ALABAMA INSURANCE UNDERWRITING ASSOCIATION 315 E Laurel Av - Suite 216D Foley, Alabama (251) or (251) Fax (251)

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ALABAMA INSURANCE UNDERWRITING ASSOCIATION

315 E Laurel Av - Suite 216D • Foley, Alabama 36535

(251) 943-4029 or (251) 928-3533 Fax (251) 943-4030

HU

www.AIUA.orgU

October 21, 2011

Fall 2011 Board of Directors Meeting The Battle House, Mobile, Alabama

BOARD MEMBER COMPANIES PRESENT:

Alfa Insurance Companies Wyman Cabaniss

Allstate Insurance Company Randy Birchfield

Auto-Owners Insurance Company Sandra McCullough

Baldwin Mutual Insurance Company Kevin Russell

Farmers Insurance Group of Companies Jerry Workman

Liberty Mutual Insurance Company Jared Stuckey

Mobile County Public Sector Jay Ison

Nationwide Insurance Patrick Foy

Travelers Companies Bob Schurke

State Farm Insurance Company Kim Robison

ALSO PRESENT:

Alabama Department of Insurance Charles Angell

STAFF:

Bob Groves, Secretary/Manager

Ursula Jackson, Assistant Manager-Operations Ray Skinner, Assistant Manager-Claims Manager Chuck Woods, Assistant Manager- I.T.

LEGAL COUNSEL:

Denny Hughes Haskell, Slaughter, Rediker, & Young

OTHER GUESTS:

Ken Selzer AON Benfield

Sherry Huang AON Benfield

Robert Fox AON Benfield

Deborah Smith O’ Sullivan Creel

Steve Etheridge Alfa Insurance Companies

Wade Wright Alfa Insurance Companies

Renee Carter AIIS

Stacey Long Willis Re

Robert W. Groves Secretary/Manager

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I. Chairperson Kim Robison called the meeting to order at 8:30am II. AIUA Legal Counsel read the AIUA Anti-trust Admonition:

“We are all aware that the purpose of this board meeting is to conduct the affairs of this underwriting association for the benefit of Alabamians living in the coastal areas of the state. Board members, nevertheless, are reminded of the provisions of the various federal anti-trust acts. Subjects such as boycotts, voluntary rates, market sharing and the like, are in violation of those laws and totally contrary to the purposes of this meeting and this association.”

III. Kim Robison requested Bob Groves call the roll. The Baldwin County Public Sector was not present.

A. A quorum was present. IV. Recognition of Guests/Visitors:

A. Denny Hughes - Haskell, Slaughter, Rediker, & Young B. Charles Angell – Alabama Department of Insurance C. Ken Selzer – AON Benfield

D. Sherry Huang – AON Benfield E. Robert Fox – AON Benfield

F. Steve Etheridge – Alfa Insurance Companies G. Wade Wright – Alfa Insurance Companies H. Renee Carter – AIIS

I. Stacey long – Willis Re

V. Adoption of Minutes from April 8, 2011 Board Meeting. Motion to waive the reading of the minutes

of the April 8,2011 meeting and adopt the minutes. Motion seconded. The motion passed

unanimously.

VI. Adoption of Minutes from June 8, 2011 Board Meeting. Motion to waive the reading of the

minutes of the June 8,2011 meeting and adopt the minutes. Motion seconded. The motion

passed unanimously.

VII. Operational Reports

A. Treasurer’s Report – Kevin Russell, Chairman (Baldwin Mutual) 1. 3rd Quarter Financial Statements were presented (Exhibit C).

B. Manager’s Report

1. Bob Groves, Secretary/Manager

a. Presented 2010-2011 budget as approved at the October 2010 board meeting with actual figures year to date as of July 31, 2011 and budget variances.

b. Budget Performance Report 2010/2011 as of July 31, 2011

i. Total Operating Expenses - $5,845,236. $297,122 over the

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ii. Total Capital Expenditures - $97,003. $56,747 favorable of the original projections for 2010/2011 capital expenditures.

iii. Net Income - $11,367,014. $9,515,110 above original projections for 2010/2011 net income.

iv. Secretary/Manager noted the continuous growth pattern in new business.

a. New submissions for plan year 2010-2011 as of August 2011: 6,609

b. Average of 486 new applications per month since 2007 c. Renewal retention for plan year 2010-2011 as of August

2011: 86%

d. Average increase of policies in force since 2007 per month: 296

c. Budget Forecast for 2011/2012 – based on $45,000,000 in Gross Premiums – presented by the Secretary/Manager

i. Projected policies in force – 26,800

ii. Total insured value - $4,600,000,000

iii. Written Premiums - $45,000,000

d. Changes in Operation i. Staff

a. Plan Year 2010-2011

i. 23 Positions Authorized

ii. Current Positions Filled a. 18 Full Time b. 1 Part Time b. Plan Year 2011-2012

i. 23 Positions Authorized

a. 19 Filled Positions

b. 4 Authorized; 1 accounting manager and 3 staff positions

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ii. Productivity

a. October 2009

i. 18 Filled Positions

ii. 800 Policies per person

b. October 2010

i. 18.5 Filled Positions

a. 1,000 Policies per person

ii. 25% Increase in Productivity

c. October 2011

i. 19 Filled Positions

a. 1,191 Policies per person ii. 19.1% Increase in Productivity iii. Capital Improvements – Proposed

a. Software and Programming

i. AIUA – Pilot CiC Claims Integration

ii. Web-site programming

(enhancements/maintenance)

iii. ImageRight programming (enhancements) iv. Upgrade Policy/ Claims/ Accounting System

a. Find suitable vendor

b. Data Processing Equipment

i. Server SAN

ii. Server Switch

iii. High Speed Scanner

iv. Replacement Computers, Monitors, Printers iv. Office Space – Proposed

a. Acquire more space in existing building 2. Claims – Ray Skinner, Assistant Manager

a. Open Claims report: 5 Routine, 4 CAT

3. Legal Report – Denny Hughes (Haskell, Slaughter, Rediker, & Young) a. No pending litigations against the association.

b. Assisting in administrative tasks including negations with Pilot CIC program technology agreement.

c. Revised the Plan of Operation and Articles of Agreement effective August 1, 2011. Assisting management with the collection of membership

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d. Voting Results:

i. Total Votes Available: 1,379,806

ii. Votes Cast For: 804,035 iii. Votes Cast Against: 0 iv. Votes Not Cast: 575,771 VIII. Proxy Report – Bob Groves, Secretary Manager

A. Nothing to report IX. Standing Committee Reports:

A. Accounting and Fiscal Affairs Committee – Kevin Russell, Chairman (Baldwin Mutual) 1. Motion to adopt the 2011/2012 budget as proposed. Motion seconded. The

motion passed unanimously.

2. The trust account has been broken into two sub-accounts: Members Equity and Retained Surplus.

B. Appeals Committee – Sandra McCullough, Chairperson (Auto-Owners) 1. 11 appeals were made since April 2011

a. 4 resolved without appeal hearing/ruling b. 7 appeal hearings, all resolved in favor of AIUA

C. Governmental Affairs and Advisory Committee- Jerry Workman, Chairperson (Farmers)

1. Legislative update

2. Affordable Homeowner Commission - update

D. Loss or Claims Committee – Wyman Cabaniss, Chairperson (Alfa)

1. 5 routine claims open, 4 from storm Lee, out of 59. Congratulates Mr. Skinner and AIUA staff on handling claims.

2. AIUA Claims Audit performed on October 19, 2011 by Steve Etheridge and Wade Wright (Alfa claims managers).

a. 36% of the company’s claims submitted between November 1, 2010 and October 19, 2011 were audited.

b. A letter was submitted to the Claims Committee Chair detailing their findings – no deficiencies noted; claims were handled in a timely manner; claimants are being kept updated on the status of their claims.

E. Meetings Committee – Jared Stuckey, Chairperson (Liberty Mutual)

1. Spring 2012 Board Meeting is scheduled for April 11-13, 2012 at the Perdido Beach Resort

2. Fall 2012 Board Meeting date is scheduled for October 24-26, 2012 at The Grand Hotel, Point Clear, AL

3. Motion to authorize the manager to schedule and contract the 2013 Spring Board Meeting. Motion seconded. The motion passed unanimously.

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F. Nominating Committee – Bob Schurke, Chairperson (Travelers) 1. Nothing to report

G. Rate Committee – Patrick Foy, Chairperson (Nationwide) 1. AIUA filed rate change effective August 1, 2011

a. Zone 1 rates increased 6.8% b. Zone 2 rates decreased 15.6% c. Zone 3 rates decreased 14.5% d. Zone 4 rates decreased 18.2% e. Over-all rates decreased 6.2% 2. AIUA to review rate adequacy for 2012

H. Reinsurance Committee – Kevin Russell, Chairperson (Baldwin Mutual) 1. AIUA Reinsurance RFP – received 6 responses

2. Motion was made to continue to use Aon Benfield for reinsurance. Motion seconded. Motion passed unanimously.

3. The Reinsurance Committee authorizes management to begin placement with AON on the June 1, 2012 renewal.

I. Underwriting Committee – Kim Robison (State Farm) Chairperson

1. Nothing to report

J. Voluntary Writings Committee – Jay Ison, Chairperson (Mobile Co Public Sector) 1. Member Participation for 2011 published in July.

2. Rules/Procedures updates were approved and implemented 8/1/2011. 3. Standardized Reporting of Voluntary Writings to AIUA

a. Web-based – 80% complete

4. Independent, external audit of AIUA Voluntary Writings procedures/calculations a. On hold until the web based reporting is complete

VIIII. New Business:

A. Kevin Russell suggested establishing Technology Operations Committee.

1. Kim Robison – Committee to be established with Chuck Woods and will ask for 3 more members to join.

B. Charles Angell (Alabama Department of Insurance)

1. Jim Ridling is working with the Affordable Homeowners Insurance Commission. 2. Department of Insurance is actively working on the implementation of Healthcare

Reform. C. Renee Carter (AIIS)

1. Thanked Bob and AIUA for the opportunity to launch Alabama Insurance Information Services this May.

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2. Southern Insurance Information Services (Atlanta) decided to place a representative/ spokesperson in Alabama.

3. She stated she is looking forward to working with the association and appreciates any input from the member companies.

X. Motion to adjourn meeting. Motion seconded. The motion passed unanimously and the meeting was adjourned at 9:10am.

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