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What is the insurance service office? | Legal insurance blog about property insurance



The Insurance Office (commonly referred to as "ISO") is involved with practically individuals, companies, associations, and government agencies in the United States. Most people have no idea what it is and how important it is for a role in the background of risk, finances and insurance. Today, many companies want transparency in the form of internal documents to know what role it plays, which means that all risk forms for business interruptions and virus exemptions that insurers claim do not cover their income losses caused by COVID-19.

A 2013 Market conduct review of ISO gives a pretty good story:

The Insurance Service Office was formed on April 1

, 1971 as a national voluntary, non-profit, non-profit association of insurance companies by consolidating various state, regional and national rating agencies for different lines of property / accident insurance. In the decades after its formation, ISO made a number of changes in its operations and structure. As of January 1, 1983, the Insurance Service Office changed its legal form from a non-profit association to a non-profit organization. The name was changed from Insurance Services Office to Insurance Services Office, Inc. (ISO). In 1989, ISO began to provide advisory costs instead of advisory rates and transferred full decision-making authority in all tariff-related matters, including insurance methodology, to ISO staff from insurance committees. In 1994, insurers relinquished control of ISO to a board of directors that included seven non-insurers. In 1997, ISO became an independent for-profit company. Insurers may only own shares in ISO that have very limited voting rights, mainly limited to the election of a minority on the board and matters that involve a significant change in the company's structure or business purposes. In 2008, Verisk Analytics was founded, which acts as the parent company for ISO. In 2009, Verisk completed its IPO and became a listed company.

ISO Data, Inc., a subsidiary of ISO, applied to the states to be appointed as a statistical agent on July 6, 2001.

Market Conduct Study also noted the basic function of ISO:

ISO's functions include that Develop programs to help insurers define and manage insurance products Provide information to help insurers determine their own independent premium rates. Insurers use ISO offers mainly for their product development, insurance and rating functions.

ISO serves insurers, reinsurers, insurers, insurance authorities, risk managers and other participants in the property / non-life insurance market. The following is a list of the advisory organization's products and services offered by ISO:

• Data to help insurers make independent decisions about their pricing

• Statistical and actuarial services

• Insurance language

• Rules needed to write and evaluate insurance

• Tools for predictable modeling and risk assessment

• Information about specific properties and communities

Regarding forms of insurance and changes noted Market Conduct Study:

ISO communicates changes to participating insurance companies through circular notes circular) throughout the review and implementation process,

ISO modifies forms through a defined process that includes staff and manager depreciation, quality assurance and legal review. Once a form has been considered final, all previous versions, if applicable, will be removed from production.

A 2007 Market Conduct Examination conducted for New York indicated that at the end of 2004 ISO also had external contact and advisory panels:

In addition to the board committees, ISO has established User Advisory Panels and Liaison Panels. Advisory panels for users have no decision-making authority but provide recommendations within their area of ​​expertise. Commercial lines, personal lines and actuarial advisory panels are some of the user advisory panels. Members of user advice panels are employed in a suitable senior position as a member or subscriber of the company. National, regional and / or state liaison panels shall be established for the purpose of obtaining views and comments on matters of significant importance from such non-insurers and non-insuring trade associations, including but not limited to, associations of agents, brokers, insurers, actuaries, regulators and risk managers.

Regarding forms of insurance and approval, noted 2007 Market Conduct Examination:

ISO submits revisions to its insurance programs (insurance forms and endorsements, manual rules and pricing considerations) as needed to reflect amendments to statutes, ordinances and departmental circulars in New York . ISO also makes changes to its programs in response to general market developments, societal changes, competitive needs and general advances in the real estate / accident industry.

Such a development during the IP was related to terrorist coverage. Following the events of September 11, 2001, ISO began to reconsider the exclusive political language in property and liability policies related to terrorist coverage. In response to the Terrorism Risk Insurance Act of 2002 (TRIA), ISO filed various forms related to losses from "certified terrorist acts" for insurance companies to use in existing, new and renewal policies. It developed and archived loss-making costs for terrorist coverage for commercial property, general liability, commercial vehicle and business owners.

These standardized forms and amendments thereto shall be carefully examined by each insurance department. The National Association of Insurance Commissioner & # 39; s explains:

What are regulators trying to accomplish with the process that requires filing and reviewing insurance forms, approvals, riders, and other insurance contracts? Review of policy form guarantees protection for the public and the archivist. Despite the importance of insurance contracts in people's lives, the public generally does not take the time to read and understand coverage, insurance limits and coverage limitations and the insurance and insurer's obligations set out in detail in insurance and other related contract documents. These documents affect the benefits that a person is entitled to receive and the obligations that the individual has to protect and receive these benefits. In addition, insurers may inadvertently develop contractual language that provides benefits that are not intended or that do not comply with the provisions of state law and / or regulation. Insurers also benefit from the services offered by the contract analyst. An analyst for contract review is probably much more familiar with the requirements of state laws and regulations for the products they are assigned to review than any employee of the insurance company. The analyst also sees product applications from several insurance companies and can benefit from an understanding of a particular market in a way that the insurer's employees cannot duplicate. This enables the contract review analyst to review a policy form, rider or approval with an extensive knowledge base that can be helpful to insurers. For example, if an insurer has inadvertently failed to comply with a law or regulation, the analysis analysis may point out the shortcomings of the application and ask the archivist to make appropriate changes. Insurance companies often want to use the same product in several states and therefore a specific requirement in a particular condition may not be treated adequately and the contract review analyst will be able to assist the notifier accordingly.

Review of the policy form ensures that high quality standards are maintained. These include the provision of generally expected benefits to the policyholder, the avoidance of breach of contract by the archivist, the introduction of mandatory provisions set out in law or regulation, the exclusion of provisions prohibited by law or regulation and the assurance that the insurance contract has an acceptable appearance to the intended audience. .

Regulators must carefully review forms to ensure that they contain the essential elements required by law and / or regulation. In some states, the review of policy forms includes review of advertising materials for specific areas of activity. 1

How did the insurance service office come under Verisk's control? An SEC application from November 2009 states:

The Insurance Service Office … enables risk-bearing companies to better understand and manage their risks. The company provides its customers with in-house developed data that, in combination with analysis methods, creates embedded decision support solutions. The company is one of the largest collectors and suppliers of property and accident data ("P&C") or P&C insurance risks in the United States ("U.S."). The company offers solutions for detecting fraud in the US non-life insurance, mortgage and healthcare industries and sophisticated methods for predicting and quantifying losses in various contexts, ranging from natural disasters to health insurance. The company provides solutions, including data, statistical models or tailored analyzes, all designed to enable customers to make more logical decisions. The company was formed in 1971 as an advisory and rating organization for the P&C insurance industry to provide statistical and actuarial services, to develop insurance programs, and to help insurance companies meet governmental requirements. Over the past decade, the company has broadened its data assets, entered new markets, placed greater emphasis on analysis and conducted strategic acquisitions.

Verisk was founded on May 23, 2008 to serve as the parent company of the company. after the implementation of the proposed IPO. On June 27, 2008, the company's shareholders approved certain changes in corporate governance that were necessary for the company to be able to continue with a proposed IPO. On October 6, 2009, the company carried out a corporate reorganization, whereby … the ordinary shares in the company were exchanged by the current shareholders for Verisk's ordinary shares on a one-to-one basis … On October 9, 2009, the company completed its IPO. Following the completion of the IPO, the selling shareholders sold 97,995,750 shares in Verisk, Class A shares, which included 12,745,750 over-allotment alternatives, at a share price of USD 22.00 per share. The company did not receive any income from the sale of ordinary shares in the offer. Verisk trades on the NASDAQ Global Select Market under the ticker symbol & # 39; VRSK. & # 39; …

In its 2008 prospectus to potential investors, Verisk, which was really ISO because Verisk was just a compound name for the former private investor. contained ISO, indicated the spirit of the risk analysis that it provides to insurance companies:

Risk assessment: We are the leading provider of statistical, actuarial and guarantee data for the US insurance industry. Our own and unique databases describe premiums and losses in insurance transactions, accident and property risk characteristics for commercial buildings and their inhabitants and fire-fighting ability in municipalities in addition to other properties and attributes. Our largest non-life insurance database contains almost 14 billion records, and in each of the last three years we updated the database with over 2 billion validated new records. We use our data, for example, to create policy language and our own risk classifications that are industry standards and to generate potential loss cost estimates that are used to hedge insurance prices.

Decision analysis: We provide solutions in each of the four processes in the Verisk risk analysis framework by combining algorithms and analysis methods that contain our own data. Our unique data sets include approximately 600 million non-life insurance claims, historical natural disaster data covering more than 50 countries, data from more than 13 million mortgage applications and over 300 million US criminal records. Customers integrate our solutions into their models, formulas or insurance criteria to predict potential loss events, ranging from hurricanes and earthquakes to unexpected health claims. We are a leading developer of disaster and extreme event models and offer solutions that cover natural and artificial risks, including terrorist acts. We also develop solutions that enable customers to quantify costs after events have occurred. Our fraud solutions include data on claims, analysis of mortgage applications to identify misinformation, analysis of claims to find new fraud patterns and identification of suspicious claims in the insurance, healthcare and mortgage sectors.

It is not surprising that companies that have been denied lost revenue from COVID-19 want to see what the internal ISO documents say about their policy is interpreted to cover their losses and then the effect of virus exemptions written by ISO. The insurance companies are fighting vigorously against this ISO disclosure in the same way that tobacco companies in cigarette disputes fought against internal quotations that indicate that cigarette smoking was addictive.

A recently filed lawsuit 2 directly sued ISO. and claimed that it had conspired with the insurance company and the American Association of Insurance Services to misrepresent to the regulators about the coverage caused by a virus and the effects of viral circulars:

315. As stated above, ISO and AAIS, and through them Berkshire, made incorrect information to the NJ DOI and the insured regarding the virus exclusion, in order to convince the state insurance authorities that the virus exclusion only clarified the coverage and did not reduce the scope of the coverage.

316. The defendant made such false representations with knowledge of the truth and / or negligent and / or negligent disregard and intent that the insured and / or NJ DOI and other supervisory authorities would rely on the statements thereof.

317. The insured and / or NJ DOI reasonably and rightly relied on one or more of such petitions to the detriment, as evidenced by the fact that virus exclusion was approved by state insurance authorities based on incorrect representations of ISO and AAIS …

It has been almost a year since we started with this COVID mess. Still, the subsequent COVID interruption dispute is quite common for my previous experiences of insurance disaster. The insurance companies through their lawyers and publicists say the same things they did for fifteen years in Hurricane Katrina slab process:

  1. People and companies claim too much and that the losses are not covered.
  2. The policyholders' lawyers exceed and create a mountain from a mole.
  3. There is no need to discover internal documents on coverage and the behavior of insurance companies.

One of the blessings I am grateful for is to have met and shared information and ideas with bright and hard-working lawyers who work to help companies that are also in dispute in this battle seeking coverage against their own insurance companies. If we can only make a breakthrough in this discovery of the internal documents with the insurance service office …

The idea of ​​the day

The song remains the same is not a good movie, but there is no point in making excuses. It's just a reasonably honest statement about where we were at the time. It's very difficult for me to look at it now, but I would like to see it in a year just to see how it stands up.
—Jimmy Page, Lead Guitar, Led Zeppelin

] Today's Song

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1 Product Archiving Handbook at age 65 (NAIC August 2016).
2 The Learning Experience v. Berkshire Hathaway Specialty Ins. Co. No. 2: 20-cv-14013 (D. N.J. complaint filed October 7, 2020).


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