Texas Disallowed Expense Call.

Texas Department of Insurance 333 Guadalupe Street P.O. Box 149104 Austin, Texas 78714-9104 512/463-6169 Commissioner's Bulletin # B-0007-96 February 15, 1996 ## Texas Disallowed Expense Call Pursuant to the authority of Article 1.24, of the Texas Insurance Code (TIC), the department requests all companies writing property, residential and automobile insurance in Texas to submit information relating to disallowed expenses on the attached forms. Article 5.101 of the Texas Insurance Code prohibits the consideration of certain incurred expenses in the determination of Benchmark and individual company rates for lines of insurance regulated under the Flexible Rating Program. This call is designed to provide quantification of such "disallowed" expenses on a countrywide basis. In addition, this call requires the reporting of information regarding executive compensation and affiliate transactions. This call must be completed and returned in accordance with the instructions by not later than April 1, 1996. Underlying data, individual source documents and other information utilized in the development of your call response must be maintained in your records for a minimum of two years after April 1, 1996. Failure to comply with the requirements of this call within the time limits specified shall constitute a violation or violations of the Insurance Code and shall subject the insurer to the penalties provided by law. Questions concerning this call should be directed to Julie Jones at the Texas Department of Insurance at 512/475-3027. Sincerely, C.H. Mah C.H. Mah Associate Commissioner Technical Analysis Mail Code 105-5G Enclosures CHM/JJ # **Instructions:** 1. Companies with direct written premiums in Texas in 1995 in one or more of the following lines must complete the Report of Insurance Expense Exhibit Data for the written lines and for all property and casualty lines combined: Residential Fire Residential Allied Lines Farmowners Multiple Peril Homeowners Multiple Peril Private Passenger Automobile Commercial Automobile In addition, the Report of Executive Compensation and Benefits, the Report of Affiliate Transactions, the Transmittal form and Affidavit must be completed. 2. Companies having no Texas direct written premium in 1995 in any of the above lines may satisfy the call by completing and returning the Transmittal Form and affidavit. 3. Companies filing as a group must list names and NAIC numbers on the transmittal and acknowledgment forms. 4. This call requires the reporting of countrywide experience. 5. Report all amounts to the nearest thousand as they are reported in the Insurance Expense Exhibit. 6. The affidavit must be signed by the highest ranking company official with management and control authority over the development of the reported information. The affidavit must be notarized. 7. Underlying data and other information utilized in the development of your call response must be maintained in your records for a minimum of two years after April 1, 1996. 8. Return Acknowledgement form by March 4, 1996, by mail or fax. 9. If a TDI acknowledgment of receipt is desired, include a stamped, self addressed envelope. 10. Questions regarding this call should be directed to Julie Jones at the Texas Department of Insurance at 512/475-3027. 11. The completed call forms and affidavit must be returned on or before April 1, 1996 to: Julie Jones Texas Department of Insurance Data Services (MC 105-5D) PO. Box 149096 Austin, Texas 78714-9096 Group/Company Name: # REPORT OF INSURANCE EXPENSE EXHIBIT DATA CALENDAR YEAR 1995 | LINE | Fire (IEE Line 1) | | Allied Lines (IEE Line 2.1) | | Farmowners Multiple Peril (IEE Line 3) | | | --- | --- | --- | --- | --- | --- | --- | | | Amount (000) | % of Direct Written Premiums (XX.X) | Amount (000) | % of Direct Written Premiums (XX.X) | Amount (000) | % of Direct Written Premiums (XX.X) | | 1 | Direct premiums written - must equal the amount reported on Part III, column 1 of the Insurance Expense Exhibit. | | | | | | | | $ | % | $ | % | $ | % | | 2a | Other acquisition, field supervision and collection expenses incurred - must equal the amount reported on Part III, column 14 of the Insurance Expense Exhibit. | | | | | | | | $ | % | $ | % | $ | % | | 2b | All advertising expenses incurred EXCEPT the following: 1. Advertising directly related to the services or products provided by the insurer; 2. Advertising designed and directed at loss prevention; and 3. Advertising for promotion of organizations exempt from federal taxation under 5.01(c)(3) of the Internal Revenue Code. | | | | | | | | $ | % | $ | % | $ | % | | 2c | Adjusted other acquisition, field supervision and collection expenses incurred - line 2a minus line 2b. | | | | | | | | $ | % | $ | % | $ | % | | 3a | General expenses incurred - must equal the amount reported on Part III, column 15 of the Insurance Expense Exhibit. | | | | | | | | $ | % | $ | % | $ | % | | 3b | Loss control and safety engineering expenses. (Although this is not a disallowed expense, it must be reported separately to ensure appropriate consideration.) | | | | | | | | $ | % | $ | % | $ | % | | 3c | All lobbying expenses. Lobbying expenses are considered to include all salaries, fees and other expenses incurred to influence elected or appointed decision-makers regarding legislation or rule making and all other activities required to be reported under the Texas Ethics Law. | | | | | | | | $ | % | $ | % | $ | % | | 3d | All amounts paid by an insurer as damages in a suit against the insurer for bad faith or as fines or penalties for violation of law. | | | | | | | | $ | % | $ | % | $ | % | | 3e | All contributions to organizations engaged in legislative advocacy. | | | | | | | | $ | % | $ | % | $ | % | | 3f | All fees and penalties imposed on the insurer for civil or criminal violations of law. | | | | | | | | $ | % | $ | % | $ | % | | 3g | All contributions to social, religious, political or fraternal organizations. | | | | | | | | $ | % | $ | % | $ | % | | 3h | All fees and assessments paid to advisory organizations. | | | | | | | | $ | % | $ | % | $ | % | | 3i | Disallowed general expenses - sum of lines 3c, 3d, 3e, 3f, 3g and 3h. | | | | | | | | $ | % | $ | % | $ | % | | 3j | Adjusted general expenses incurred - line 3a minus line 3b minus line 3i. | | | | | | | | $ | % | $ | % | $ | % | Page 2 Group/Company Name: # REPORT OF INSURANCE EXPENSE EXHIBIT DATA CALENDAR YEAR 1995 | LINE | Homeowners Multiple Peril (IEE Line 4) | | Automobile Liability | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | Private Passenger (IEE Lines 19.1 and 19.2) | | Commercial (IEE Lines 19.3 and 19.4) | | | | Amount (ooo) | % of Direct Written Premiums (xx.x) | Amount (ooo) | % of Direct Written Premiums (xx.x) | Amount (ooo) | % of Direct Written Premiums (xx.x) | | 1 | Direct premiums written - must equal the amount reported on Part III, column 1 of the Insurance Expense Exhibit. | | | | | | | | $ | 100% | $ | 100% | $ | 100% | | 2a | Other acquisition, field supervision and collection expenses incurred - must equal the amount reported on Part III, column 14 of the Insurance Expense Exhibit. | | | | | | | | $ | % | $ | % | $ | % | | 2b | All advertising expenses incurred EXCEPT the following: 1. Advertising directly related to the services or products provided by the insurer; 2. Advertising designed and directed at loss prevention; and 3. Advertising for promotion of organizations exempt from federal taxation under 5.01(c)(3) of the Internal Revenue Code. | | | | | | | | $ | % | $ | % | $ | % | | 2c | Adjusted other acquisition, field supervision and collection expenses incurred - line 2a minus line 2b. | | | | | | | | $ | % | $ | % | $ | % | | 3a | General expenses incurred - must equal the amount reported on Part III, column 15 of the Insurance Expense Exhibit. | | | | | | | | $ | % | $ | % | $ | % | | 3b | Loss control and safety engineering expenses. (Although this is not a disallowed expense, it must be reported separately to ensure appropriate consideration.) | | | | | | | | $ | % | $ | % | $ | % | | 3c | All lobbying expenses. Lobbying expenses are considered to include all salaries, fees and other expenses incurred to influence elected or appointed decision-makers regarding legislation or rule making and all other activities required to be reported under the Texas Ethics Law. | | | | | | | | $ | % | $ | % | $ | % | | 3d | All amounts paid by an insurer as damages in a suit against the insurer for bad faith or as fines or penalties for violation of law. | | | | | | | | $ | % | $ | % | $ | % | | 3e | All contributions to organizations engaged in legislative advocacy. | | | | | | | | $ | % | $ | % | $ | % | | 3f | All fees and penalties imposed on the insurer for civil or criminal violations of law. | | | | | | | | $ | % | $ | % | $ | % | | 3g | All contributions to social, religious, political or fraternal organizations. | | | | | | | | $ | % | $ | % | $ | % | | 3h | All fees and assessments paid to advisory organizations. | | | | | | | | $ | % | $ | % | $ | % | | 3i | Disallowed general expenses - sum of lines 3c, 3d, 3e, 3f, 3g and 3h. | | | | | | | | $ | % | $ | % | $ | % | | 3j | Adjusted general expenses incurred - line 3a minus line 3b minus line 3i. | | | | | | | | $ - | % | $ | % | $ | % | Page 3 Group/Company Name: # REPORT OF INSURANCE EXPENSE EXHIBIT DATA CALENDAR YEAR 1995 | LINE | Automobile Physical Damage | | | | Grand Total (IEE Line 32) | | | --- | --- | --- | --- | --- | --- | --- | | | Private Passenger (IEE Line 21.1) | | Commercial (IEE Line 21.2) | | Amount (000) | % of Direct Written Premiums (xx.x) | | | Amount (000) | % of Direct Written Premiums (xx.x) | Amount (000) | % of Direct Written Premiums (xx.x) | | | | 1 | Direct premiums written - must equal the amount reported on Part III, column 1 of the Insurance Expense Exhibit. | | | | | | | | $ | 100% | $ | 100% | $ | 100% | | 2a | Other acquisition, field supervision and collection expenses incurred - must equal the amount reported on Part III, column 14 of the Insurance Expense Exhibit. | | | | | | | | $ | % | $ | % | $ | % | | 2b | All advertising expenses incurred EXCEPT the following: 1. Advertising directly related to the services or products provided by the insurer; 2. Advertising designed and directed at loss prevention; and 3. Advertising for promotion of organizations exempt from federal taxation under 5.01(c)(3) of the Internal Revenue Code. | | | | | | | | $ | % | $ | % | $ | % | | 2c | Adjusted other acquisition, field supervision and collection expenses incurred - line 2a minus line 2b. | | | | | | | | $ | % | $ | % | $ | % | | 3a | General expenses incurred - must equal the amount reported on Part III, column 15 of the Insurance Expense Exhibit. | | | | | | | | $ | % | $ | % | $ | % | | 3b | Loss control and safety engineering expenses. (Although this is not a disallowed expense, it must be reported separately to ensure appropriate consideration.) | | | | | | | | $ | % | $ | % | $ | % | | 3c | All lobbying expenses. Lobbying expenses are considered to include all salaries, fees and other expenses incurred to influence elected or appointed decision-makers regarding legislation or rule making and all other activities required to be reported under the Texas Ethics Law. | | | | | | | | $ | % | $ | % | $ | % | | 3d | All amounts paid by an insurer as damages in a suit against the insurer for bad faith or as fines or penalties for violation of law. | | | | | | | | $ | % | $ | % | $ | % | | 3e | All contributions to organizations engaged in legislative advocacy. | | | | | | | | $ | % | $ | % | $ | % | | 3f | All fees and penalties imposed on the insurer for civil or criminal violations of law. | | | | | | | | $ | % | $ | % | $ | % | | 3g | All contributions to social, religious, political or fraternal organizations. | | | | | | | | $ | % | $ | % | $ | % | | 3h | All fees and assessments paid to advisory organizations. | | | | | | | | $ | % | $ | % | $ | % | | 3i | Disallowed general expenses - sum of lines 3c, 3d, 3e, 3f, 3g and 3h. | | | | | | | | $ | % | $ | % | $ | % | | 3j | Adjusted general expenses incurred - line 3a minus line 3b minus line 3i. | | | | | | | | $ | % | $ | % | $ | % | Page 4 # REPORT OF EXECUTIVE COMPENSATION AND BENEFITS The following information must be provided for the five highest paid policymaking employees in the insurance group. The determination of the five positions to be included shall be based on total compensation and benefits. Amounts shown should reflect market value at year end. Provide the description and method of determining market value of all amounts reported in the "All Other" column in the space provided below. | Group/Company Name:________________________ | | | | | | --- | --- | --- | --- | --- | | Position Title | 1995 Compensation and Benefits | | | | | | Salary and Cash Bonuses | Expenses (Taxable and Nontaxable) | All Other | Total | | 1 | | | | | | 2 | | | | | | 3 | | | | | | 4 | | | | | | 5 | | | | | Page 5 # REPORT OF AFFILIATE TRANSACTIONS This form must be completed for each type of affiliate transaction which produced an aggregate payment amount greater than $500,000 for calendar year 1995. For the purposes of the reporting of aggregate transactions, "affiliate" has the meaning assigned by Section 2, Article 21.49-1, Texas Insurance Code. Company Name: Affiliate Name: Description of Goods or Services: Payment Amount: Competitively Bid? yes ☐ no ☐ If not competitively bid, description of how the cost of goods or services was set at market value: Attach additional pages as needed. Page ___ of ___. Page 6 # TEXAS DISALLOWED EXPENSE CALL ## AFFIDAVIT THE STATE OF ________________ COUNTY OF ________________ I, ________________, the (position) ________________ of the ________________ being duly sworn, deposes and says that all of the information of the named Company contained herein, together with any necessary related exhibits, schedules and explanations contained, annexed or referred to are a full and true statement in accordance with the instructions provided according to the best of my information, knowledge and belief. Signature SUBSCRIBED AND SWORN TO BEFORE ME this the ____ day of __________, 1995 Notary Public (Printed Name of Notary) My Commission Expires: Page 7 # TEXAS DISALLOWED EXPENSE CALL ## TRANSMITTAL FORM DUE DATE: April 1, 1996 GROUP/COMPANY NAME: ________________________ NAIC CODE: __________ NAIC GROUP NO.: ______ IF THIS IS A GROUP REPORT, LIST EACH INDIVIDUAL COMPANY NAME AND NAIC CODE: Group/Company had direct written premiums in Texas in 1995 in the following lines: ☐ Residential Fire ☐ Residential Allied Lines ☐ Farmowners Multiple Peril ☐ Homeowners Multiple Perile ☐ Private Passenger Automobile ☐ Commercial Automobile ☐ None of the above COMPANY CONTACT PERSON: ________________________ PHONE: ________________________ Page 8 # "ACKNOWLEDGMENT OF RECEIPT" I, ________________________ AN OFFICER FOR (Insurance Company/Group Name) ________________________, (NAIC Number) ________, (Group Number) ________ DO HEREBY ACKNOWLEDGE RECEIPT OF THE TEXAS DISALLOWED EXPENSE CALL. (If you are filing a group filing, please list company names and NAIC numbers below). Company Name NAIC Number SIGNATURE DATE NEW POINT OF CONTACT (ONLY REQUIRED IF CHANGED OR NEW APPOINTMENT REQUIRED) NAME: ________________________ Phone Number: (____) ________________________ Address: ________________________ This acknowledgment must arrive at TDI by March 4, 1996. Mail to: Texas Department of Insurance Clare Pramuk, Director Data Services Mail Code 105-5D P.O. Box 149096 Austin, TX 78714-9096 or fax to: (512) 463-6122