Session 148 PD, Manufacturer vs Retail A Primer on Carrier Manufacturer Partnership Models & Opportunities. Moderator: Andrew G. Steenman, FSA, MAAA

Transcription

1 Session 148 PD, Manufacturer vs Retail A Primer on Carrier Manufacturer Partnership Models & Opportunities Moderator: Andrew G. Steenman, FSA, MAAA Presenters: Annette V. James, FSA, EA, FCA, MAAA Nickolas J. Ortner, FSA, MAAA SOA Antitrust Disclaimer SOA Presentation Disclaimer

2 MODERATOR Andrew Steenman, FSA, MAAA Milliman Consulting Actuary Indianapolis (317) PRESENTERS Nick Ortner, FSA, MAAA Milliman Consulting Actuary (Health) Milwaukee (262) Annette V. James, FSA, MAAA, EA, FCA State of Nevada Division of Insurance Lead Actuary (775) Define, Understand, Prioritize Regulator Perspective Session 148 PD: Manufacturer vs Retail - A Primer on Carrier Manufacturer Partnership Models & Opportunities Wednesday 10/26/2016, 8:30am-9:45am

3 Session 148 (Panel Discussion): Manufacturer vs Retail - A Primer on Carrier Manufacturer Partnership Models & Opportunities Sponsor: Marketing & Distribution Competency: Strategic Insight and Integration Nick Ortner presentation: Defining & understanding the manufacturer insurance carrier market, and prioritizing its opportunities 2

4 Agenda & Goals Just hopefully not this morning.. Questions welcome at any time 3

5 Agenda & Goals 1. Define the manufacturer insurance carrier market; 2. Understand the opportunities in that market; 3. Appreciate the regulatory questions and challenges in that market; 4. Identify how to prioritize such opportunities; and 5. Most efficiently pursue & develop such partnerships going forward 4

6 Background Large distribution agencies/brokerages and smaller insurance companies seeking o Additional/new revenue streams o Flexibility o Exclusivity While doing so.. o Cost-effectively o Efficiently (in terms of resources) o Timely 5

7 Defining the Market Simple Paper Rental or Fronting One product Transitional Limited risk-sharing One or a few products Fully-Integrated Balanced risk-sharing Multiple product suite Simple: Fee for Paper; 90+% risk transfer to reinsuring company; typically one product Transitional: 70%-90% risk transfer; 1/few products Fully-Integrated: 50/50 risk; multiple aligned products 6

8 Defining the Market Roles & Agreements Administration o Front-End (premium collection; enrollment; fulfillment) o Back-End (claims) Marketing/Sales Reinsurance / Risk-Sharing o Insurer o Captive o By agreement 7

9 Defining the Market Compensation / Premium Allocation Expense Recipient Sample Allocation (% of Premium) * Claims Insured 65% Marketing Commission Marketing Override/Expenses Administration Front-End Administration Claims Agent Marketer Front-End Entity TPA 12% 2% Overhead/Expenses Carrier 4% Taxes State Taxes ACA/Feds (if applicable) State IRS/CMS/Feds Intermediary Fee/Management Intermediary 0% 3% 5% 2% 0% Profit Risk-Sharers 7% * Allocations change based on parties, competition, scale while complying with applicable MLRs 8

10 Opportunities Products made available by the insurer o Target LRs 50%-70% products with higher MLRs (ACA) o Supplemental life & health products (Dental, Vision, CI, Limited Med, Life) Scalable Capabilities brought by partner o Administration o Marketing o Risk-Sharing (ability & appetite) = skin in the game Branding what will sell in the market o White Label / Private Label 9

11 Opportunities Some Key Carriers Who may allow their products to be branded differently and sold by downstream partners*? o Ameritas / Security Life Insurance Company of America [SLICA] (especially Dental/Vision) o Companion Life o Davis Vision o Fidelity Security Life (FSL) o IHC Group o National Guardian Life (NGL) o Nationwide o Pan American (especially limited benefit medical lines) o Reliance Standard * product documentation will say insured/underwritten by ABC Ins. Co 10

12 Prioritizing Opportunities Growth o Demonstrated track record o Scalable advantages Administration Marketing Risk-Sharing/Reinsurance Key marketer initiatives Current markets complementary products New markets o States (distribution expansion, need license access) o Case Sizes (need A- or higher rated paper to sell to large groups) 11

13 Efficient Pursuit & Development Distribution/Administration/Carrier Partner o Robust track record or unique niche/advantage o Pieces & systems in place (admin, marketing, risk-sharing) Most seamless = already working together & talking to one another o Game plan & focus Carrier o Products available, in states needed o Internal support & focus Actuarial Financial/Accounting Legal/Compliance Marketing Align expectations All Parties 12

14 Additional Questions? 13

15 Session 148 (Panel Discussion): Manufacturer vs Retail - A Primer on Carrier Manufacturer Partnership Models & Opportunities Sponsor: Marketing & Distribution Competency: Strategic Insight and Integration Annette James presentation: Regulator perspective on the manufacturer insurance carrier market 14

16 Regulatory Themes Issues, Questions & Challenges Context: the role of the regulator Issues Questions Challenges 15

17 Context: The Role of the Regulator Protect the consumer Solvency regulation Insurer licensing Quarterly financial analysis and periodic financial examinations Market regulation Product regulation (file and use / prior approval) Forms Rates Market conduct analysis and targeted examinations Consumer services Producer licensing 16

18 What Does the Regulator Need to Know? Who are the players in the market? What products are being sold? Do they conform to state law? Are they appropriate? To whom are products being sold? Individuals, groups Are the rates reasonable (adequate / not excessive) Target loss ratios Risk transfer who is assuming/ceding the risk? How are consumers affected? Is the (domestic) carrier solvent? Are there significant factors that may affect the solvency of a domestic carrier in this market? 17

19 Regulatory Concerns with the Manufacturer/Reseller Model Blurred lines: Who is accountable? Invisibility of market: Can t regulate what is not visible Circumvention of state laws? Lack of transparency for consumers Consumer issues Which carrier is responsible for claim disputes? What happens when a contract is terminated mid-year (ACA market)? Potential financial risk to downstream carriers 18

20 Example # 1 Actuarial Memorandum for Dental Filing from Wholesaler NOTE: Only a hint that this rate filing represents a product that will be resold Establishment Claims administration is performed by ABC company, marketing and policy issue/renewal is performed by ABC company and/or various TPAs Under this product, several plan designs will be available through a given distribution. To the extent that multiple distributions are marketing the same plan design, this will be treated as one plan. 19

21 Example # 2 Filing for Downstream carrier NOTE: The following is the only indication that the benefit is not provided by the insurer: Evidence of Coverage - This benefit is serviced by XYZ company who can be reached at (800) for Customer Service and Coverage questions NOTE: Excerpt from the documentation included with the rate filing from the carrier. Reliance statement actuaries relied on the company for data regarding Capitation rates for pediatric vision and DME coverage 20

22 Lingering Questions Is the current regulatory structure sufficient for this market? Who should be accountable? Is this a way for unlicensed entities to do business in our state? Downstream entity may not need to be licensed depending on delegated responsibilities and risk sharing arrangement What information should be filed with the regulator by manufacturer/reseller? Rates Forms Reseller agreement When should it be filed? At product introduction Not always sure who the partners are until later When downstream partners are identified and agreement is inked? SERFF filing requirements Do we need new SERFF TOI/sub TOI codes to identify these types of arrangements to ensure the appropriate level of regulatory review? Require inclusion of SERFF tracking numbers of all products for all entities involved? 21

23 Further Questions? 22