FAQ - Underwriting
The following are Underwriting questions and answers pertaining to cedable
coverages as stipulated in Rule 6 of CAR's Rules of Operation, CAR's Commercial
Automobile Insurance Manual and CAR's rate edit penalty program pertaining to the
premium dollars listed on each statistical record.
Questions:
What are the penalties associated with failure to comply with the rate edit program?
Are there penalties for failure to respond to discrepancy reports produced by the Experience Rating System?
Can Hired Auto or Non-Ownership liability be written on a stand-alone basis in CAR?
What are the cedable limits of liability for private passenger and commercial business?
When, if ever, is a Servicing Carrier allowed to cede coverage in excess of the limits stipulated in Rule 6?
What policy form should be used when writing dealer operations only?
What policy form should be used when writing repair or service operations with incidental dealer exposure?
What policy form should be used when writing dealer operations with incidental repair plate exposure?
What is the purpose of Garagekeepers Legal Liability (GKLL)?
Can an insured get Garagekeepers Legal Liability (GKLL) and physical damage for an incidental dealer exposure?
Can Garagekeepers Legal Liability and physical damage for incidental dealer exposure be written on a stand alone basis?
Is a Garagekeepers Legal Liability (GKLL) policy without plates cedable?
What coverage is no longer available in CAR for policies effective 07/01/04 and after?
Does our company have the option of adopting the modified Garage Policy referenced on Accounting and Statistical Notice 410?
Answers:
What are the penalties associated with failure to comply with the rate edit program?
For private passenger, a company that does not reduce its error percentage equal to
or less than the established rate edit tolerance within the six month timeframe,
will be assessed a Statistical Data Quality Penalty of $1 per error record in
excess of the tolerance level, with a minimum of $2,000 assessed. An additional
penalty of $2,000 per month will be assessed for each subsequent month that the
error percentage remains uncorrected and a company remains over the rate edit
tolerance. For commercial, a company that does not reduce its error percentage
equal to or less than the established rate edit tolerance within the six month
timeframe will be assessed a penalty of $2,000. An additional penalty of $2,000
per month will be assessed for each subsequent month that the error percentage
remains uncorrected and a company remains over the rate edit tolerance.
For both private passenger and commercial business, companies are responsible for
assuring that their cumulative percentage of rate errors for each line of
business and policy year remain below the established rate error tolerance of
2%. Once a company exceeds the rate edit error tolerance, and if the established
minimum number of error records per line of business is exceeded, the company
will be provided with six accounting months from the error listing cycle in
which the tolerance was exceeded to reduce its rate edit error percentage to
within the established tolerance. For private passenger, the minimum is 200
records in error per line of business and, for commercial, the minimum is 50
error records per line of business.
Are there penalties for failure to respond to discrepancy reports produced by the Experience Rating System?
Failure to provide CAR with notification of a ceded policy’s experience rating status
within the proscribed timeframes will result in the assessment of penalty fees.
The amount of a penalty is dependent upon the receipt date as follows:
- 121-150 days from the policy effective date - $25
- 151-180 days from the policy effective date - $50
- 181-210 days from the policy effective date - $75
- 211 or more days from the policy effective date - $100
Reports are produced on a quarterly basis from the Experience Rating System. These
reports compare information contained on the experience rating file to data
which has been statistically reported. Policies found to be eligible for
experience rating based upon their statistical data for which a corresponding
record is not found on the experience rating file are listed and provided to the
Servicing Carrier for resolution. Resolution of this discrepancy can be the
submission of the appropriate information to the experience rating file,
correction of erroneous statistical data, or an explanation as to why a
particular policy is not eligible.
For further information on CAR’s online experience rating application, please
refer to the ,
Telecommunications Manual, Chapter 15 - Experience Rating System.
Can Hired Auto or Non-Ownership liability be written on a stand-alone basis in CAR?
Hired Auto and Non-Ownership liability coverage may be written on a stand-alone basis
and ceded to CAR. Hired Auto Physical Damage coverage is not cedable.
What are the cedable limits of liability for private passenger and commercial business?
Massachusetts law requires that a Servicing Carrier must make available at least the coverages
and limits of liability listed below to both private passenger and commercial
risks reinsured through CAR.
The cedable limits for the liability coverages are as follows:
- Bodily Injury - $250,000/$500,000
- Medical Payments - $5,000
- Uninsured Motorist Coverage - $250,000/$500,000
- Underinsured Motorist Coverage - $250,000/$500,000
- Property Damage - $50,000
Personal Injury Protection
The cedable limits for the physical damage coverages are as follows:
- Collision - $500 Deductible
- Limited Collision
- Comprehensive - $500 Deductible
- Fire and Theft - $500 Deductible
- Comprehensive or Fire and Theft - $100 Glass Deductible
Additionally, all coverages and limits required by any financial responsibility law, or state
or federal regulation as defined in Rule 2 of the CAR Rules of Operation
under the definition of an eligible risk, are to be made available for private
passenger and commercial ceded risks.
For private passenger business, in addition to the cedable coverages and limits
noted above, CAR Rules of Operation allows a Servicing Carrier, at its
discretion, to increase the cedable limits for policies issued in accordance
with the Private Passenger Automobile Insurance Manual.
For commercial business, in addition to the cedable coverages and limits noted
above, CAR Rules of Operation requires a Servicing Carrier, at the option of the
insured, to increase the cedable limits for policies issued in accordance with
the CAR Commercial Automobile Manual.
Refer to Chapter III – Premiums, of the Manual
of Administrative Procedures for the additional information regarding increased
limits.
When, if ever, is a Servicing Carrier allowed to cede coverage in excess of the limits stipulated in Rule 6?
For commercial policies ceded to CAR, a Servicing Carrier is allowed to cede liability limits in excess of $1
million/$1 million/$500,000 or a CSL (Combined Single Limit) of $1 million only if required by any state or federal
regulation, the Interstate Commerce Commission, United States Department of Transportation, or the Massachusetts
Department of Public Utilities. Examples of such regulations are the Motor Carrier Act and the Bus Regulatory Act.
CAR requires that documentation showing that the insured is subject to a state or federal regulation that
requires limits in excess of the ordinarily cedable amount be maintained and available for review at CAR's
request. Higher limits are not available without proper documentation which may also complicate and delay
claims settlements.
Are the CAR commercial rates available online?
Yes, the CAR commercial rates are available on our website by
accessing 'manuals' from our home page and selecting 'CAR Commercial Automobile
Manual' from the list of manuals available. Please note that the CAR Commercial
Automobile Manual gives you the 'Rules Section', 'Rates Section' and
'Instructions For Rate Implementation' by effective date. This manual does
not include software required for rating a policy.
What policy form should be used when writing dealer operations only?
If the business being written is for dealer operations only the policy must be written under a Garage Policy form.
What policy form should be used when writing repair or service operations with
incidental dealer exposure?
If the business being written is for repair or service operations with incidental dealer exposure the Business
Auto Policy (BAP) must be used for the plate exposure and the Comprehensive General Liability Policy (CGL)
for the premises exposure.
What policy form should be used when writing dealer operations with incidental
repair plate exposure?
If the business being written is for dealer operations with incidental repair exposure, the Garage policy must
be used with a dealer plate exposure and to cover premises and liability arising out of dealership operations
and the Business Auto Policy (BAP) must be used for the repair plate exposure.
What is the purpose of Garagekeepers Legal Liability (GKLL)?
Garagekeepers provides physical damage coverage for vehicles in the care, custody and control of a service
or repair shop (i.e. those vehicle in the care, custody or control that are being serviced or repaired).
Can an insured get Garagekeepers Legal Liability (GKLL) and physical damage for
an incidental dealer exposure?
Yes, these coverages are required to be written at the option of the insured pursuant to Rule 6 of the CAR
Rules of Operation. For service and repair risks endorsed onto a Business Auto Policy, you need to use endorsement
CA 99 37 1001 for the GKLL and endorsement MM 20 27 0104 for physical damage - Autos Held for Sale by Non Dealers.
Can Garagekeepers Legal Liability and physical damage for incidental dealer exposure
be written on a stand alone basis?
No. They must be endorsed onto a Business Auto Policy. There is no ability to issue these coverages on a stand alone basis
on a ceded policy. These are endorsements, and as such, they must be attached to the main policy.
Is a Garagekeepers Legal Liability (GKLL) policy without plates cedable?
No. GKLL can only be ceded in conjunction with a statutory policy, so if there is no plate on the policy, GKLL
coverage is not available on a ceded policy.
What coverage is no longer available in CAR for policies effective 07/01/04 and after?
Non-auto related liability coverage was eliminated, i.e. premises and operations.
Does our company have the option of adopting the modified Garage Policy referenced
on Accounting and Statistical Notice 410?
This option applies to voluntary business only.