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Section 5.4, Documentation of Compliance (now section 3.4)—One respondent pointed out that
there was no mention of a requirement within the standard relating to the documentation of the
data used and commentary on the quality of the data. Another wanted the phrase if applicable
added to the end of the first sentence. Another suggested that if the actuary receives information
from a source outside the actuary’s firm, the actuary should obtain signed correspondence from
the source verifying the accuracy and completeness of the information. As for the first
comment, a standard already exists on data quality (see ASOP No. 23), so the committee
did not believe that any additional language on this subject was necessary within this
standard. As for the second comment, the phrase if applicable was added at the end of the
first sentence. The suggestion regarding obtaining signed correspondence may be a good
idea in practice, and the committee notes that such a practice can be used. However, this
practice is not required by the standard.
Section 5.4.1, Rating Methods and Renewal Underwriting Practices (now section 3.4.1 and titled
Rating Methods and Underwriting Practices)—One respondent suggested changing the title to
Rating Methods and New Business and Renewal Underwriting Practices. Others suggested
deleting sections (b), (c), and (g) on the grounds of being overly burdensome on small
companies. Another thought that all of the sections should be eliminated. If the sections were not
eliminated, this respondent suggested combining sections (a), (d), and (e); combining sections
(b) and (g); and eliminating section (c). Another suggested that the list of items should be
expanded to include the basis of the data on which claims were estimated, corporate practices
regarding expense and investment income allocation, pooling/reinsurance mechanisms, and any
subsidizing of the small group line by other lines. A couple of respondents also suggested
removing the parentheses from the parenthetical phrase in section (a). In response to the above
comments, the committee changed the title of this section by removing the word renewal.
The committee also added a new section (b) in response to comments received on
investment income, pooling/reinsurance, and other items. Further, the committee removed
the parentheses in section (a), as was suggested.
Section 5.4.2, Fees and Charges (now section 3.4.1(i))—One respondent welcomed the reference
to fees or charges that may or may not be remitted to the carrier. Another respondent asked for
clarification relative to the treatment of association dues. This section was moved to section
3.4.1, Rating Methods and Underwriting Practices, as being one of several items that are
usually reviewed in order to certify compliance with requirements for rating methods and
new business and renewal underwriting practices. As for the latter comment, the answer is
dependent on regulatory interpretation, and, thus, the material is too specific for this
ASOP.
Section 5.4.3, Demonstration of Compliance with Rating Constraints (now section 3.4.2)—One
respondent asked for clarification as to whether the standard requires that the documentation
supporting the certification be submitted to regulators. The committee believes that regulators
define what documentation they should receive, not the ASOP. Thus, no change was made
to the text.
Section 5.4.4, Demonstration of Compliance with Actuarial Soundness (now section 3.4.3)—
One respondent asked for clarification as to whether the required documentation was similar to