing agents, reviewing policy forms for compliance with state legislation, investigating

consumer complaints and providing consumer information. In addition to its regulatory duties, the agency



administers the State Life Insurance Fund, Local Government Property Insurance Fund, and Injured Patients and Families Compensation Fund.

Prior to his appointment, Commissioner Nickel worked for almost 18 years as Director of Governmental and Regulatory Affairs for Church Mutual Insurance Company in Merrill, Wisconsin. Commissioner Nickel has been actively engaged in insurance industry affairs in Wisconsin serving on the board of directors of the Wisconsin Insurance Alliance including serving as Alliance Board Chair. Commissioner Nickel served on the board of directors of the Wisconsin Insurance Security Fund and the Oklahoma Property Casualty Insurance Guaranty Association, and as a member of the Legal and Government Affairs Committee of the Property Casualty Insurance Association of America. Commissioner Nickel also worked in the Governor Tommy Thompson Administration.

Commissioner Nickel served on the Northcentral Technical College Board of Trustees for six years. While there, he served as secretary/treasurer and participated in a CEO recruiting committee. He chaired the Merrill Parks and Recreation Committee and was vice-chair of the City Planning Commission.

The Commissioner currently serves in various positions for the National Association of Insurance Commissioners. He is chair of the Midwest Zone, a member of the Executive (EX) Committee, Internal Administration (EX1) Subcommittee, and the Governance Review (EX) Task Force, vice chair of the Health Insurance and Managed Care (B) Committee, chair of the Contingent Deferred Annuities (A) Working Group, chair of the Mortgage Guaranty Insurance (E) Working Group, and chair of the Health Care Reform Regulatory Alternatives (B) Working Group. In addition, he is a member of the Life Insurance and Annuities (A) Committee, the Audit Committee, the Consumer Participation Board of Trustees, and the American Indian and Alaska Native Liaison Committee of the NAIC.

In August 2014, the Commissioner was appointed to the Federal Advisory Committee on Insurance which serves as an advisory committee to the Federal Insurance Office.

Commissioner Nickel earned his Bachelor of Science Degree in Business Administration with a concentration in Finance from Valparaiso University.

ROBERT PASSMORE is a Senior Director - Personal Lines with the Property Casualty Insurers Association of America (PCI). His responsibilities include policy development and issue identification for claims, personal automobile insurance, boat and motorcycle insurance as well as auto safety issues. He is also the staff liaison for the PCI Claims, Fraud, Auto Physical Damage and Automobile Insurance committees.

Bob joined PCI in January 2007 after almost 22 years with Liberty Mutual. While his prior experience is concentrated in automobile claims, since joining PCI he has worked extensively on legislative and regulatory issues involving claims and personal automobile insurance.

He is a member of the Society of Chartered Property Casualty Underwriters (CPCU) having received his designation in 2002.



KATE SAMPSON is the Vice President of Insurance Solutions at Lyft. After 20 years in the Commercial Insurance Brokerage Industry as Managing Director with Marsh, Inc (a division of Marsh & McLennan Companies), Kate joined Lyft (once her client back when Lyft was Zimride) as the VP of Insurance Solutions in May 2014. In addition to working proactively to address the insurance needs of Lyft, drivers, passengers and member of communities where Lyft operates, Kate, and the Lyft team work to help drive further innovation in the insurance industry to address share economy insurance exposures. Her list of former

clients includes the who’s who of the share economy, an industry she has been working with since the beginning of the decade.

Kate is no stranger to innovating in the insurance space, she is recognized as an industry expert in D&O Insurance, Transactional Risk Insurance and Private Equity Insurance Products.

AL SCHMITZ is a principal and consulting actuary with the Chicago-Milwaukee office of Milliman. He joined the firm in 1998. Al’s area of expertise is senior health care products, with a primary focus on LTC insurance. He has worked with most of the major LTC insurance carriers in the United States, assisting with product development, financial projections, appraisals, compliance issues and experience analysis. Al is an expert witness on issues relating to rating, underwriting and financial projections. He also testified before

the United States Congress on actuarial implications of the CLASS Act – the LTC reform provision in the Patient Protection and Affordable Care Act.

Al is also involved in LTC on the international front, working with Milliman’s Hong Kong office on projects in Singapore and Japan. In addition, Al leads the International Actuarial Association LTC topic team. Al has assisted clients with Medicare bid preparation and Medicaid LTC rate analysis. He has also worked with various healthcare reform projects and initiatives that examine innovative approaches to healthcare financing. Prior to joining Milliman, Al worked for eight years at an insurance company in life insurance and LTC product development.

Al has written numerous articles for the Society of Actuaries, Milliman, and other publications. He is a frequent speaker at industry meetings. He is a co-author of the LTC insurance Study Note that is used by the Society of Actuaries Education and Examination Committee as required reading for its Design and Pricing Exam.

Al has been significantly involved in various industry professional committees as Chair of the Academy of Actuaries Principles-Based Reserve Technical Workgroup, Leader of the International Actuarial Association (IAA) Long-Term Care Team, member of the Society of Actuaries LTC Section Council, and member of the Academy of Actuaries Long-Term Care Risk-Based Capital Workgroup. He also recently was part of a small group of actuaries representing the profession through a Society of Actuaries and Academy of Actuaries committee that provided analysis to the U.S. Senate Committee on Health, Education, Labor and Pensions with respect to potential LTC reform.

Al is a Fellow in the Society of Actuaries and a Member of the American Academy of Actuaries. He graduated from the University of Wisconsin-Oshkosh with a bachelor’s degree in applied mathematics, and obtained his MBA from Marquette University.



LAWRENCE SMITH is a founding partner of SmithAmundsen. Larry has tried over 125 jury cases throughout his career in different practice areas including product liability, transportation, aviation, employment, and commercial law. He is also an authority on the defense of traumatic brain injury claims. His practice focuses on risk management consulting, case monitoring, mediation, arbitration, and implementing successful trial strategies. Larry was named to the Illinois Super Lawyers®* list for 2005-2014, a peer

review designation published by Thomson Reuters. Larry has received an “AV” rating from Martindale-Hubbell for his legal ability and ethics and was named a Leading Lawyer in transportation defense law (aviation, FELA, and maritime), alternative dispute resolution (employment and personal injury), and products liability defense law by the Law Bulletin Publishing Company.

Larry is licensed to practice in Illinois, the U.S. District Courts for the Northern, Central, and Southern Districts of Illinois, the U.S. District Court for the Eastern District of Wisconsin, the U.S. District Court for the Eastern District of Missouri, the U.S. District Court for the Northern District of Indiana, and the U.S. District Court for the District of Idaho. He has litigated cases from Idaho to New York and from Minnesota to Georgia.

Larry is a contributor to the SA Labor & Employment Law Update blog and a past moderator of Insurance Forum programs in 2011, 2012 and 2013.

BRIAN C. WEGNER is the President and Chief Executive Officer for Senior Health Insurance Company of Pennsylvania (SHIP) and Fuzion Analytics. Brian is a 30 year veteran of the insurance industry in leadership roles involving management of business lines, operations, and Information Technology. SHIP is one of the largest and oldest closed blocks of LTC business in the industry. Fuzion was formed in 2012 specifically to provide analytics and other services to SHIP and the LTC insurance industry.

Brian served as VP over LTC Operations for Conseco from late 2006 until that business was spun off to form SHIP in 2008. Brian served as Chief Information Officer (CIO) of Fortis Health (now Assurant Health) and Blue Cross Wisconsin (acquired by Wellpoint). In addition to his CIO roles, Brian led P&L and Operations for one of Fortis Health’s largest business lines, comprised of small group and individual medical insurance.

Brian graduated the University of Wisconsin, and has degrees in Business Administration and Management Information Systems.

KENNETH M. WEINE is the President of JVP Partners, Inc, an insurance regulatory compliance, corporate governance, and internal audit consulting company. Ken has over twenty five years experience advising insurers, counsel, and regulators on compliance, internal audit, and financial and market conduct matters. This includes new regulations including ORSA and the corporate governance regulations. Additionally, Ken has assisted



insurers on mergers and acquisitions. He also assisted companies managing their enterprise risk management process. Companies included P&C and Life/Health.

Ken has consulted insurers on technical issues related to key activities including financial reporting, claims, underwriting, and reinsurance. He also assisted insurers on improving internal controls, corporate governance, and risk assessments capabilities. Additionally, he has consulted on the capability maturity of company operations including key processes.

Ken has extensive examination experience including assisting insurers in undergoing examinations and demonstrating how controls adequately managed risk. He also trained and prepared executive management for undergoing an examination. He has helped companies reduce fines and remove findings.

Ken also has extensive experience assisting insurance departments with their statutory charge. Mr. Weine assisted the NAIC’s Risk Assessment Working Group in drafting the risk-focused changes to the NAIC’s Financial Condition Examiners Handbook and co-authored the NAIC Receiver’s Handbook chapter on claims. He also assisted in changes to the Market Conduct Examiners Handbook. Mr. Weine oversaw the first risk based financial examination in the US.

Additionally, Ken advised several commissioners and the NAIC’s Life Insurance and Annuities (A) Committee, Small Face Amount Working Group on its market conduct investigation.

Ken is the Chairman of the Insurance Forum Committee, an annual national insurance symposium featuring insurance commissioners, insurance and reinsurance company executives, and attorneys. He is also Chairman of RiskLink.org, an organization that provides free risk management consulting to woman and minority owned businesses that cannot afford it. He is also a frequent speaker at other industry events.

Ken is a retired member of the Board of Directors for the International Association of Insurance Receivers and received his AIR accreditation from the organization. He is also a member of the Society of Financial Examiners and the Institute of Internal Auditors, and the Association of Insurance Compliance Professionals.

JEFF ZYCH is a Senior Managing Consultant with IBM Global Business Services specializing in Insurance. Jeff’s advisory expertise is focused upon “Office of the CFO and COO” strategy and operations functions with deeper internal consulting experience in finance, treasury, audit, risk, actuarial, claims and underwriting transformations. This includes change management, finance and accounting operations strategy, cloud, mobile and social business solutions, accounts payable and receivables management, budget &

forecasting. He is also deeply involved in IBM’s Smarter Workforce innovations and HR solutions for large Global organizations looking to enhance Learning Delivery and end to end HR & Employee Retention strategy. He is a chartered audit and risk professional, a former Insurance industry COO and CFO and finance governance leader with 20+ years of experience on both the brokerage and carrier sides of the industry.

© 2014 Insurance Forum

The Insurance Forum Committee

The Insurance Forum Committee is committed to securing the most influential insurance regulators, business leaders, attorneys and corporate officers for this annual event. The Forum is a unique and independent event. No officers have ever had a panel. No speakers have ever been chosen through sponsorship. Some long time sponsors have never been on a panel. The Forum Board of Directors is as follows: Kenneth Weine, Chairman Jim Parizek Andrew Nummy Karen Gombiner Patricia Collins Dorothy Strofs

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Sponsors

The Insurance Forum would like to thank our generous sponsors: Corporate Sponsors

JVP PARTNERS, INC JVP Partners, Inc is a consulting firm providing expert financial, operational, and strategic advice on:

• Compliance and Insurance Regulatory Issues • Corporate Governance • Internal Audits and Sarbanes-Oxley • Financial and Market Conduct Examinations • Quality Assurance Reviews • Corporate and Enterprise Risk Management • Risk Assessments • Best Practices

JVP’s team of credentialed experts includes CPAs, Actuaries, MBAs, CIA’s, CISAs, AIAs, CFEs, AIRs and other insurance related designations. All of JVP’s professionals have many years experience, over 20 on average, and we do not leverage work to inexperienced staff. JVP’s clients retain the firm when it matters most – when an experienced and trusted advisor is essential. JVP dedicates only the most experienced personnel on engagements, and they devote their full attention until the engagement is completed. This approach provides the firm’s clients with the most thoughtful and detailed answers to their most critical questions. JVP’s Clients Include:

• Insurers (Property & Casualty, Life & Health, and Managed Care Entities) • Insurance Related Entities • Attorneys • Auditors • Regulators such as State Insurance Departments • Public and Non-Public Companies

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JVP has also been at the center of developments in insurance regulation. The firm advised the NAIC and state insurance departments on the creation of new requirements such as Risk-Focused Financial Examinations and insolvency matters. JVP assisted the NAIC’s Risk Assessment Working Group in drafting the Risk-Focused changes to the NAIC’s Financial Condition Examiners Handbook, and advised the NAIC and state insurance departments on the implementation of the Risk-Focused Financial Examination process. JVP personnel also co-authored the NAIC’s Receiver’s Handbook chapter on claims. Additionally, JVP advised several commissioners and the NAIC’s Life Insurance and Annuities (A) Committee, Small Face Amount Working Group on its Market Conduct investigation. JVP is expert at advising insurers on meeting the requirements of new regulations due to the firm’s involvement their creation. Also, JVP has advised risk management clients on the appropriateness of their insurance programs, including identifying gaps and overlaps. The firm’s work also includes consulting companies on their internal risk management capability maturity and ability to match risk transfer programs with risk strategies. JVP’s experience consulting insurers, regulators, and risk management clients (large insurance purchasers), plus the firm’s involvement in assisting insurance departments and the NAIC create new requirements, provides JVP a unique perspective for advising clients. This distinctive experience also led to the creation of JVP’s Best Practices advisory group. For additional information, please contact Kenneth M. Weine, AIR at (847) 337-8538, [email protected] or visit our website at www.jvppartners.com. Sidley Austin LLP is a global full service law firm with 1,900 lawyers practicing on four continents (North America, Europe, Asia and Australia). Sidley is one of only a few internationally recognized law firms to have a substantial practice group with multidisciplinary capabilities devoted to the insurance and financial services industry. We have 35 years of experience and a team of 85 lawyers devoted exclusively to providing transactional, regulatory and dispute resolution services specifically to the insurance industry. Our Insurance & Financial Services Group lawyers have a deep knowledge of the industry and understand its unique issues and challenges. In addition, as part of a global law firm, we can call upon the resources of experienced lawyers in a variety of other practice groups, including tax, general litigation, employee benefits, corporate, investment funds, securitization, healthcare, litigation, banking and financial institutions, regulatory practice groups and many more.

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We offer extensive experience in domestic and international insurance and reinsurance transactions, as well as dispute resolution and regulatory matters. Regular clients include many of the largest U.S. and international insurance and reinsurance companies, insurance brokers, private equity firms, banks, investment banking firms and regulatory agencies, for which we provide regulatory, corporate, securities, mergers and acquisitions, litigation, securitization, tax, reinsurance dispute, class action defense and other services. Sidley was the only firm named “Insurance Powerhouse” (the highest rank) in the BTI Client Relationship Scorecard 2014: Ranking Law Firm Client Relationships. www.sidley.com

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Supporting Sponsors

Robinson Curley & Clayton, P.C. is one of Chicago’s leading boutique business litigation law firms. We have extensive trial and appellate experience in courts around the country on a broad range of commercial disputes, including insurance insolvency matters. The firm, which is majority women-owned, provides the highest quality legal services with an unwavering commitment to value, efficiency and individualized client attention.

Locke Lord is a full-service, international law firm with offices in Atlanta, Austin, Chicago, Dallas, Hong Kong, Houston, London, Los Angeles, New Orleans, New York, Sacramento, San Francisco and Washington, D.C. Our team of approximately 650 lawyers has earned a solid reputation in complex litigation, regulatory and transactional work. We serve our clients' interests first, and these clients range from Fortune 500 and middle market public and private companies to start-ups and emerging businesses. Locke Lord's more than 70 insurance lawyers have a breadth and depth of experience that touches on every aspect of the insurance and reinsurance industries. Our insurance teams focus on a full range of insurance matters and continue a tradition of 100-plus years serving insurance clients around the United States and around the world. Locke Lord's Insurance attorneys have earned a global reputation for excellence, dependability, solid solutions and client service and are known for helping clients meet the challenges of today while preparing for the opportunities of tomorrow.

2014 Insurance Forum Registrants

First Name Last Name Title Organization

Serge Adam Partner Schuyler Roche & Crisham Kristy Allen AVP Reinsurance Contracts CNA InsuranceDavid Anderson SVP GoldwaterTaplinWilliam Barnes General Counsel Dearborn National Life Ins. Co.Reynold Becker Government Relations Director Combined Insurance/ACE GroupDavid Behnke Partner B2B CFOPaul Bergmann Principal Paul Bergmann ConsultingRick Bingham Owner Glynloen ConsultingPaul Blume Senior Vice President Property Casualty Insurers Association of AmericaSteve Boss Sr. Claims Adjuster RGA Claims Management Bill Boyce Account Manager Wolters Kluwer Financial ServicesMichael Brennan Director The Warranty GroupCatherine Bresler Vice President, Counsel-Government Relations The Trustmark CompaniesSteve Broadie Vice President, Financial Policy Property Casualty Insurers Association of AmericaDiane Buckley CFO North American CompanyPeter Bulandr Senior Vice President and Group Head Associated BankMonica Byrd International Controller The Warranty GroupGina Cabay Sr. Counsel - Regulatory MarkelRuth Ann Cacchione Attorney Cacchione Consulting, Inc.Charles Carter President Charles B. Carter and Associates, Inc.Edward Chidiac Senior Vice President Associated BankRandi Cigelnik Senior Vice President, Corporate Secretary & General Counsel Property Casualty Insurers Association of AmericaDonna Ciszewski Financial Examiner INS Regulatory Insurance Services, Inc.Joseph Clak Partner Risk & Regulatory ConsultingSharon Clark Commissioner Kentucky Department of Insurance David Clayton Senior Audit Manager Eide Bailly, LLPMarianne Collopy Carl Attorney Allstate Insurance CompanySarah Condon Vendor Relations Consultant CNA InsuranceJohn Conway Principal Conway Insurance ConsultingDale Coonrod Deputy General Counsel Office of the Special Deputy ReceiverDan Cotter General Counsel Fidelity Life AssociationAlan Curley Shareholder Robinson Curley & Clayton, P.C.Michael Cybulski Director, Risk Management Cummins-Allison Corp.Jay Deiner Exec. V.P., Secy. & General Counsel Ormond Insurance & Reinsurance Management Services, Inc.Perry DiCastri Examiner Self EmployedStephanie Dobecki Associate Sidley Austin LLPMary Kate Donnelly Senior Attorney Allstate Insurance CompanyFrank Donofrio Insurance Risk Management Specialist Federal Reserve Bank of ChicagoJohn Dore President Sheridan Ridge Advisers LLCRick Ehlers VP & Associate General Counsel CNA Insurance CompaniesEdwin Felice Managing Director Allegis PartnersMark Fischer President HRMSIMichael FitzGibbons President FitzGibbons and Company, Inc.John Fitzpatrick Principal Consultant Cavendish Consulting Eric Fogel Partner SmithAmundsenJames Frasher Assistant General Counsel & Assistant Secretary Northwestern MutualMatt Furton Partner Locke Lord LLPMatthew Furton Partner Locke Lord LLPJohn Gaines Senior Vice President/Secretary Acceptance Insurance CompanyMelissa Giannini Senior Claims Analyst OMSNICKaren Golden Director, Risk Management Kraft Foods Group, Inc.Michael Goldman Partner Sidley Austin LLPMichael Gooding Deputy General Counsel Fidelity Life AssociationMark Goodman Partner Freeborn & PetersEarnest Gregory Senior Attorney Navistar, Inc.Thomas Hampton Senior Advisor Dentons US LLPWilliam Harrington Partner PwCTrent Heinemeyer SVP and General Counsel MedProRebecca Hemmings Senior Corporate Counsel Harbinger Group Inc.Louise Hensleigh Counsel The Medical Protective Company

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Douglas Hertlein Partner Allen Kuehnle Stovall & Neuman LLPAndrew Holland Partner Sidley Austin LLPMolly Horrigan Excess Casualty Zurich North AmericaLiliana Huerta Vice President Associated BankGeoffrey Isaac Senior Vice President, Claims & Legal The Plexus GroupeMartin Jackson Partner Sidley Austin LLPJulie Johnston Contracts Director CNA InsuranceDeborah Jones Retired RetiredJames Jones Executive Director Katie School of InsuranceJamie Kandalepas Senior Assistant General Counsel Zurich North AmericaTimothy Kemp Partner Locke Lord LLPMichael Kilkenny Managing Director & Principal Ingardus, LLCNorman Koefoed Owner Prairie States Insurance ConsultantsDaniel Kohn Attorney Daniel KohnTeresa Kopriva Senior Counsel CNA Insurance CompaniesLaura Kotelman Associate Director of Business Development Sidley Austin LLPBill Kovacs Director Capital Development Ins. Co.David Kroeger Partner Jenner & Block LLPCorinne Kruse Assistant Vice President Zurich Insurance Co.Raymond Lapinas Consultant Salo, LLCKristen Lay Senior Attorney Allstate InsuranceLorrie Leonard AVEP & Sr. Counsel Allianz Global Corporate & SpecialtyLisa Levine General Counsel U.S. SoccerDeborah Ligda Compliance Director ZurichJean Liu Director of Compliance Accretive HealthBen Llaneta SVP, General Counsel & Compliance Officer Brit Global Specialty USAMichael LoGiudice Managing Director CBIZ Valuation GroupAaron Lunt Assistant General Counsel The Warranty GroupJoe McDavitt Senior Vice President Laurel Hill Advisory GroupChristine Michals Vice President CNA InsuranceBarbara Miller Sr. Assistant General Counsel ZurichMichael Miller President and Chief Operating Officer Scottsdale Insurance CompanyMaureen Mulville VP Compliance & General Counsel Illinois Mutual Life InsuranceCatherine Nelson Assistant General Counsel Health Care Service CorporationDave Neumeister Sr. V.P. and General Counsel HDI-Gerling America Ins. Co.Ted Nickel Commissioner Wisconsin Office of the Commissioner of Insurance Dennis Norton Assistant General Counsel CNA InsuranceScott Novak Sr. Asst. General Counsel Zurich North AmericaDouglas Ochab Director VKCGreg Oguss Associate Sidley Austin LLPJohn O'Hara Senior Consultant The Warranty GroupAngela Ohlmann Principal & CFO Ingardus, LLCBrian Ollech SVP, Global Controller The Warranty GroupAmir Ovcina Assistant General Counsel Health Care Service CorporationRobert Passmore Senior Director - Personal Lines Property Casualty Insurers Association of AmericaChristine Pecha Legal Counsel Medical ProtectiveMarion Penny Senior Counsel CNA InsuranceAmy Pinkerman Condo Assistant General Counsel Health Care Service CorporationDebra Piper Senior Counsel - Regulatory Markel CorporationCraig Posson General Counsel Great West Casualty CompanyJanis Potter Executive Director Illinois Life & Health Insurance Guaranty AssociationJoseph Radogno Corporate Counsel Allstate Insurance CompanyRichard Rager President Old Republic International CorpKim Raisbeck Director, Financial Regulation CNA InsuranceAllen Reed Senior Attorney Allstate FinancialScott Reed Secretary and Asst. General Counsel Illinois Mutual Life Insurance Co.Andrew Refka Account Manager - Group Long Term Care CNA InsuranceKerri Reuter Attorney Allstate Insurance CompanyJanice Richards Vice President JPMorgan ChaseBryan Roberts Assistant General Counsel Dearborn National Life Insurance Company

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Michael Rybak Vice President & CFO Hiscox Insurance Company Inc.Robert Sajdak Corporate Counsel Hub International LimitedKate Sampson Vice President, Insurance Solutions Lyft, Inc.Terry Sampson Director, Risk Management The Art Institute of ChicagoJames Schacht President The Schacht GroupShimrit Scher Associate Sidley Austin LLPAl Schmitz Principal and Consulting Actuary MillimanFrancine Semaya Legal & Insurance Regulatory Consultant Legal & Insurance Regulatory ConsultingWilliam Shepherd Counsel State Farm Insurance Mark Sickles Partner, Attorney Sudekum Cassidy & Shulruff, Chtd.William Simonaitis Senior Attorney Allstate Insurance CompanyErin Slater Senior Counsel Wells FargoLaura Smith Assistant General Counsel Health Care Service CorporationLawrence Smith Partner SmithAmundsenMaciej Sokolowski Attorney Maciej Sokolowski, Attorney at LawKathy Starck Compliance Consultant Zurich North AmericaCynthia Starrett Director, Troubled Companies Noble Consulting Services, Inc.Heather Stenmark Staff Attorney Allstate Insurance CompanyJames Stephens Deputy Director Illinois Department of InsuranceMichael Stern Vice President of State and Industry Affairs ACE GroupStephen Stone Director, Enterprise Rise Management The Northwestern Mutual Life Insurance CompanySusan Stone Partner Sidley Austin LLPRonald Strohm Claims Management AIG Vendor ServicesElliot Stultz SVP and Deputy General Counsel Allstate Insurance CompanyDebra Suchor Transactional Counsel Galmont LegalMaryanne Swaim PE, M&A Practice HylantJoseph Tann Principal Law Offices of Joseph S Tann, Jr., Esq.Douglas Terry Senior Vice President IPS Search, Inc.Mark Tharp Chief Executive Officer Tharp and Associates, Inc.Ben Thomas Counsel Medical Protective Charles Thomas Vice President CNA InsuranceDavid Trace Claims Account Manager Arch Insurance CompanyMichael Vahey Senior Counsel CNA InsuranceRichard Veed President Realtime ServicesRamesh Verma Insurance Calgary Great Way FinancialTim Walsh Risk Manager Cook CountyJeremy Watson Associate Sidley Austin LLPAnn Weber Director of Regulatory Affairs Society of ActuariesBrian Wegner President and Chief Executive Officer Senior Health Insurance Company of PennsylvaniaKenneth Weine President JVP Partners, Inc.Tom Werlein Counsel The Medical Protective CompanyDonna Wilson Assistant Receiver/Estate Manager Oklahoma Receivership Office IncJill Wolowitz Vice President, Health Policy Blue Cross and Blue Shield of IllinoisCindy Wood Director Risk & Regulatory ConsultingKenneth Wylie Lawyer Sidley Austin LLPCheryl Yakey Senior Regulatory Counsel Kemper CorporationKaren Yotis Journalist and Author Straight Talk on InsuranceGerald Zimmerman Corporate Counsel Allstate Insurance CompanyAgnes Zurek Laws and Regulations Analyst ZurichJeff Zych Senior Managing Consultant IBM

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