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New State Farm venture responds to regulator's questions on auto program

The initial filings for HiRoad Assurance Co., the new State Farm Mutual Automobile Insurance Co. subsidiary that plans to launch a distinctive direct-to-consumer private-passenger auto program in Rhode Island, remain subject to regulatory review on the date the company originally proposed for their effectiveness.

Oliver Wyman Actuarial Consulting Inc., the firm retained by the Rhode Island Department of Business Regulation to review the initial HiRoad filings, submitted to HiRoad a five-page request for additional information July 12, and the insurer responded with a series of documents dated July 31. The filings remain open and subject to actuarial review.

HiRoad deemed "confidential" its responses to eight of the 13 categories of questions posed by Oliver Wyman, including as it pertains to the differences between the new program and State Farm's existing Rhode Island private-passenger auto policies, the nature of the telematics program the company intends to use in calculating a safe-driving discount, and its plans for possibly expanding the program to other states.

State Farm does not have captive agents in Rhode Island, and the State Farm group generated only $4.6 million in private auto direct premiums written in the state during 2016. The company has said it plans to use HiRoad to test advanced insurance and technology concepts.

As originally proposed, HiRoad said its program would generally carry average premiums and base rates at 10% below the new business rate level that would be appropriate for State Farm. Oliver Wyman had asked how State Farm would comply with a provision of Rhode Island's insurance regulations stating that insurers "must offer each insured the lowest premium for which that insured qualifies, within the insurer or group, at policy issuance and annual renewal."

The consulting actuary also asked what the rate level impact would be should all current State Farm policies in Rhode Island get renewed into the HiRoad program and whether State Farm's existing private auto program in the state would be closed to new business.

Regarding a question about how the new policy forms and endorsements compare with the existing State Farm program, HiRoad said its policy represents an adaptation of its parent company's policy. Changes included the language and limits applicable to car rental and travel expenses coverage, for example.

Oliver Wyman asked several questions pertaining to HiRoad's telematics program. The insurer indicated in its initial filings that base premiums for bodily injury and property damage liability, medical payments, comprehensive and collision coverages would be eligible for a safe-driving discount to be determined based on data collected by a telematics device. The policy form indicates that the discount would be calculated monthly using driving data collected from the HiRoad mobile app for all listed drivers of the insured vehicle.

The consulting actuary queried whether the telematics program is voluntary, what devices would be used to collect data, what information would be shared with drivers, what minimum information must be collected each month to revise the discount, whether surcharges could result in the future from the information the device collects, and the expected rate of participation in HiRoad's telematics initiative as well as the existing level of participation among State Farm policyholders in states where the company offers such a program.

HiRoad sought an Aug. 1 effective date for new business in the original filing, which it submitted June 26. The July 31 filing included an update to the company's proposed rate and rule manual.