Whole IF Presentation2014

 Insurance Regulatory Issues in
a Shared Economy
 Managing Conflicts of Interest in
Corporate Governance
 Election 2014 and What It Means
for Insurance
 ORSA/Form F and ERM
 Insurance Strategy and
Analytics
 Long Term Care Industry Issues
JVP PARTNERS, INC
Program Sponsors
Supporting Sponsors
Thursday, December 4, 2014
8:00 a.m. – 5:30 p.m.
2014

2014 INSURANCE FORUM
DECEMBER 4, 2014
Table of Contents
Tab
Insurance Forum Agenda 1
Insurance Regulatory Issues in a Shared Economy 2
Managing Conflicts of Interest in Insurance Company Corporate Governance 3
Changing of the Guard - Election 2014 and What It Means for Insurance 4
ORSA/Form F and ERM 5
Insurance Strategy and Analytics 6
Long Term Care Industry Issues and NAIC Initiatives 7
Speaker Biographies 8
Sponsor Information 9
Registered Attendees 10
Welcome to the Sidley Austin LLP Conference Center.
WiFi
Wireless network: SidleyGuest
Password: sidleygw1473837

DECEMBER 4, 2014
AGENDA
© 2014 Insurance Forum 1
Speakers Include:
(8:00 – 8:15) Market Update and New Regulations You Must Know
Kenneth Weine – President, JVP Partners, Inc
(8:15 – 9:30) Insurance Regulatory Issues in a Shared Economy
Michael P. Goldman (Moderator) – Partner, Co-Chair - Insurance and Financial Services
Group, Sidley Austin LLP
Andrew Holland – Partner, Sidley Austin LLP
Martin Jackson – Partner, Sidley Austin LLP
Robert Passmore – Senior Director - Personal Lines, Property Casualty Insurers Association
of America (PCI)
Kate Sampson – Vice President, Insurance Solutions, Lyft
(9:30 – 10:45) Managing Conflicts of Interest in Insurance Company Corporate
Governance
Lawrence Smith (Moderator) – Partner, SmithAmundsen
Eric Fogel – Partner, SmithAmundsen
Michael D. Miller – President and Chief Operating Officer, Scottsdale Insurance Company
(10:45 – 11:00) Break
(11:00 – 11:30) Changing of the Guard - Election 2014 and What It Means for Insurance
Dan Cotter – General Counsel, Fidelity Life Association
(11:30 – 12:00) New Regulatory Issues
Ted Nickel – Commissioner, Wisconsin Office of the Commissioner of Insurance and
Secretary-Treasurer, National Association of Insurance Commissioners (NAIC)
(12:00 – 1:00) Lunch
(1:00 – 1:30) Regulation and Coordination of Efforts
Sharon P. Clark – Commissioner, Kentucky Department of Insurance and Vice President,
National Association of Insurance Commissioners (NAIC)

DECEMBER 4, 2014
AGENDA
© 2014 Insurance Forum 2
(1:30 – 2:45) ORSA/Form F and ERM
Al Bottalico, CFE, CPA – Deputy Commissioner, Financial Surveillance Branch, California
Department of Insurance
Amy Pinkerman Condo – Assistant General Counsel, Health Care Service Corporation
Timothy V. Kemp – Partner, Locke Lord LLP
(2:45 – 3:00) Break
(3:00 – 4:15) Insurance Strategy and Analytics
Jeff Zych – Senior Managing Consultant, IBM Global Business Services – Insurance Practice
(4:15 – 5:30) Long Term Care Industry Issues and NAIC Initiatives
Thomas E. Hampton – Senior Advisor, Dentons US LLP
Al Schmitz – Principal and Consulting Actuary, Milliman
Brian Wegner – President and Chief Executive Officer, Senior Health Insurance Company of
Pennsylvania (SHIP) and Fuzion Analytics

1
Insurance Forum
December 4 2014
Transportation Network Companies:
Insurance Issues
1
December 4, 2014
Chicago, Illinois
Insurance Challenges
Wh t d ll thi ?• What do we call this?
• Not “sharing”, not car pooling
• Nature of Risk
• Different policies for different types of risks
• Policy Language
• “Livery” and Business Use
• Duty to Defend
• Broader than duty to indemnify
• Subsidization 2

2
TNC Essential Elements
• Support Innovation• Support Innovation
• Transportation
• Insurance: Commercial, personal and surplus
lines
• Insurance Product Certainty
• Policy language• Policy language
• Rating and underwriting for risk
• Fill coverage gaps
• Primary not contingent
• Mirror drivers coverage 3
TNC Essential Elements
N ti d Di l• Notices and Disclosures
• Drivers on coverage issues
• Drivers personal insurer on participation
• Notice of potential dispute
• TNC duty to defend until resolved
• Access to records and data
4

3
2014 TNC Activity
5
Illinois HB 4075 & 5331:
2014 State Legislative Activity
California AB 2293:
Signed by Governor
Vetoed by Governor
C l d SB 125
Arizona HB 2262:
Vetoed by Governor 6
Colorado SB 125:
Signed by Governor

4
Other 2014 Activity
I R l t• Insurance Regulators
• Public Utility Commissions
• CA Regulations (2013)
• PA, NM (2014)
• Cease and desist orders
• Cities
• Seattle, Chicago, Columbus, Milwaukee
• RICO, other lawsuits
7
2015 and beyond
D f t t t d t b• Dozens of states expected to be
battlegrounds
• Arizona and Illinois again?
• Everywhere???
• Market responding
• Surplus Lines
• Lyft/MetLife partnership
8

5
Sharing Economy
What Else Is Out There?
• Places to Stay or WorkPlaces to Stay or Work
• Air Bnb, Share Desk
• Money
• Kickstarter, Lending Club, Bitcoin
• Goods
• Etsy Bag Borrow and Steal Craigslist• Etsy, Bag, Borrow and Steal, Craigslist
• Food
• Feastly, Kitchen Surfing
• Services
• Freelancer.com, Task Rabbit
9
Questions?

Transportation Network Company
(Ride Sharing) Issue Status
11-24-14 Update
Hot Spots: Illinois Lawmakers let veto stand, seek new compromise legislation for 2015
Michigan HB 5951 Bill introduced to regulate Transportation Network Companies
North Carolina Study Committee holds hearings to discuss TNC regulations
Tennessee cities Memphis and Nashville move closer to adopting TNC regulations
Alabama
Regulatory Body: Birmingham City Council and Tuscaloosa City Council
Status: Ordinance and Cease and Desist
The battle between Tuscaloosa city government and Uber continues to intensify with the police
cracking down on TNC activities and Uber waging a grassroots campaign targeting the Mayor’s
office. Earlier this year the Birmingham City Council approved changes to its transportation code to
address mobile apps. However, Uber has opposed the existing regulations and expressed
displeasure with the new changes. In addition to concerns about being classified as a taxi service
and regulations on fees charged, Uber opposes the requirement of full-time, commercial insurance
coverage.

11-24-14 Update
2
Alaska
Regulatory Body: Insurance Division
Status: Consumer Alert
The Alaska Division of Insurance (DOI) issued a consumer alert warning about the risks of rideshare
and vehicle-sharing programs and urges Alaskans to be informed of the risks before participating in
these type of programs. The Division noted that these programs may result in a denial of insurance
for participating vehicle owners, drivers, and passengers. Personal auto insurance is not intended to
cover individuals who use their vehicles for commercial purposes. Most personal auto policies will
not cover an accident that occurs when someone uses their personal vehicles for commercial
purpose.
Regulatory Body: Municipality of Anchorage
Status: Considering Regulations
The Anchorage Assembly approved ordinance, AO-127(S), November 18 that temporarily exempts
Uber from the city’s Anchorage municipal taxi codes. However, city officials will be working with
Uber to develop a pilot program that will address issues such as insurance, background checks for
drivers, and vehicle inspections. The Assembly will have to approve the memorandum of
understanding that is negotiated before Uber will be allowed to operate in Anchorage as a paid
service. Earlier this year Anchorage banned Uber from doing business in the city. However, the
courts allowed Uber to offer free promotional rides while regulations were under consideration.
Arizona
Bill Number: HB 2262
Status: Vetoed
Comments/Actions: PCI opposed HB 2262, which specifically limited an insurer's ability to exclude
commercial activity in its contract by stating an exclusion for “commercial, fee or livery activities” is
only applicable during a transportation network “trip” but not while the driver is looking for
passengers. Governor Brewer vetoed HB 2262 on April 25, 2014 stating that, “Customer safety must
not be sacrificed for the sake of innovation.” It is anticipated that this issue will be debated by the
2015 Legislature.

11-24-14 Update
3
California
Bill Number: AB 2293
Status: Signed by Governor
California Gov. Jerry Brown signed AB 2293. This well-balanced bill provides protection for the
public by establishing reasonable insurance limits and creates a firewall protecting personal auto
insurance from subsidizing commercial activities. The primary insurance coverage requirement in
the timeframe formerly known as, “App On to Match,” is $50,000/$100,000/$30,000 with excess
coverage of $200,000. It also provides the California Public Utilities Commission oversight of TNCs.
Insurers and TNC firms were on record supporting the bill. Other states examining how to balance
insurance and TNCs can look to AB 2293 as a great starting place.
Regulatory Body: Public Utilities Commission
Status: Regulatory: Hearing Scheduled for Nov. 4
The California Public Utilities Commission held public testimony and discussed their modified
decision to Regulation 13- 09- 045 regulating Transportation Network Companies’ (TNCs) insurance
requirements. The PUC did not take a vote on their modified decision and will consider the issue in
their August meeting. The PUC is expected to hold a hearing Nov. 4 to consider issues associated
with AB 2293.
Colorado
Bill Number: SB 125
Status: Signed by the Governor
SB 125 addresses one of PCI’s critical priorities; it sets up the framework for TNCs to provide
primary insurance coverage for all commercial activity including when the driver logs onto their app
and is available for hire through the time period when they have a passenger in the vehicle and until
the driver logs off the app and is no longer available to accept rides. The bill also requires an interim
study by the Division of Insurance to examine whether or not the coverage limits currently
prescribed in SB 125 are appropriate.
Connecticut
Bill Number: SB 235
This legislation among other things, requires the state departments of Transportation and Motor
Vehicles to conduct a study of the regulation of for-hire transportation services by Feb. 1, 2015. The
study shall (1) review how emerging technologies, such as smartphone applications, currently fit
into the regulatory scheme, and (2) offer recommendations as to how and if such technologies and
the businesses offering them should be regulated to ensure the safety of the riding public. Such
recommendations shall include, but need not be limited to, mandatory insurance coverage,
licensing and background checks on drivers and vehicle safety and maintenance.

11-24-14 Update
4
Regulatory Body: Insurance Department
The Connecticut Insurance Department issued a consumer advisory May 6, 2014 advising drivers
who work for transportation network companies (TNC) that they may not be covered by their
personal automobile insurance policies while driving for hire.
District of Columbia
Bill Number: B20-753
Status: Ordinance Passed
The D.C. City Council approved regulations for TNCs that are in synch with many of the PCI essential
elements and requires them to provide primary coverage during the prearranged ride and during
the app on/off period outside of the prearranged ride; essential disclosures; carve out for PPA
policies; and allows flexibility of coverage such as a PPA endorsement and surplus lines.
Regulatory Body: Insurance Department
As private auto for hire companies, such as uberX, Lyft and Sidecar, become more popular in the
District of Columbia, the D.C. Department of Insurance, Securities and Banking issued this consumer
guide to make drivers aware of the insurance implications of using their personal cars to offer these
services.
Regulatory Body: Taxi Cab Commission
Status: Regulatory Comment Period
The DC Taxi Cab Commission has issued proposed rules to regulate Transportation Network
Companies so that their commercial insurance coverage would be the primary coverage.
Florida
Bill Number: HB 1389/SB 1618
Status: Failed
Uber pushed for legislation that would remove the minimum charge requirement for Uber Black
and meet minimum commercial insurance responsibility requirements.
Major cities across Florida continue to explore TNC regulations. City officials in St. Petersburg
recently formed a task force and plan to draft new rules that would allow TNCs to operate within
the city. Meanwhile Jacksonville officials are issuing citations and may impose tougher penalties to
force TNCs to follow city laws.
Georgia
Bill Number: HB 907
Status: Failed
HB 907 originally sought to prohibit TNCs such as Uber, Lyft, and Sidecar, from operating in Georgia.
However it was amended to regulate such companies in a way that takes into account their current
business practices. PCI sought to address insurance gaps in the legislation. Ultimately the bill died
but it is expected to be reintroduced next year.

11-24-14 Update
5
Hawaii
Regulatory Body: Department of Transportation
The Hawaii Department of Transportation sent letters to TNCs stating that their drivers were not
allowed to provide rides to and from Honolulu International Airport without obtaining permits and
paying applicable fees.
Illinois
Bill Number: HB 4075 and HB 5331
Status: Vetoed by the Governor
Illinois lawmakers announced November 18, that they would not seek to override Gov. Quinn’s veto
but work to develop compromise legislation that could be introduced in January. Insurance issues
remain among the key topics for discussion and efforts to provide a uniform statewide approach to
regulating TNCs and closing their gaps in insurance coverage will continue. The TNC legislation (HB
4075 and HB 5331) became highly politicized during the governor race and was vetoed.
Regulatory Body: Chicago City Council Substitute Ordinance 2014-1367.
Status: Approved by City Council
With the vetoes of Illinois HB 4075 and HB 5331, Chicago’s ordinance will go into effect. It requires
TNCs to provide 1 million of “primary noncontributory coverage The TNC has $1 million in liability
coverage for itself, and $1 million for the drivers from acceptance to the end of the ride, then drops
down to provide the minimum while logged in but not involved in a ride. By having two levels of
coverage and stating that the TNC coverage “applies regardless of other insurance” could promote
legal disputes and expenses that could be borne by all drivers.
Iowa
Regulatory Body: Iowa Insurance Division
The Iowa Insurance Division issued a consumer alert July 29 cautioning drivers who enter into
services that connect drivers, riders, and vehicle owners for car-sharing and ride-sharing that they
may not be covered if their vehicle is damaged or someone is hurt.
Kansas
Regulatory Body: Kansas Insurance Department
The Kansas insurance commissioner issued a consumer alert urging consumers to check with their
insurance companies before riding with or becoming a driver for ride-sharing services
Kentucky
Legislative Activity: The Kentucky Interim Joint Committee on Transportation discussed TNC issues
September 2. At the hearing the Department of Vehicle Regulation indicated it plans to issue
emergency regulations in October that would regulate the companies the same as taxi companies.

11-24-14 Update
6
Regulatory Body: Department of Transportation, Department of Insurance, Attorney General
The Department of Insurance issued a consumer alert June 25 answering common questions
associated with TNCs. With TNC firms operating in Louisville and Lexington, the issue is being
reviewed by a multiple state agencies with the Department of Transportation taking the lead. PCI
has briefed the Department of Insurance commissioner and the multi-agency meetings will
continue with an eye toward legislation for the 2015 “short” (30 day) session.
Louisiana
Regulatory Body: Department of Insurance
Insurance Commissioner Jim Donelon issued a consumer alert July 24 advising consumers to be
aware of potential gaps in insurance coverage for TNCs.
Regulatory Body: Cities of Baton Rouge and New Orleans
Status: Proposed Ordinance
The Baton Rouge Metropolitan Council voted to allow TNCs to operate without having to abide by
rules of the Taxicab Control Board on June 25. The New Orleans City Council approved rule changes
to address Uber’s limousine service.
Maryland
Bill Number: HB 1160 and SB 919
Status: Failed
PCI opposed HB 1160 and SB 919 which would have exempted TNCs from regulation and oversight
that taxicab companies and drivers must adhere to in Maryland.
Regulatory Body: Maryland Insurance Administration
Maryland Insurance Commissioner Therese M. Goldsmith issued a consumer advisory encouraging
anyone who drives for a transportation network company to contact his or her insurance agent,
broker or company to identify potential gaps in coverage.
Regulatory Body: Maryland Public Service Commission
Status: Examining Regulations
The Maryland Public Service Commission ruled that Uber Technologies Inc. is a common carrier and,
as a result, is subject to the same regulations as all other passenger-for-hire services. The ruling
does not directly impact UberX.
Massachusetts
Regulatory Body: Department of insurance
Status: Issue Under Review
TNCs are operating in Boston and Cambridge and drawing some concerns. The Insurance
Commissioner is reviewing the issue

11-24-14 Update
7
Michigan
Status: House Energy & Technology Committee
The House Energy & Technology Committee is considering HB 5951 which would create new
regulations for TNC ridesharing activities.
Regulatory Body: Michigan Department of Insurance and Financial Services
Michigan Department of Insurance and Financial Services (DIFS) issued a consumer alert reminding
drivers to double-check their auto insurance policies before signing up as a TNC driver.
Regulatory Body: Ann Arbor
Status: Cease and Desist Order
The city of Ann Arbor issued cease and desist letters to Uber-X and Lyft and after rejecting a
proposed city ordinance, an alternative solution is now being considered.
Minnesota
Regulatory Body: Minnesota Department of Commerce
The Commerce Department issued consumers tips informing Minnesotans that there may be gaps
in auto insurance coverage for both the drivers and passengers using TNCs.
Regulatory Body: City of Minneapolis
Status: City ordinance
The Minneapolis City Council approved an ordinance July 18 that allows TNCs to operate and
establishes regulation addressing licensing and inspections. The essential insurance requirement is
app on/off, but it does not provide proactive notice or include duty to defend.
Regulatory Body: City of St. Paul
Status: City ordinance
The St. Paul City Council is considering an ordinance based on the one adopted in Minneapolis.
Missouri
Regulatory Body: Cities of Kansas City, St. Louis and Columbia
Status: City Ordinances and Cease and Desist Letters
Columbia city officials have drafted new regulations for TNC ride-sharing services that are expected
to be considered by the City Council in December. Earlier in Kansas City, Lyft agreed to temporarily
stop operations. Several months ago Kansas City placed a temporary restraining order on Lyft and
ticketed drivers. Earlier this year the St. Louis Taxi Commission also issued cease and desist letters.

11-24-14 Update
8
Nebraska
Legislative Activity: The Transportation and Telecommunications Committee heard testimony from
the Nebraska Public Service Commission, the Omaha City Council and Uber, Lyft, taxicab and the
insurance industry at its interim study hearing Sept. 11 on alternative transportation options. PCI
testified on its key concerns regarding the insurance issues involved in commercial ridesharing.
Lawmakers are expected to consider the issue in the next legislative session that begins in January
Regulatory Body: Nebraska Departments of Motor Vehicles and Insurance
The Nebraska Departments of Motor Vehicles and Insurance issued a consumer advisory notice to
consumers warning on insurance issues.
Regulatory Body: Nebraska Public Service Commission
Status: Cease and Desist Letter
Nebraska Public Service Commission issued cease and desist letters for Lyft and Uber.
Nevada
Regulatory Body: Nevada District Court
Status: Hearing Nov. 14
A Nevada District Court Judge denied the state attorney general’s suit to temporarily stop Uber
from operating. However, the AG’s bid for a preliminary injunction will be heard by the judge on
Nov. 14.
The Nevada Division of Insurance has issued a warning to the public that TNCs might put them at
financial risk of being underinsured if they are involved in an accident and are injured.
North Carolina
Regulatory Body: City of Charlotte
Status: Ordinance under Review
The Charlotte City Council Community Safety Committee is exploring if and how to regulate TNCs.
Bill Number: HB 272
The Revenue Laws Study Committee held a hearing in November to study the registration
requirements, fees, and penalties applicable to for-hire passenger vehicles, including for-hire
passenger vehicles directed by digital dispatching services. As a result of HB 272, the Committee
was charged with conducting the study and shall report its findings, together with any
recommended legislation, to the 2015 Regular Session of the 2015 General Assembly upon its
convening.

11-24-14 Update
9
New Jersey
Bill Number: AB 3401, SB 2274, SB 2307 and AB 3362
Status: In Assembly and Senate
So far four bills have been introduced that would attempt to license and regulate TNC companies.
PCI has shared our model legislation with committee staff and key legislators
Regulatory Body: Department of Banking and Insurance
New Jersey Department of Banking and Insurance Commissioner Ken Kobylowski alerted consumers
to the potential loss of insurance coverage in connection with popular business activities known as
car-sharing or Transportation Network Companies (TNC)
New Mexico
Regulatory Body: Public Regulation Commission
Status: Issued Cease and Desist Letter
The Public Regulation Commission (PRC) has instituted the rulemaking process that is expected to
continue for several months. The open comment period ends Aug. 29. There will be a hearing on
October 1.
Regulatory Body: Office of Superintendent of Insurance
Superintendent John G. Franchini issued a consumer alert urging New Mexico residents to use
caution before participating in a car ride share programs stating that the services may pose hidden
risks if the rider, driver or vehicle does not have specific insurance coverage that covers these
activities.
New York
Regulatory Body: Department of Financial Services
Status: Judge allows Lyft to begin operations in NYC
A New York judge is requiring Lyft to meet certain conditions, including providing information
regarding its insurance coverage to state officials in order to be allowed to maintain operations
upstate in Rochester and Buffalo and begin operations in New York City. If all of the conditions are
not met, the judge can issue a temporary restraining order against the company.
Regulatory Body: Buffalo Common Council
Status: Holding Hearings
PCI has prepared written comments for the council regarding our support for responsible
innovation that addresses the potential gaps in insurance coverage.
Ohio
The Lieutenant Governor and Ohio Insurance Director issued a consumer alert highlighting potential
insurance implications of ride sharing.

11-24-14 Update
10
Regulatory Body: Cities of Columbus and Cincinnati
Status: Ordinances Approved
The Cincinnati City Council approved regulations for TNCs that require them to carry $100,000 in
liability insurance. In July, Columbus adopted regulations that require TNCs to carry $1 million
liability coverage and $1 million for uninsured and underinsured motorist coverage, and match
whatever comprehensive and collision coverage a driver carries on a personal policy.
Oklahoma
Bill Number: SB 1703
Status: Failed
PCI opposed this bill which failed to close important insurance coverage gaps and would have
exempted ride-sharing drivers from commercial operator requirements.
Regulatory Body: City of Oklahoma City and Tulsa
The Oklahoma City council approved a new ordinance that will regulate TNCs in much the same
manner as taxis and it will require TNCs provide primary coverage during all periods. Earlier this
year Tulsa approved an ordinance that sets regulations on TNCs.
Oregon
The Department of Consumer and Business Services, Insurance Division issued a news release Sept.
20 advises Oregonians to consider their insurance needs when engaging in new apps and websites
that facilitate car rides, vacation rentals, and other services – known as the “sharing economy.”
Pennsylvania
Regulatory Body: Public Utility Commission
Status: Commission Hearings
The Public Utility Commission extension of temporary operating licenses for Uber and Lyft comes on
the heels of PUC administrative law judges recommending that the TNCs not be granted a
permanent licenses. While granting temporary licenses the PUC is still requiring TNC drivers to
notify their insurance companies in writing of their activity.
Legislative Activity: Legislation introduced this session did not advance. However, this issue is
expected to be considered in 2015.
Insurance Commissioner Mike Consedine issued a consumer alert noting that participating drivers
and riders face insurance risk with new ride- sharing services. He said, “Learning too late of gaps in
insurance coverage can have serious financial consequences for participants in these programs.”

11-24-14 Update
11
Rhode Island
Status: Passed Legislature
Joint resolution to create an eleven (11) member special legislative commission, which includes PCI,
to make a comprehensive study of the Public Motor Vehicle Act and the impact of innovative
technologies on the market for transportation services. It would report back to the general
assembly no later than March 31, 2015.
South Carolina
Regulatory Body: Office of Regulatory Staff
Status: Consumer Alert and Request of the Public Service Commission to Review
Uber’s hearing with the South Carolina Public Service Commission scheduled for this week was
canceled after it applied for a certificate to operate as a motor passenger service in the state. The
Office of Regulatory Staff had filed a petition to review the legality of TNCs operations in South
Carolina with the Public Service Commission to determine if they should be regulated as motor
vehicle carriers.
In June the Office of Regulatory Staff (ORS) issued a consumer alert advises of potential safety and
insurance issues that could affect both customers and drivers participating in ridesharing services.
The ORS recommends consumers and drivers carefully select transportation services that operate in
compliance with South Carolina laws and thus have the proper safeguards in place such as
commercial insurance, driver background checks, and vehicle safety inspections.
Tennessee
Status: Consumer Alert and Bulletin
Commerce and Insurance Commissioner Julie Mix McPeak issued a consumer alert warning
Tennesseans of potential auto insurance gaps for individuals working as drivers for Transportation
Network Companies (TNC), such as Lyft, UberX, and Sidecar. The Commissioner also issued
Memorandum 2-24-14 warning about gaps in insurance coverage provided by TNC's and that
personal policys likely provided no coverage and urged potential drivers to have discussion with
their agent.
Regulatory Body: City of Memphis and Nashville
Status: Proposed Regulations
The Memphis City Council is close to passing regulations for TNC activities and revising its taxi
ordinance. The TNC ordinance would require primary insurance coverage of at least $1 million and
uninsured/underinsured motorist coverage of at least $1 million when transporting passengers. The
council could approve the matter at its January 6, 2015 meeting.
The Nashville-Metro Council is advancing regulations that require TNCs to have their drivers
licensed by the Metro government, meet insurance requirements and submit their vehicles to a
yearly inspection. The Council is expected to consider the proposal again Dec. 2.

11-24-14 Update
12
Texas
Regulatory Body: Austin, Dallas, Houston and San Antonio City Councils
Status: Austin City Council Considers Ordinance
The Austin City Council TNC approved an interim TNC ordinance Oct. 16 until final rules are drafted.
The ordinance requires TNC coverage to be primary from app on to app off. In other Texas cities,
Houston’s city council approved regulations for TNCs. Discussions are ongoing in Dallas, and San
Antonio. Each of the cities have issued a cease-and-desist orders for drivers of ride sharing
programs.
Utah
Utah Insurance Commissioner Todd E. Kiser issued a consumer alert to ride share drivers and their
passengers. Kiser encourages anyone who drives for a transportation network company to contact
your insurance agent or broker, or insurance company to discuss insurance needs when driving for a
TNC and identify any potential gaps in coverage. A follow up new release was issued for drivers
highlighting the insurance implications of driving for TNCs
Regulatory Body: Salt Lake City
Status: Issuing Fines and working on Regulations
Salt Lake City is issuing fines and warnings to TNC drivers for operating unlicensed taxi services.
Additionally, Salt Lake City is exploring regulations that would permit TNC to operate legally.
Vermont
Regulatory Body: Burlington City Council
Status: Considering Regulations
The Burlington Mayor and City Attorney have informed Uber that they are operating illegally and
city may take enforcement action, but officials are open to working on regulations that will allow
TNCs to operate legally.
Virginia
Bill Number: HB 908 and SB 531
Status: Carry Over
PCI opposed HB 908 and SB 531. These bills relaxed regulations that would apply to TNCs but failed
to address insurance gaps. The bills were carried over until 2015.
Regulatory Body: Department of Motor Vehicles
Status: Cease and Desist Orders and DMV Fines
After months of issuing fines, the Department of Motor Vehicles granted Uber and Lyft Temporary
Operating Authority for six months. The insurance provisions in the operating guidelines require
TNCs to provide $1 million in primary coverage from "app match" to passenger drop off and
100/300 UM/UIM coverage and 50/100/25 contingent liability coverage for the period that the
driver is logged in to the app but hasn't accepted a ride. This contingent coverage leaves the door
open for coverage disputes between insurers and TNCs.

11-24-14 Update
13
Washington
Status: Failed
House Bill 2782 would have directed the Joint Transportation Committee to study TNCs provide a
report to the Legislature examining issues such as insurance coverage requirements, safety
regulations, and the unique barriers faced by taxicab companies.
Regulatory Body: Seattle City Council
Status: New Agreement
The Seattle City Council passed new rules regulating rideshare companies July 13. Previously, the
council repealed an ordinance it passed in March. The new rules address the number taxi licenses
insurance other licensing requirements.
Wisconsin
Legislative Activity: PCI and industry partners have briefed state legislators interested in the issue
and will work with key stakeholders with the goal of advancing legislation in the 2015 session.
Regulatory Body: Milwaukee
The Milwaukee Common Council approved an ordinance July 22 to completely lift the cap on the
number of taxi cabs that are allowed to operate, allows TNCs to operate and be licensed, and
establishes basic health and safety requirements such as inspections and minimum insurance
coverage.
Regulatory Body: Madison
Status: Proposed Ordinances
The Madison Common Council is expected to address ordinances regulating TNC activities proposed
by Mayor Paul Soglin and Alder Scott Resnick later this fall.

1
December 4, 2014
Managing Conflicts of Interest in Insurance
Company Corporate Governance
Lawrence R. Smith (Moderator) – Partner, SmithAmundsen, LLC
Eric M. Fogel – Partner, SmithAmundsen, LLC
Company Corporate Governance
Michael D. Miller – President and Chief Operating Officer,
Scottsdale Insurance Company

2
Managing Conflicts:
1. Minority Investments in other Insurance Companies
2. Investments in Insurance Companies with Publicly Traded
Shares
3. Merger and Acquisition Transactions
4. Lift Out Transactions
5. Compensation
6. Corporate Governance of Property and Casualty Mutuals
Minority Investments in Other Insurance Companies
1. Should you sit on the Board of Directors?
2. Fiduciary Duties
3. Valuations
a) Independent Committees
b) Independent Third Party Appraisers

3
Publicly Traded Affiliates
1 Fid i D ti1. Fiduciary Duties
2. Timing
3. “Pros” of Public Company Subsidiaries or Affiliates
4. “Cons” of Public Company Subsidiaries or Affiliates
5. Independent Committees
Insurance M&A Activity

4
Insurance M&A Activity
Merger & Acquisition Activity
1. Explicit Agendas and Hidden Agendas
2. Establishment and Role of the Special Committee

5
Lift Out Transactions
1. Non-Competition/ Non-Solicitation Provisions
2. Confidentiality/ Trade Secret Provisions
3. Financing Lift Outs
Compensation
1. Individual Goals/ Entity Wide Goals
2. Short-Term Objectives/ Long-Term Objectives
3 Incentives vs Risk Management3. Incentives vs. Risk Management

6
Corporate Governance of Property & Casualty Mutuals
1. Self-Perpetuating Corporate Governance
2. Policyholder Meetings and Disclosure
3. Policyholder Activism

1
December 4, 2014
Effect of The Election on the Insurance Industry
Daniel Cotter – Vice President, General Counsel & Secretary,
Fidelity Life Association

2
Presentation Outline/Overview
Did thi h N b 4th?- Did something happen on November 4th?
- Few elections at state and federal level
- What does it mean for the insurance
industry in the years to come?
Federal Impact?
 Senate changed to R
- 54-44-2
 House added +11 R
- 244-188-3 undecided

3
Federal Effect
 Affordable Care Act?
 TRIA?
 FIO?
State – Action at this level
 Twenty governors who
appoint were reelected,
so no change likely:
 AL, CO, CT, FL, ID, IA,
ME MA MI NV NH
 PA- incumbent lost
- Impact on Commissioner
 KS – Commissioner
Praeger did not run
againME, MA, MI, NV, NH,
NY, OH, OR, SC, SD,
TN, VT, WI and WY.
again.
- State picked the
Republican, Seizer
- Praeger had supported
the Democrat

4
State Impact
 States with Changes in
Party in Govs’ offices:
- AK, AZ, AR, HI, IL, MD,
MA, NE, PA, RI, TX
These states appoint their
 Areas impacted:
- Medicaid Expansion?
- NAIC leadership?
- International matters
i t d?- These states appoint their
director/commissioner
- Changes likely?
impacted?
Summary

1
December 4, 2014
ORSA/Form F and ERM
Al Bottalico – Deputy Commissioner, Financial Surveillance Branch,
California Department of Insurance
Amy Pinkerman Condo – Assistant General Counsel,
Health Care Service CorporationHealth Care Service Corporation
Timothy V. Kemp – Partner, Locke Lord LLP
Chicago and Washington, DC

2
Presentation Outline/Overview
FSAP Program
NAIC Regulatory Initiatives
ORSA
Enterprise Risk Management
Form F
Corporate Governance Model Law
Model Holding Company Act
Global Capital Standards
FSAP Program
Th FSAP d th i t ti l d l t d i f thThe FSAP program and other international developments drive many of the
changes in U.S. regulation
• The Financial Sector Assessment Program (FSAP), a joint International Monetary Fund
(IMF) and World Bank program that assesses a country’s financial system including
insurance and each country’s compliance with International Standards.
• Supported by experts from a range of national and international agencies and standard
setting bodies, the FSAP has the following aims:
• (i) to identify the strengths and vulnerabilities of a country’s financial system;
• (ii) to determine how key sources of risk are being managed;
• (iii) to ascertain the financial sector’s developmental and technical assistance needs
and
• (iv) to help prioritize policy responses.
• In order for the U.S. insurance sector to do well on the FSAP review we must adopt as
much as possible international standards as set by the IAIS.
• If U.S. insurance regulation does not implement IAIS standards, it may not be deemed
“equivalent,” which could have an impact on U.S. companies operating overseas.
• The U.S. is currently undergoing an FSAP review with a report due early next year which
will likely drive additional changes based on recommendations from the report.

3
FSAP Program
NAIC Regulatory Initiatives
(Compliance requirements designed to help regulators identify insurer(Compliance requirements designed to help regulators identify insurer
risks – some key initiatives underway)
• Governance and Risk Management Initiatives (upcoming regulatory filings for
insurers)
• ORSA Report (1st filing due in 2015)
• Model Law
• Guidance Manual
• 19 states have passed the Legislation
• Corporate Governance Annual Filing (target date 2016). Model Law and
Regulation just adopted by the NAIC at the fall national meeting.
• Model Law
• Model Regulation
• Enterprise Risk Report (Form F) (1st filing was due in 2014)

4
U.S. ORSA Annual Filing
Insurers meeting certain premium level requirements will have to file with their
lead regulator an annual ORSA report beginning in 2015.
ORSA stands for Own Risk and Solvency Assessment.
ORSA Definition in Guidance Manual
The ORSA, which is a component of an insurer’s enterprise risk management
(ERM) framework, is a confidential internal assessment appropriate to the nature,
scale and complexity of an insurer conducted by that insurer, of the material and
relevant risks identified by the insurer associated with an insurer’s current
business plan and the sufficiency of capital resources to support those risks.
Insurers subject to ORSA will have to file an annual ORSA Summary Report with
regulators beginning in 2015.

5
Goals of ORSA
The ORSA has two primary goals:
1. To foster an effective level of ERM at all insurers, through which each insurer
identifies, assesses, monitors, prioritizes and reports on its material and
relevant risks identified by the insurer, using techniques that are appropriate to
the nature scale and complexity of the insurer’s risk in a manner that isthe nature, scale and complexity of the insurer’s risk, in a manner that is
adequate to support risk and capital decisions; and
2. To provide group-level perspective on risk and capital, as a supplement to the
existing legal entity view.
ORSA Summary Report

6
Guidance Manual-Section I
(ERM Framework)(ERM Framework)
Risk Culture and
Governance
Risk
Identification and
Prioritization
Risk Appetite,
Tolerances and
Limits
Risk
Management and
Controls
Risk Reporting
and
Communication
Risk Culture

7
ERM for insurers (a continuum)
What is ERM for insurers?
• Previously risk management only facilitated the identification of risks but did not provide
satisfactory methods for measuring and managing risks or for determining related capital
requirements to cover those risks.
• ERM involves the self assessment of all reasonably foreseeable and relevant material
risks that an insurer faces and their interrelationships between risk management and
capital allocation.
P i f th ti th t i t k t it i k i b i• Primary focus on the actions that an insurer takes to manage its risks on an ongoing basis
and to manage those risks to ensure that the insurer stays within its risk tolerance.
• Rigorous enforcement of risk standards, policies and limits.
• ERM is an acknowledged practice and has become an established discipline, and a
separately identified function, assuming a much greater role in many insurers everyday
business practices.

8
What is ERM for insurers? (continued)
• ERM processes used today increasingly use internal models and sophisticated risk
metrics to translate risk identification into management actions and capital needs.
• ERM provides a link between the ongoing operational management of risk and longer
term business goals and strategies.
• Not one size fits all but ERM is based on the nature, scale and complexity of the
organizationorganization.
• The objective of ERM is not to eliminate risk but rather to manage risks within a
framework that includes self-imposed limits.
• Insurers should integrate their ERM framework into their overall Corporate Governance
framework.
Enterprise
Wide Risks
I f ti
Life Health P&C
ILLUSTRATIVE
Market Strategic Operating Financing Information
Life
Insurance Insurance
&C
InsuranceCredit
Equity
Interest
Rate/
Spreads
Capital
Markets
Trading
Default
and
Migration
Other
Counter-
party
Rein-
surance
External
Internal
Process
Compliance
People
Funding/
Treasury
Credit
Downgrade
Liquidity
Financial
Operational
Technology
A&H
Morbidity
Expense
Longevity
Accident
& Health
Liability
Motor
Property
Protection*
Annuities/
Savings**
Trading
Risk
Property
Risk Identification and Prioritization
This is an illustrative diagram of typical risks faced by a multi line insurance company. While
risk classification diagrams are common, they are typically custom to each firm based on the
risks they take.

9
Risk Identification
• Develop a list of risks that represent a collective view of the company’s overall risk
exposures. Risk identification should occur at multiple levels in the organization
• Risk classifications generally include but are not limited to Market, Strategic,
Operating, Life, P&C, etc. Risk identification and prioritization will be different for
Life and P&C companies and will also be different depending on particular business
and product strategy
• Sources of risk can be generated externally internally from legal regulatory change• Sources of risk can be generated externally, internally, from legal, regulatory change,
weather patterns, economic conditions, etc
.
• Focus is on major risks that are inherent to the Corporation and should include
known and emerging risks
• The risk identification and assessment process should cover all major risk categories
and all business units by using a common set of risk metrics
Risk Prioritization
Risk Prioritization: Once risks have been identified, risk prioritization should take
place
•Prioritization is based on both quantitative and qualitative criteria and is used to guide the
allocation of risk management and other internal resources
•For risks that are known, focus is on ongoing prioritization and on tactical assessment.
Evaluate whether and how to accept, avoid, mitigate or offset risk
•For risks that are emerging, there should be an ongoing effort to identify, evaluate and
develop plans to get in front of the risk and / or develop contingency response plan
•Risk correlations should be considered as well as risk diversification. In other words if risk A
happens, will risk B also happen or will risk B offset risk A and provide a diversification
benefit?

10
Risk Appetite, Tolerance and Limits
Capital risk
• Material loss of capital
• Ratings downgrade
Earnings risk
• Income volatility
• Failure to meet plan
• Underperformance versus peers
Liquidity risk
• Extraordinary need for cash to fulfill liabilities• Extraordinary need for cash to fulfill liabilities
• Illiquidity of assets; market failure
• Poorly designed, inadequate liquidity facility
Franchise risk
• Damage to reputation
• Loss of customers and top-line revenue
• Loss of employees/talent/capabilities
The focus is on the aggregate level/amount of risk to be accepted by the enterprise
Risk Management within the Organization
Board of Directors/ Board Risk Committee:
•Overall responsibility for monitoring risk-reward
decision-making
Board of Directors
(Risk/Audit Committee)
Executive Management
(CRO)
Executive Management Team:
•Overall responsibility for risk-reward decisions
Enterprise Risk Management:
•Risk culture & governance
•Risk identification & prioritization
Enterprise Risk Management
Lines of
Business
Lines of
Business
Lines of
Business
•Risk identification & prioritization
•Risk appetite & limits
•Risk management & controls
•Risk reporting & communication
Lines of Business:
•Creation and ongoing ownership of risk-taking
•Identification and underwriting of risk
•First line of defense in risk management
•Implementing corrective action and controls to
address risks

11
Risk Management and Controls
•Risk management actions and controls should be regularly updated based on
actual performance
•A “feedback loop” ensures that management actions and controls are well attuned
to the organization’s current and new risk exposures
•Clear and regular communication is necessary to ensure that risk information is
discussed and built into decisions/controls
Risk Management and Controls (continued)
• The importance of communication stems from the number of parties that may be
involved in risk management
– Typical areas that perform assessments of risk controls and risk management
effectiveness include:
• External audits
• Corporate areas
• Internal Audit
• Internal Compliance
• Sarbanes-Oxley or “Model Audit Rule” units
• Business areas
• Actuarial experience studies
• In addition, specific “lessons learned” studies supplement risk control and audit
activities

12
Risk Reporting and Communication
• The objectives of risk reporting are to provide key
constituents with transparency into the risk management
processes and facilitate active, informed decisions on risk
taking and managementtaking and management.
Risk Reporting and Communication (continued)
• Typically, risk reporting will occur on both regular and exception cycles; and will occur at
all levels within the organization — Board, executive, and operating management
• Just like any other management process, risk reporting should act to ‘bring the process to
life”, by providing clear scorecards on the performance of the risk management function
• Reports do not need to be extensive; level of detail depends on audience; key is to
communicate critical information
• In addition to reporting “up the chain of command”, there should be downward
communication to provide feedback
• Education on risk and risk-management processes is often a key element in
communicating to the Board and management
• In reporting to external parties, confidentiality is extremely important given the strategic
importance of risk information

13
Guidance Manual-Section II
Insurer Assessment of Risk Exposures
Risk Exposure
Each Material
Risk
Category
Insurer Assessment of Risk Exposures
Quantitative
and
Qualitative
Assessment
Normal
(Expected)
Environment
Stressed
Environment
25
U.S. ORSA Section 2:
Q tit ti & St T tQuantitative & Stress Tests
For each major risk:
• Quantify risk exposure
– Under Normal Environment
Under Stressed Environment– Under Stressed Environment
• Reverse stress test
(level of stress which could cause the insurer to fail)
Expect no standard stress tests but some regulatory input on the level of
stress (e.g. a 5% increase).

14
Guidance Manual Section 3 - Group Risk Capital and
Prospective Solvency AssessmentProspective Solvency Assessment
Financial
Needs
Policy Quantification
Needs
Section 3 combines the qualitative elements of risk management
policy with the quantitative measures of risk exposure to
determine the level of financial resource needs
U.S. ORSA Section 3:
P ti S l A tProspective Solvency Assessment
A feedback loop…
Do you have the necessary financial capital or quality of capital to…
Execute a 3-5 year business plan?
…under normal and stressed situations?
What are your Contingency plans?

15
Confidentiality
Section 1 of the Model Act provides, in part:
The Legislature finds and declares that the ORSA
Summary Report will contain confidential and sensitive
information. This information will include proprietary
and trade secret information that has the potential for
harm and competitive disadvantage to the insurer or
insurance group if the information is made public.
Enterprise Risk Report (Form F)
• In 2011, changes were adopted to NAIC Model #440, NAIC Model #450 (Holding
Company Act). One of the changes was to “Expand the ability to evaluate any entity
within an insurance holding company system that may or may not directly affect the
holding company system, but could pose reputational risk or financial risk to the
insurer.”
• As part of the Holding Company filing requirements is a new Enterprise Risk Report
(Form F) that will allow regulators to more clearly identify risks to the U.S. insurers
posed by non-insurers within the holding company system. With Form F, holding
companies will confidentially report on enterprise risk, including reporting of any
material developments in strategy, risk management, litigation, etc., affecting the
enterprise

16
Enterprise Risk Report (Form F)
(first filing was due April 30 2014)(first filing was due April 30, 2014)
Form F includes the following types of disclosure requirements:
• Identification of material concerns of the insurance holding company system raised by
supervisory college, if any, in last year;
• Business plan of the insurance holding company system and summarized strategies for
next 12 months;
• Identification of insurance holding company system capital resources and material
distribution patterns;
• Identification of any negative movement or discussions with rating agencies which may• Identification of any negative movement, or discussions with rating agencies which may
have caused, or may cause, potential negative movement in the credit ratings and
individual insurer financial strength ratings assessment of the insurance holding company
system (including both the rating score and outlook);
• Information on corporate or parental guarantees throughout the holding company; and the
expected source of liquidity should guarantees be called upon; and
• Identification of any material activity or development of the insurance holding company
system that, in the opinion of senior management, could adversely affect the insurance
holding company system.
Corporate Governance Model Law Development
( )(new)
• The NAIC Corporate Governance (E) Working Group has developed a new
model law to facilitate the annual collection of confidential information on
insurers' corporate governance practices. After several years of studying issues
related to the corporate governance of insurers including a review of existing
i t d i t ti l t d d th W ki G id tifi d drequirements and international standards, the Working Group identified a need
to collect and review corporate governance information of insurers in the period
between onsite examinations.

17
Why a new model law for corporate
?governance?
• The development of an "Annual Reporting of Corporate Governance Practices of
Insurers Model Act" will provide a means for regulators to get a better
understanding of the governance practices of their domestic insurers. The
development of this model law will also ensure the confidentiality of governancedevelopment of this model law will also ensure the confidentiality of governance
information collected from insurers and assist U.S. regulators in achieving
greater consistency with international standards.
Corporate Governance Annual Disclosure
Eff ti 2016Effective 2016
The CGAD must include a description of a company’s:
• Governance framework and structure
• Policies and practices of the most senior governing entity and significant
itt th fcommittees thereof
• Policies and practices for directing Senior Management
• Processes by which Board, its committees, and Senior Management oversee
critical risk areas.

18
Potential future Model Holding Company Act changes
• Clear legal authority and delineated powers to act as the group-wide
supervisor for an IAIG and other large insurance groups;
• Direct legal authority over the insurance holding company, including the
authority to set group capital requirements;
• Group-wide financial reporting requirements for the insurance group.
These issues are just now being discussed by NAIC working groups but result
from international pressures and IAIS standards.
Development of Global Capital Standards
In 2010, the IAIS began developing ComFrame as a comprehensive framework for
the supervision of IAIGs (Internationally Active Insurance Groups). The IAIS has
now agreed to develop a risk-based global ICS and to include it within ComFrame,
which has always included a capital component within its solvency assessment.
This component will be used as a starting point for development of the ICS. In 2014,
the IAIS will also develop the BCR, which is planned to be finalized and ready for
implementation by G-SIIs in late-2014. The BCR will serve as the foundation for
HLA requirements for G-SIIs, which are to be implemented in 2019; it is anticipated
that their development and testing will also inform development of the ICS.

19
Global Capital Standards (continued)
While we recognize the role and importance of group supervision, legal entity
capital requirements are necessary to protect U.S. policyholders and promote a
stable market, particularly given the structure of U.S. financial regulation. As U.S.
insurance regulators work within the IAIS to develop and consider implementing
the various capital proposals we will be mindful of the cost/benefit of the proposedthe various capital proposals, we will be mindful of the cost/benefit of the proposed
standards, the impact on insurance product availability and affordability or other
market impacts, and the compatibility of the proposed standards with the U.S.
insurance regulatory system.
Capital Standards: Points to consider
U.S. state insurance regulators support the need to assess capital adequacy as
part of coordinated solvency oversight and recognize that insurance supervisors in
emerging markets are calling for basic international capital standards or
benchmarks of some kind; however, a single uniform capital standard is not the
silver bullet solution.
The business model for insurance is significantly different than the business model
for banking and even the business models and risk management approaches
t i i Th t k d i th b ki t f liamongst insurers are unique. The track record in the banking sector of a reliance
on capital standards did not prevent a system-wide banking collapse during the
recent financial crisis. Development of an ICS needs to reflect the distinct
characteristics of the insurance business model and its supervision.
The risks inherent in insurance products, even for the same business line, can be
very different jurisdiction to jurisdiction. A single risk charge for that business line
may well lead to incorrect assessments of the relative capital strength of IAIGs.

20
Capital Standards: Fungibility
U.S. state insurance regulators are also concerned with a reliance on the
assumption that capital can be freely moved within an insurance group. It is critical
that the free flow of capital (i.e. assets) across a group should not jeopardize the
financial strength of any insurer in the group. As such, the flow of capital out of an
insurance legal entity within the group should remain subject to required approvals
by that entity’s regulator. Ultimately, whatever is implemented at the group level
should be in addition to jurisdictional capital requirements For the U S it will be inshould be in addition to jurisdictional capital requirements. For the U.S., it will be in
addition to, and not a replacement for, the U.S. Risk-Based Capital (RBC) that
applies at the legal entity level.
Regulators see this as an uphill battle for U.S. regulators and the NAIC.
Summary
In summary the U.S. insurance regulators with the adoption of many changes to
regulatory oversight, hope to be more in line with international standards and
comply with FSAP requirements. If state regulators are not successful there could
be a shift to more federal regulation of the insurance industry. The state based
system has worked well but is under scrutiny from many sides. While industry is
impacted by all these new requirements they realize the alternative of possible
more federal involvement in the future is not something they necessarily want andmore federal involvement in the future is not something they necessarily want, and
therefore are working with state regulators through the NAIC process on these
initiatives.

1
December 4, 2014
Strategy & Analytics in Insurance
Jeff Zych – Senior Managing Consultant – Insurance - IBM Global
Business Services

2
Trends in 2014 indicate new uses and new models for the Cloud
 Cloud is not only about cutting costs but also is about innovation & competitive edge
 Cloud is an evolving distribution channel for insurance solutions & related services – “not just about the Geico app”
 Cloud marketplaces are evolving to further enable the rapid development and deployment of Cloud applications
 Demand for Cloud security is increasing tremendously
 Private Cloud Forecast – Cloudy!! Delays in implementation of private Clouds has opened doors to public Cloud
adoption
 Hybrids Cloud Forecast – Partly Sunny!! Analysts predicted that 2014 would be a great year for hybrid Clouds - it was!
 Mobile Cloud Forecast – Sunny!! A whole new generation of Cloud apps designed for a mobile work force is out there
 Cloud Brokerage Services: A crucial need exists. Capabilities to manage the different Cloud environments with a
consistent management framework are difficult to acquire
 Cloud Skills are in Demand and educational institutions need to step up to fill this skills gap
Key drivers & benefits for Cloud adoption by insurers
 Pressure to decrease costs
 Need for business agility
 Call for fast solution deployment
 Expanding global footprint
 Intense competition from others already in the Cloud
Key Drivers
 Better Economies of scale
 Scalable storage and processing
 Increased productivity and collaboration
 Process and data standardization
 Reduce time to market
 Lower cost of ownership and maintenance
Benefits

3
Cloud is last on the priority list for insurers current & future investment
Source: Kable report Oct 2013 n=119 & Gartner Report 2013 n=116
Cloud preferences by insurers in mature markets

4
Cloud investment to date has been non-strategic
Insurance CXO’s strong focus on private Cloud limits their options
What is being done ?
 Virtualized data centers are not "private Clouds" as they do not leverage Cloud benefits such as rapid
scalability or “pay per use”
 Private Clouds require greater initial infrastructure investment compared to public Clouds and they lead to
higher recurring maintenance costs. Don’t forget the IT spend approval process!!.
 Private Clouds enable the status quo of existing IT architectures. Barrier to innovation!
 There are options other than public Clouds — for example, hybrid or community Clouds — whose potential
benefits are not accurately evaluated because of the need to have control of the Cloud
 Private Clouds set up and run by internal IT departments may inhibit insurers from focusing on their core Private Clouds set up and run by internal IT departments may inhibit insurers from focusing on their core
competencies. “If IT votes for anything other than a private Cloud, they enable their demise”
What can be done ?
 Conduct a segmented cost-benefit analysis of all potential Cloud computing models for your CXO. Include
private, public, hybrid and community Cloud (including combinations)
 Create a hybrid Cloud services portfolio that will allow you to match different Cloud models against different
levels of risk appetite within your organization. Find a way to force the discussion!!

5
Major Challenges faced by Insurers in Cloud Adoption
 Data Privacy/ Security Concerns - Insurers are apprehensive about the possibility of their customers’
sensitive personal data being compromised on a public Cloud – “It is MY data and YOU can’t use it”
 Compliance - Compliance requirements from local regulators are a challenge because there are questions
about ownership and management of Cloud-based services – “If I don’t fully understand it, there MUST be a
risky compliance issue somewhere”
 Lack of Integration - Integrating applications hosted on the Cloud with an enterprise management system is
critical to leverage the full potential of Cloud based solutions – “How much of my organization is integrated
right now? BE HONEST!!”
 Lack of Standardization - P&C insurance firms generally have too many IT applications and lack a high
degree of data and business process standardization to be able to take full advantage of the scalability
promised by Cloud computing – Standardization? What’s Standardization?
 Lack of Competency - The small size and limited experience of inexpensive vendors that offer Cloud-
enabled core solutions increases insurers' implementation risk and slows adoption of Cloud solutions within
the industry – “We DON’T have the budget, unless we all don’t want a bonus, and I am NOT going to be the
executive whose legacy is adoption of the Cloud.”
“Cloud is a challenge for our organization because we never did it this way before”
Opportunity areas for Insurers in Cloud domains
 Business support applications: including office suites and sales and service management applications.
These are usually highly standardized and require no industry expertise and VERY limited customization
 Enterprise applications: such as financial management (Workday), HR (learning, recruiting, candidate
management) and procurement solutions may lead to Cloud adoption in the Insurance industry—especially
when organizations are changing their operations models by implementing shared services
 Vertical applications: highly standardized processes such as billing and collections, are anticipated to
become increasingly attractive to insurers that are being forced to modernize their IT legacy environments
because they are finally breaking
H i l b l li ti I th t i t t d i di th i hi d Housing global applications: Insurers that are more interested in expanding their geographic presence and
need to become more agile to compete with “new players in the industry” are likely to be among the early
adopters of Cloud computing due to the IT infrastructure savings realized almost instantly
 Community Clouds: that are operated by industry associations to exchange non-proprietary data for
underwriting purposes (ex. IoT information from subscriptions to sensors in smarter cities, weather data from
NOAA, unstructured stock market data, surveys, etc.) Data is not the secret sauce. It is your process to
extract intelligence that is your secret.
 Infrastructure services: such as storage and servers

6
When building a Cloud strategy the Insurer should………..
IBM’s Cloud strategy is based upon experience gained from our own
transformation
IBM IT
transformation
 In a five-year period, IBM's own Cloud investments delivered a cumulative benefit yield
of approximately $4.1 billion.
IBM data center
efficiencies
achieved
 Consolidation and virtualization of thousands of servers leveraging IBM System z,
System p, System x and storage virtualization
 Substantial savings achieved in multiple dimensions: energy, software and system
management and support costs.
Project  Virtualized environment uses 80 percent less energy and 85 percent less floor space
Project
Big Green
p gy p p
 Two-fold increase in existing function capacity
 Dramatically decreased carbon footprint and cost.
Cloud-enabled
on-demand IT
delivery
 Reduced configuration time, capital and operating costs for development and test.
Environments are stood up FAST and tested faster.
 Worldwide automation of development and test environments in a Cloud has resulted
in >80% around-the-clock hardware utilization

7
Use cases from Banking & Financial Markets
 Cloud Efficiency: A Swiss Investment Banking client needed to streamline and automate their sourcing, contracting, risk &
compliance processes.- Implemented IBM’s Cloud-enabled SaaS solution. Estimated savings: $159M
 Cloud Risk Management: A French client wanted to adapt to Regulatory & Compliance requirements.- Client implemented IBM’s
Algo FIRST on Cloud with access to 11,000+ operational risk loss events to drive compliance process and control improvements
 Cloud Revenue / Financial Markets’ Ecosystem: A British client wanted to overcome the latency barriers in high-frequency trading:
Implemented high-performance Cloud trading infrastructure-as-a-service for 130+ global investment banks, exchanges, hedge funds,
broker/dealers, proprietary trading firms and private equity houses.
 Cloud Desktop, Security & Business Continuity: A Japanese Client intended to mitigate risks in security and business continuity if
Asian Flu spread to pandemic levels. This 34,000-employee client deployed an IBM private Cloud to centralize management of
desktops via enterprise-class data center rather than at the user stations. Gained greater remote flexibility without losing control.
 From 4-months to 29-minutes: A Global Bank wanted Service desk analytics to improve Customer Service: Soft Layer enabled they p y
deployment of the client’s service-desk analytics solution in 29 minutes versus 4 months. The service desk solution lowers call
volumes, reduce help desk ticketing and provides better self-help capabilities to clients.
 Cloud Ecosystem for Revenue Growth: Large Greek Bank wanted to initiate new business. IBM created a Cloud-based multi-
lateral trade offering between Greek businesses and their international trading counterparts across 180 countries.
 Cloud Storage Cost Savings: A Chinese Client wanted to manage growth 2+ Billion customers. Created a Cloud-based storage
system that reduced system management costs, sped up deployment for resource requests, standardized software configuration for
each deployment and simplified system management and maintenance.
Conclusion
Questions on Cloud?

8
Part 2: Transforming Insurance with Cognitive
Computing
Agenda
What is Watson?
Watson in Action
Watson in Insurance
Next Steps
© 2014 International Business Machines Corporation

9
What is Watson?
What is Watson?
Watson is a cognitive technology that processes information
more like a human than a computer—by understanding natural
language, generating hypotheses based on evidence and
learning as it goes.

10
The new era of cognitive computing will transform our future
Tabulating
Systems Era
Programmable
Systems Era
Cognitive
Systems Era

11
Cognitive systems expand the problems we can address
Programmable Systems
• Deterministic
• Leverage traditional data sources
• Follow pre-defined rules (algorithms)
Cognitive Systems
• Probabilistic
• Are taught, not programmed
• Improve based on experience
Watson has graduated from a startup to a full business
IBM WatsonInternalJeopardy!Research atso
Group
2014 – present
te a
Startup Division
2011 – 2013
Jeopa dy
Grand Challenge
2011
esea c
Project
2006 – 2010
$1B Investment
$100M for Ecosystem
NYC HQ – Astor Place
Commercialization
Validation
Demonstration
R&D

12
Watson enables Transformations in a way that was not possible before
Perceiving:Perceiving:
Watson understands the world as we do.
Reasoning:
Watson thinks through complex problems: it deepens our analysis
and inspires creativity. Not only thinking through questions, but
synthesizing information, evaluating pros and cons, and creating
inferences… types of thinking that traditional systems cannot
perform
Relating:
Watson understands how we communicate, and personalizes its
interactions with each of us. Adapting its interaction to the user, not
only in understanding how they communicate, but also customizing
its interactions to what we know about them
Learning:
Watson learns from every interaction, scaling our ability to build
experience
Watson in Insurance

13
The Financial Services industry is undergoing a major transformation
E Disco er D id
Emboldened, digitally-
savvy customers expect
rapidly evolving new
services and offerings,
available 24/7
Fierce competition for
customers spawns non
traditional competition
The explosion of data
creates opportunities to
develop deeper insight
into customer/client
needs/behaviors
Insight and Intelligence
was identified as key
focus by Financial
Core systems are being
upgraded to improve
operational agility and
efficiency. Increase in
data challenges and
decision making.
Regulations such as
Dodd Frank, Basel III, and
Engage Discover Decide
traditional competition
from “new” firms entering
the market
focus by Financial
Industry CEOs over the
next 3-5 years
, ,
RMORSA are introducing
complexity and new
costs
© 2014 IBM Corporation
We see cognitive computing & analytics fundamentally transforming
how insurance business is conducted
TRANSFORMED
INTERACTIONS
EMPOWERED
ADVISORS
OPTIMIZED
OPERATIONS
Direct-to-consumer digital virtual
agents that leverage analytics and
cognitive capabilities to serve,
guide, and advise on the web or
mobile devices
• Conversational style of
interaction using a combination
of text and speech
Employee-facing applications
designed to help agents, producers,
call center representatives or other
customer-facing advisors provide
guidance to customers
• Front office applications that allow
customer advisors to readily find
relevant information pertinent to a
customer interaction
Employee-facing applications
designed to aid knowledge workers in
the execution of specific business
processes to create optimal business
outcomes
• Back office applications that allow
knowledge workers to leverage
prior experience and analytics to
help make better decisions• The ability to create a
differentiated experience based
on customer insights and to
make analytically driven
recommendations
• The ability to invoke processes
or transactions specific the
appropriate business process
customer interaction
• Integration with CRM and other
applications to provide a “total
view of the customer”
• The ability to make analytically
driven recommendations for the
customer advisor to present
during customer interactions
help make better decisions
• Shift time spent finding
information to making decisions.
• Access to data within disparate
business applications to provide
the knowledge worker with a a
“total view of the situation”
• The ability to make analytically
driven recommendations for the
knowledge worker to consider
© 2014 IBM Corporation

14
Insurance Use Cases Categories
Use Case Value PropositionUse Case Value Proposition
Customer Self Service Empower customer with answers to questions on specific content
Digital Virtual Agent
Emulates a prospect or insured interacting and conversing with a
human agent. Provides guidance. Drives new business and
transaction processing
Call Center Rep Assist
Empower call center representative with answers to questions.
Enables consistency, best practices.
Wealth Advisor
Empower wealth advisor with answers to questions, recommend
asset allocation etc.
TRANSFORMED
INTERACTIONS
EMPOWERED
ADVISORS
asset allocation etc.
Discovering Relationships and
Impacts
Identification of connections between chains of events and
entities.
Underwriting & Claims
Assist underwriters & adjusters with analysis of complex cases
and decision making. Increases productivity, quality of decision
making and decreases expenses.
Regulatory Policy Compliance
Helps evaluate compliance of a decision to multiple, complex,
overlapping external regulation and internal policies
OPTIMIZED
OPERATIONS
Example of the Watson
Digital Virtual Agent

15
Discovering Relationships and Impacts
• Initial application was for pharmaceutical research
– Watson analyzed more than 70,000 scientific articles related to p53, a protein that has
been linked to many cancers.
– Automated analysis carried out by Watson helped Baylor biologists and data scientists
identify SIX proteins that modify p53 and that should be targeted for new research.
(Validation in progress – 2 already validated)
– Watson did this in a matter of WEEKS
– Teams of Researchers typically come across ONE of these target proteins per year.
• Sample applications for Insurance
– Equity Research for Asset Management: Assist asset managers and equity analysts
researching markets and companies for trends and risks.
– Supply Chain Research: Exploring the impact that some event has on products and
services linked to that event through multiple, non-obvious steps.
– Exposure Analysis: Identifying the aggregate exposure to an event
Underwriting Advisor (P&C)PDF’s U/W
Guidelines
Loss
Experience
Rating
Criteria
Underwriting
Notes
Adjuster
Notes
Previous
Submissions
Previous
Policies …
Internal Information
Underwriting Advisor (P&C)
missionDocuments
Spread
Sheets
Loss Runs
emails
Guidelines Experience Criteria Notes Notes Submissions Policies
Underwriting
Guidance
Provide key information and
guidance to underwriter with
supporting reasoning.
Subm
Acord Forms
…
Financial
Data
Dunn &
Bradstreet
Geo-spatial
information
Social Media
News
Services
Insurance
Publications
OSHA
Reports
…
External Information

16
Internal Information
Underwriting Advisor (Life)
Application
U/W Reinsurance Rating Underwriting Mortality Previous Other
tionDocuments
Underwriting
Guidance
Provide key information and
guidance to underwriter with
supporting reasoning.
Medical
Records
Prescription
Drug History
Financial
Data
Guidelines Guidelines Criteria Notes Tables Submissions Policies
…
Applica
External Information
Blood work
Questionnaires
Financial
Data
Driving
Records
Criminal
Records
Social Media
News
Services
Industry
Publications
Medical
Research
…
…
Steps to Explore Watson

17
Watson is a journey which starts with the Cognitive
Value Assessment and expands into business domains
A vision starts the journey Train Watson in one LOB Expand to other LOBs
Identify Opportunities
Develop Benefits Case
Core Watson
System Training
Business Domains
 Lines of Business
Business Functions
 Customer Support
 Field Support
 Cross Sell / Up Sell
 Semantic Discovery
Develop Roadmap
 Semantic Discovery
Users
 Underwriters, Claims
 Service Center Agents
 Customers
Regulatory Applications
 Research & Change mgmt.MUST engage best experts!!!
ibmwatson.com
facebook.com/ibmwatson
@JeffZych or @ibmwatson

1
Long Term Care Industry Issues
And NAIC Initiati esAnd NAIC Initiatives
Allen J. Schmitz, FSA, MAAA, Milliman Consulting
Brian Wegner, President and CEO Senior Health Insurance
Co. of Pennsylvania and Fuzion Analytics
Thomas E. Hampton, Senior Advisor, Dentons, US LLP
Agenda
 LTC Insurance Regulatory Proposals
 Discussion of the Evolution of LTC Market
 Key LTC risks and their impact on profitability
 Industry Attempts to Manage LTC Risks
Ri k i l d ith Cl d LTC Bl k Risks involved with a Closed LTC Block
 Conclusion and Questions
2

2
LTC Insurance Regulatory Proposals
 Insurance Regulation Depends on Point of View
- Regulator Point of View
 Company Solvency
 Rate Stability
- Industry Point of View
 Financial Viability
- Sales, Rate Stability
- Consumer Point of View
 Affordability Affordability
 Rate Stability
- Policy Maker Point of View
 People covered
 Affordability
 Finding the Balance is Important!
3
LTC Insurance Regulatory Proposals
 NAIC Model Regulation on Initial Filing Requirements
- Adopted August 2014
- Contains new provisions for new business and rate increases
 Bulletin for rate increases on pre-rate stability policies
- Requirements with some provisions from post-rate stability plansRequirements with some provisions from post rate stability plans
 Model Regulation for LTC Premium Increases
4

3
Model Regulation Initial Filing Requirements
 2001 Rate Stability Regulations
 A statement that the initial premium rate
schedule is sufficient to cover anticipated
costs under moderately adverse experience
and that the premium rate schedule is
reasonably expected to be sustainable over
the life of the form with no future premium
(Additions)
 A statement that the premiums contain at
least the minimum margin for moderately
adverse experience defined in (i) or the
specification of and justification for a lower
margin as required by (ii).
(i) and (ii) next slidethe life of the form with no future premium
increases anticipated;
(i) and (ii) next slide.
5
 A statement that the premiums contain at least the minimum margin for
moderately adverse experience defined in (i) or the specification of and
justification for a lower margin as required by (ii).
(i) A composite margin shall not be less than 10% of lifetime claims.
(ii) A composite margin that is less than 10% may be justified in uncommon circumstances. The
proposed amount, full justification of the proposed amount and methods to monitor
developing experience that would be the basis for withdrawal of approval for such lowerdeveloping experience that would be the basis for withdrawal of approval for such lower
margins must be submitted.
(iii) Combination Products – Potentially lower margin.
(iv) Credibility of experience may lead to greater margins.
6

4
 Initial filing Actuarial Memorandum
requirements in “Loss Ratio” Section.
- Basis of rates
- Description of reserves
- Summary of Benefits
- Description and table of actuarial assumptions
(Additions)
 Actuarial Memorandum
- Policy Design and Coverage
- Underwriting and Claims Adjudication
- “A complete description of pricing assumptions”
- Sources and levels of margins
- Demonstration of minimum marginDescription and table of actuarial assumptions
- Average Premium
- Underwriting
7
Model Regulation Reporting Requirements
 Annual reporting
- Lapse and replacement
 2014 Rate Stability Regulations (Additions)
 Annual Rate Certification
- Sufficiency of current schedule
- If not sufficient, plan must be filed within 60 days to re-
establish
 Actuarial Memorandum to Support Certification
- Data sources
Experience assumptions and relationship to pricing- Experience assumptions and relationship to pricing
assumptions
- Credibility
- Explanation of analysis and testing
 Due May 1st of each year
8

5
Bulletin on Rate Increase Filing Requirements
 Pre-Rate Stability Policies
 Actuarial Assumptions for Establishing Rate Increase Requests:
- Department to review reasonableness
 Approval of Rate Increase
- Single rate increase – no future increases for three years
- Series of increases – three year monitoring
 Requirement of Contingent Benefit on Lapseq g p
- 20th policy duration – without regard to trigger percentages
 Policyholder Notification Requirements
 Loss Ratio Requirements
- 60% on initial
- 80% on increase (75% for group)
9
Model Regulation Premium Increases
 Certification: If the requested premium rate
schedule increase is implemented and the
underlying assumptions, which reflect
moderately adverse conditions, are realized,
no further premium rate schedule increases
are anticipated
 2014 Rate Stability Regulations (Additions)
 The insurer may request a premium rate
schedule increase less than what is required
under this section and the commissioner may
approve such premium rate schedule
increase, without submission of the
certification in Subparagraph (a) of this
paragraph if the actuarial memorandumare anticipated paragraph, if the actuarial memorandum
discloses the premium rate schedule
increase necessary to make the certification
required under Subparagraph (a)
10

6
Model Regulation Premium Increases
 2001 Rate Stability Regulations  2014 Rate Stability Regulations (Additions)
 Actuarial Memorandum with
- Expected Claims
- Projections
- Other Assumptions
 If rate greater than 200% of original rate –
projections filed every five yearsprojections filed every five years
 Commissioner can require premium
adjustments if projections do not materialize
11
Evolution of the Market
12

7
Timeline of Major Market Changes
Relatively New Coverage Due To Increasing Life Expectancies & Growing # Of ElderlyRelatively New Coverage - Due To Increasing Life Expectancies & Growing # Of Elderly
1970’s - Early
Generation NH Only,
Following Hospital
Stay (3 Day
Minimum), “Medical
Necessity”
Early 1990’s,
Comprehensive
Policies With ADLs
(Activities Of Daily
Living) And CI
(Cognitive
Impairment)
T i ALF
Early 2000’s -
Federal EE
Program, Combo
Products, Rate
Stability, Revised
Reserve Standards
& RBC
1970 1980 1990 2000 2010
1980’s - Removal Of
Prior Hospital Stay
Gatekeeper, Change
To “Medically
Necessary”, Some
HHC Only,
Mandatory Inflation
Protection Offer &
Nonforfeiture
Triggers, ALF
Late 1990’s – Federally
Tax-Qualified Policies,
Improved Underwriting
& Care Management
Recently –
Partnership,
Company Exodus
due to Low Interest
and Lapses
13
Individual Long-Term Care Sales
14

8
Employer-Sponsored LTCI Sales
15
Total Market
16

9
Top Individual Writers (Broker World Surveys)
2004 Top Writers 2012 Top Writersp p
Production
Rank Company ($millions)
1 Genworth 153
2 John Hancock 114
3 MetLife 86
4 Bankers L&C 62
5 MassMutual 25
6 Allianz 24
7 UNUM 20
8 Lincoln Benefit 19
9 Prudential 19
Production
Rank Company ($millions)
1 Genworth 221
2 Northwestern 118
3 Mutual of Omaha/United 52
4 MassMutual 29
5 John Hancock 27
6 New York Life 26
7 Transamerica 21
8 Bankers Life & Casualty 17
9 State Farm 13
10 MedAmerica 10
10 Penn Treaty 18
11 New York Life 18
12 State Farm 15
13 Physicians Mutual 13
14 MedAmerica 11
15 Mutual of Omaha 9
16 Equitable L&C 8
17 State Life 8
18 Knights of Columbus 4
19 Kanawha 4
20 AFLAC 3
0 ed e ca 0
17
Changes in Carrier Landscape
Out of market since 2004:
MetLife
Allianz
UNUM
Lincoln Benefit
Penn Treaty
Physicians Mutual
Equitable L&C
Newly departed:
Prudential
CUNA Mutual
AIG
American Fidelity
Berkshire
American General
Humana
Back in the market:
Thrivent
Aegon
Equitable L&C
State Life
Kanawha
AFLAC
Humana
Physicians Mutual
Source: 6th and 15th Annual LTC Insurance Surveys, Broker World Magazine
18

10
K LTC Ri kKey LTC Risks
19
Review of Primary LTC Insurance Product Risks
Risk Management of Risk Comments
LTC morbidity
higher than
expected
Primary management lever is rate increases Critical to continuously monitor
Morbidity trends positive (but not definitive)
Milliman LTC Guidelines are converging
Persistency higher
than expected
Primary management lever is rate increases Primary reason for most rate increase filings
Current pricing lapse rates very low – therefore
more limited downside risk
Mortality becoming more known
Interest Rate Risk Hedging opportunities
Product design
Limited ability to receive rate increases based
on interest rates different than expected (also
depends on loss ratio)
Regulatory Risk Limited ability to manage Regulatory risk relative to rate increases is a
major concern for many companies
Concern over limitation on product innovation
and reserve and capital requirements
20

11
LTC Insurance Sample Premiums and Claims
3500
1500
2000
2500
3000
3500
Dollars
Premiums
Claims
0
500
1000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49
Duration
21
Why the Turmoil?
 Companies Leaving the Market:
- Lapse rates, interest rates, & mortality: low
- Morbidity - claims quite close to pricing for some, very far off for
others (depending on aggressiveness of original pricing and on
underwriting)
- Concerns about profitability and being able to get rate increases
- Felt that capital was better invested elsewhere (would yield more
immediate results)
- Psychology (what do others know)
22

12
I d t Att t tIndustry Attempts to
Manage LTC Risk
23
The Status and Challenges of LTC Closed Blocks
• LTC Insurance Challenges
• Transition to Closed Blocks
• Alternatives to LTC Insurance
• Rate Increases – Challenges and Business Impacts
• The Benefits of LTC to Policyholders
• How Do We Stabilize the Industry?
24

13
Recent LTC Headlines
March 28, 2012
Long Term Care
Insurance Crisis:
The Failure of the
Class Act
Forbes 10/4/2012
Insurers Are Getting Out Of Long
Term Care 25
LTC Insurance Challenges
Fi t LTC li i itt i 1970’ b l• First LTC policies written in 1970’s, became more popular
in 1980’s
• Drivers of LTC insurance challenges from expectations:
• Lower lapse rates
• Lower mortality
• Higher utilization (morbidity)
• Compound inflation drives higher daily benefits• Compound inflation drives higher daily benefits
• New facilities (Assisted Living Facilities, for example,
didn’t exist when original policies were written)
• Lower investment yields
• Increasing percentage of chronic vs. acute conditions
• Claim durations lengthening 26

14
Other Factors Challenging LTC Carriers
F d d b d i l i• Fraud and abuse drives up claims
• Lack of standards that exist in health care
• No usual and customary rates in LTC
• Med Necessity has become more subjective
• Certain benefits have been inappropriately used
(Restoration of Benefit, for example)
• Limits on types of investments allowed• Limits on types of investments allowed
• Very high asset requirements
• Many closed block policies have older, problematic
contract language
• States have prohibited some of the contract terms
• Rate increases drive anti-selection 27
Transition to Closed Blocks
A i t l 60 i i ld LTC d t t• Approximately 60 insurance companies sold LTC products at one
time
• Currently, only about 10 companies still writing policies
• Remaining blocks are “closed” – no longer selling
• Within active carriers, some blocks are also closed
• Implication: No new premium coming in to offset older policies and
claims
• Many closed block carriers have limited internal expertise, resultingy p , g
in higher claims than necessary
• Higher claims drive:
• High claim reserves
• High Actual to expected, resulting in higher reserves
• Rate increases, which drive more claims for period of time, and
loss of healthier insureds 28

15
Medicare and Long Term Care Coverage
L t C S i Skill d N iLong-term Care Services – Skilled Nursing
Pays part of bills for up to 100 days only, must be ordered by
physician
•Medicare does not pay the largest part of long term care services or
personal care - such as help with bathing, or for supervision often called
custodial care.
•Medicare will help pay for a short stay in a skilled nursing facility, for
hospice care or for home health care if the individual meets all of the
following conditions:
• Have had a recent prior hospital stay of at least three days
• Are admitted to a Medicare-certified nursing facility within 30
days of your prior hospital stay
• Need skilled care, such as skilled nursing services, physical
therapy, or other types of therapy
29
Medicaid and Long Term Care Coverage
Long-term Care Services – Nursing home, home and community
services
•Coverage varies state to state
•Coverage only in Medicaid qualified facilities (typically lower quality)
•Must spend down nearly all assets to qualify for Medicaid
•Low limits on income•Low limits on income
•Subject to assessment to determine functional requirements (ADLs)
30

16
Benefits of LTC to Policyholders
• Lifetime probability of seniors becoming disabled in at
least 2 ADLs or cognitively impaired: 68%
• In 2013, over $6.6 billion in benefits paid to over 200,000
policyholders (average of $33,000 per claimant)
• Largest LTC claim to date: $3 million
• Reduces or eliminates impact of family having to providep y g p
care
• Preserves assets of insureds
31
How Do We Stabilize the Industry
• Change the policyholder tendency to go on/stay on claim• Change the policyholder tendency to go on/stay on claim
in order to collect on policy
• Engage them with benefits pre-need to keep them
independent
• Engage the claimant during care to help them return to
independence (when possible)
• Seek creative claim approaches that benefit theSeek creative claim approaches that benefit the
policyholder and the carrier
• Analyze claims
• Identify fraud
• Identify signs of unexpected trends, address the root
cause 32

17
How Do We Stabilize the Industry
• Engage in reinsurance to reduce the risk of any single• Engage in reinsurance to reduce the risk of any single
block
• Improve long-term projections to ensure reserve
sufficiency
• The earlier it is addressed, the lower the impact
• Offer options to policyholders to reduce risk and lower
reserves (NFOs, benefit reductions)reserves (NFOs, benefit reductions)
• Think carefully about rate increases
• Take advantage of alternative investment options to
increase yield
33
Conclusion
Questions?
34

© 2014 The Insurance Forum
2014 INSURANCE FORUM SPEAKERS
AL BOTTALICO is the Deputy Commissioner of the Financial Surveillance Branch (FSB)
for the California Department of Insurance. FSB’s primary responsibility is the on-going
risk focused financial oversight of companies licensed to do business in California which
includes analysis, examinations and actuarial, as well as the review and analysis of
various corporate affairs applications. Al also serves on numerous National Association of
Insurance Commissioners (NAIC) Committees, Task Forces and Working Groups and also
Chairs the NAIC Financial Examiners Handbook Technical Group. Prior to becoming Deputy Commissioner
in 2011, Al served as Chief Examiner since 2004. Al is a Certified Public Accountant and a Certified
Financial Examiner and is California State Chairman for the Society of Financial Examiners and serves on
the Society of Financial Examiners (SOFE) Board of Governors.
Al joined the California department in 1977 and earned his Bachelor of Arts degree in accounting from
California State University, Fullerton.
SHARON P. CLARK is the Commissioner of the Department of Insurance (DOI).
Commissioner Clark, a veteran of Kentucky state government, was appointed
Commissioner of the Department of Insurance in July 2008 and was reappointed to the
post in July 2012. Commissioner Clark was the first director of the DOI’s Consumer
Protection and Education Division, a position she held for five years. Under her leadership,
the Department hired its first ombudsman, added consumer education and outreach
functions, and strengthened enforcement efforts by expanding the number of consumer complaint
investigators.
Commissioner Clark serves as the chair of the Kentucky Health Benefit Exchange Advisory Board and is a
member of the Kentucky Group Health Insurance Board. She serves as Secretary-Treasurer of the NAIC
and is a member of its Executive Committee. She is also a member of the NAIC’s Internal Administration
(EX1) Subcommittee. Clark is past chair of the NAIC’s Market Regulation and Consumer Affairs (D)
Committee and was an officer for the NAIC’s Southeastern Zone. She is also past Secretary-Treasurer of
the National Insurance Producer Registry board and is interim chair of the Surplus Lines Multistate
Compliance Compact.
Prior to being appointed Insurance Commissioner, Clark worked at the Finance and Administration Cabinet.
She also held positions for the Kentucky House of Representatives, the Public Service Commission, and
the former Workforce Development Cabinet.
She earned bachelor’s and master’s degrees from the University of Kentucky.

2014 INSURANCE FORUM SPEAKERS
2
© 2014 The Insurance Forum
AMY PINKERMAN CONDO is the Assistant General Counsel in the Chicago
Headquarters of Health Care Service Corporation, a Mutual Legal Reserve Company,
which has exclusive rights to use the Blue Cross and Blue Shield names and marks in
Illinois, Texas, New Mexico, Oklahoma and Montana. (HCSC) Her principal internal clients
include Financial Reporting, Treasury, Tax and the Board of Directors of various HCSC
subsidiaries, focusing on insurance financial regulatory and corporate governance
matters.
Practicing law exclusively in-house for insurance holding company groups for over 19 years, Amy has
worked for both property and casualty and life and health insurers. She has also advised health
maintenance organizations, managed care organizations, fronting carriers, producers, managing general
agents and third party administrators within her employer’s respective holding company group. Amy
experience is primarily focused in the areas of insurance regulatory, corporate governance, mergers and
acquisitions, corporate formation, re-structuring, insurance licensing, reinsurance, as well as advising on
debt instruments and credit agreements. She also tracks the activities of the NAIC (E-Committee), working
with external trade associations - and then with internal government relations staff once matters of interest
originating within the NAIC are introduced in the state legislatures.
Amy received a Bachelor of Arts in Political Science from Arizona State University, cum laude, and a Juris
Doctor from Drake University Law School. In 2001, Amy was asked to serve on Illinois Secretary of State
Financial Responsibility Task Force, a partnership formed between government and industry to automate
financial responsibility filings. Prior to her role with HCSC, Amy was Vice-President, General Counsel and
Corporate Secretary of U.S. Operations of a publicly traded insurance group that operated internationally
and included numerous insurance and reinsurance companies.
DANIEL COTTER has been the Vice President, General Counsel & Secretary of Fidelity
Life Association and Efinancial, LLC and Members Mutual Holding Company since April
2013. In this role, he is responsible for all legal aspects of the organization, including
regulatory, compliance, litigation, Enterprise Risk Management (ERM), Risk Management,
and government relations. From 2010 until 2013, Dan was in private practice with a mix of
insurance industry and other industry clients, assisting them on various aspects of litigation
and corporate work. Prior to private practice, Dan was in house at Argo Group US, Inc (2005-2010),
Kemper Corporation (formerly Unitrin) (2000-2005) and CNA Financial (1996-2000). Dan began his legal
career as an associate at Lord Bissell & Brook, where he was in a litigation group.
Prior to becoming a lawyer, and while attending law school at night, Dan worked at CNA as an accountant
(1988-1993) and then as a paralegal in the litigation group (1993-1994).
During his career, Dan has worked on major US and cross-border M&A transactions for his clients, and has
obtained Form A approvals in more than a dozen jurisdictions. He has also drafted international cost
sharing agreements and has negotiated significant savings for his clients in third party negotiations. Dan
has testified before a number of insurance departments on various matters, including Y2K, and has
assisted in drafting of legislative changes in a number of jurisdictions.
Dan currently serves as President of the Chicago Bar Association and is a member of the Board of
Trustees of Monmouth College. He personally has raised more than $325,000 for mentoring programs

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