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NCCI Responds to Charge of High Prices for Rate Filings

Dear Editor:

Will Peacock's letter to the editor that was recently printed in the May AR was so laden with inaccuracies and omissions that I felt it was imperative to set the record straight. For example, Mr. Peacock asserts that he requested four rate filings from the National Council on Compensation Insurance, Inc. (NCCI) and was quoted a price that he felt was too high. What he fails to note, however, is the fact that he has refused to provide information that would enable NCCI to license the use of the filings at a price that is commensurate with his intended use of the products. Furthermore, he also neglects to point out that he is a competitor of NCCI who clearly seeks to make use of this valuable product for commercial purposes. Perhaps Mr. Peacock does not feel he should bear the fair costs of his use of NCCI's intellectual property, but believes he should be subsidized by NCCI's member companies.

Contrary to the inferences raised by Mr. Peacock in his letter, the price charged by NCCI for the licensed use of rate filings by outside consultants is rational and appropriate. For example, an actuarial consulting firm doing work on behalf of an NCCI affiliate may be licensed to use the related rate filing, at no additional charge, and will be asked to protect the filing from additional distribution. Alternatively, if a consultant wishes to use a filing on behalf of an insurer that is not an NCCI affiliate, the consultant is charged a premium based charge that is the same as that charged an NCCI affiliate plus 25 percent. The difference reflects the lack of affiliate investment and commitment that non-affiliates do not provide to NCCI. Only if the consultant refuses to disclose the intended use of the rate filing will NCCI charge the consultant a fee based on the premium of the affiliate with the highest premium in that state plus a 10 percent administrative fee. In the instant case, Mr. Peacock has refused to disclose his intended use of this valuable intellectual property.

Mr. Peacock also goes to great lengths to deny the existence of NCCI's intellectual property - somehow inferring that these valuable property rights don't exist because of regulatory and actuarial involvement in the ratemaking process. Apparently Mr. Peacock does not understand federal copyright law, but he also fails to recognize that the loss cost filings prepared by NCCI represent the culmination of substantial investments in technology, countless hours of human effort, and the application of techniques developed over many years at great expense. It should also be noted that Mr. Peacock ignored the fact that the Florida court decision was a response to a motion to dismiss and is currently on appeal to the Circuit Court of Appeals.

Finally, Mr. Peacock incorrectly suggests that NCCI has not made necessary data available when, in fact, a myriad of data products are offered to our members and customers at reasonable prices. For example, our actuarial customers regularly purchase the highly valued NCCI Annual Statistical Bulletin, Economic Conditions Report, Schedule Z Summary Data, Circular Services, and other key data products and services. Unlike Mr. Peacock, our customers' responses to these products are overwhelmingly positive and negative comments on our pricing are infrequent. Interestingly, when we have asked Mr. Peacock if some of the products identified above might be appropriate for his professional needs (in lieu of the full rate filing), he has failed to respond.

NCCI welcomes competition and we believe we have made many efforts to accommodate Mr. Peacock and his business needs, despite the fact that he is a competitor of NCCI and our affiliates. As a result, we are perplexed by his continuing written diatribe against NCCI. NCCI is not a governmental entity. NCCI is a not-for-profit corporation, owned by affiliate members who have agreed to support the organization through financial support and data contributions. NCCI's affiliates have embraced competition, but they are not willing to subsidize their competitors or others who are unwilling to pay the contributive costs of doing business. Although Mr. Peacock indicates that he is willing to pay a reasonable price for NCCI's products and services, in fact it appears that what he really wants is either free or subsidized access to products and services that are not only valuable intellectual property, but are costly to produce. We don't think that's appropriate or fair.
William D. Hager
Chief Executive Officer, NCCI

[Editor's note: Look for more discussion between Will Peacock and the NCCI in the November AR.]