Whether the cost would be accounted for in other acquisition or in general
expense may be more of an annual statement and IEE question. You might be open
to criticism in states that take an active roll in monitoring the allowable
underwriting expenses that can be loaded into rates.
As a regulator, I would first consult with others in my state DOI regarding the
anti-rebating question and any other issues. Assuming we got past that (this
may be a large assumption) the next question is how will this affect loss
experience and rates?
As an actuary, I wonder whether you're overestimating the impact to frequency
and pure premium. How many of your policyholders are really going to take
advantage of the coupons? Will participation reach a cost effective level? How
large must a discount be to make a family decide to travel by air rather than by
car? With the variation in prices for airline tickets we see today, would a
coupon have any noticeable affect on consumer decision making?
John Pedrick
Actuarial Supervisor
Ohio Department of Insurance
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