From the Readers

Is NCCI Price Gouging?
Dear Editor:
I recently requested four rate filings from the NCCI (National Council on Compensation Insurance) for the states of Georgia, Florida, Alabama and Mississippi. I was shocked to learn that the total cost for the filings would be $957,557. Of course I could have gotten a copy from the insurance department, but that would be in copyright violation. Besides, some states, e.g., South Carolina, now allow NCCI to withhold actuarial content.

Pricing and copyright protection were non-issues for over 70 years of NCCI's existence. With the exception of a few independent states, NCCI is the P&C insurance industry arm of concerted ratemaking for workers compensation. Sanctioned at both the state and federal level, NCCI has been the state custodian of workers compensation data. Although created by the insurance companies at the behest of the individual states to supply needed ratemaking detail for the purpose of regulating rate adequacy, NCCI now claims proprietary interest in its work based on "intellectual property" rights. It appears the states really goofed here.

The explanation I ultimately received from the business experts at the NCCI was something to the effect that my company is expected to bear the full costs of the NCCI data collection and ratemaking systems in each state as if I were the largest insurer in each state. Say what? Why can't I just pay a reasonable price? Apparently NCCI needs revenue to retool its infrastructure now that it's assessment base has shrunk with the great success of self-insurance.

Who owns the workers compensation data is not spelled out in the law. But NCCI controls the data and denies public access through outrageous pricing and licensing restrictions. NCCI is calling the actuarial rate development its intellectual property when, in fact, the workers compensation ratemaking procedures have been developed and published by the general actuarial community over the last forty years or more, and despite the fact that a federal court in Florida recently ruled that these data and procedures are not proprietary.

It is incumbent for actuarial professionals to be able to reference industry data in order to comply with actuarial standards for loss reserving and ratemaking purposes. This is, in fact, one of the primary reasons for the existence of statistical agencies under the exemptions allowed by the McCarran-Ferguson Act.

Join me in making a strong and clear case against these NCCI practices which potentially threaten the integrity of all our actuarial analyses in workers compensation.

Will Peacock

By Another Name
Dear Editor:
I would like to add my thoughts on the renaming of "incurred" losses as proposed by Hank Youngerman, FCAS. I agree that we should begin with reported losses, but then we should develop them to ultimate losses with the difference being IBNR.

There is an additional problem for rating organizations that use, as one of their methodologies, incurred losses (including IBNR) development (i.e., developing losses that were already developed by member insurance companies). In this case, you can begin with "Company ultimate losses" and develop them to "Industry ultimate losses."

Brian Turner

P.S. Who let Benjamin "Ben" Dover submit a letter to the editor? Next time you'll get letters from his sister Eileen Dover and her friend Jim Naysium!

More on Prop. 213
Dear Editor:
Regarding the article on California's Prop. 213 in the February AR, there is another flaw in the Department's calculation besides the one Gary Dean pointed out. The calculation considers only drivers; but BI claimants can also be passengers, bicyclists, etc. Obviously there is no requirement for passengers or pedestrians to have auto insurance, so Prop. 213 has no effect on these claimant's right to sue for pain and suffering. According to IRC's claim study, 61 percent of BI claimants countrywide were drivers of autos or motorcycles. If we use this figure Dean's estimated savings of 8.68 percent is reduced to 5.29 percent.

Doug Hoylman, FCAS

Correction
Dear Editor:
I just wanted to point out an error in Michael Walters' story "The Top 10 Actuarial Stories of 1996" that appeared on page 1 of the latest Actuarial Review. His No. 1 story is about the mergers of reinsurers. He then lists the following mergers: Swiss Re/American Re, Munich Re/National Re, Gen Re/Cologne Re and ACE/Tempest. Of the four mergers mentioned he missed on two of them. It should have been: Swiss Re/M&G Re, Munich Re/American Re, and I believe, Gen Re/National Re.

Karen Pehrson, FCAS

Ms. Pehrson is correct. The list of mergers should have read: Swiss Re/M&G Re, Munich Re/American Re, Gen Re/National Re/Cologne Re, and ACE/Tempest.

Responses to Bob Anker's Letter
Editors' Note: The AR has obtained a number of letters and E-mails written to Bob Anker and the AR regarding Bob Anker's February 24, 1997, letter to members. Following are two responses. We intend to print more in the August 1997 issue.

Dear Editor:
President Robert A. Anker sent a letter dated February 24, 1997, to the CAS membership regarding the North American Actuarial Journal. The letter reflects what I believe to be simple misunderstandings about the NAAJ and the actuaries who are responsible for it. As the CAS member who serves on the SOA's Committee on Encouragement of Literature, it is appropriate for me to respond. These are, however, my personal remarks.

The NAAJ does not replace the Transactions of the Society of Actuaries, which still exits to publish technical refereed papers, but rather the NAAJ is a new journal designed to appeal to actuaries of all disciplines. The NAAJ does not exist to compete with the Proceedings of the Casualty Actuarial Society except in the limited sense that a paper of general interest to all actuaries might have been published in the Proceedings had the NAAJ never been created. Indeed, papers of interest to all actuaries have been published in the Proceedings, but with the result that they were readily available only to members of the CAS.

The Committee on Encouragement of Literature exists to stimulate submissions to all SOA publications. SOA President David Holland has asked us, as members of the SOA, not to solicit papers specifically from members of the CAS because of the concerns of the CAS Board of Directors that were expressed in Anker's letter. Nonetheless, all actuaries are permitted to submit articles of general interest to the NAAJ. Indeed, many members of the CAS are also members of the SOA, the Academy of Actuaries, the Canadian Institute of Actuaries, and the Conference of Actuaries in Public Practice, and a journal directed to all actuaries would serve its purpose poorly if it were to draw a line between the knowledge of value to actuaries and the knowledge that might be imparted by a member of the CAS.

The Board of Directors of the CAS decided not to support the work of the NAAJ. Anker's letter refers to "the long term desire of the CAS to retain independence and ... continued assurances for the SoA that they have no plans to ‘take over’ the CAS." There were perhaps other reasons, too. Still, actuarial science is changing and, as Shane Chalke has pointed out, there is only one science that the actuary of the future will practice. It seems likely that when all actuaries learn the same science, all actuaries will be members of the same professional organization. This onslaught of impartial science is as uncaring of the divisions that currently separate actuaries as the armies of Norway were uncaring for the court intrigue that drove the plot of Hamlet. Science will eventually wear the crown; it is for us, in the meantime, to carry out the business of being an actuary with whatever grace we can muster.

Oakley E. Van Slyke, FCAS, ASA, MAAA

Editors' Note: The fact that the NAAJ is intended to replace the SOA's Transactions is confirmed in a February 25, 1997, letter from David Holland, president of the SOA, to CAS President Bob Anker, and we quote: "It was a difficult decision for us to end the Transactions, which had been our scholarly journal and flagship publication from the inception of the SOA. (emphasis added.)

Dear Bob Anker:
Your letter voiced my concerns very well. I believe this journal [the NAAJ] goes well beyond the competition for authors. It almost feels like a war as to which organization voices the opinion of casualty actuaries. This journal only has the support of the SOA yet it seems to imply that it is the professional voice of "actuaries." The last time I looked, the SOA is a professional organization of non-casualty actuaries.

I have recently become involved with the Conference of Consulting Actuaries in meeting planning. In that case we are not usurping anyone. We are simply trying to give other voices a chance to be heard. In addition, we give consultants an opportunity to discuss their needs with other consultants. I believe there are positive opportunities with the CCA. Yet with the Journal, I do not see this positive approach to our difference with the SOA.

I called the SOA to voice my concerns. I also had a nice conversation with Tim Tinsley at the CAS. Again, thanks for voicing my concerns, too.

Howard Cohen