Private Passenger Automobile Filing Guidelines – CLEAR Simplified

​A. General Information

Sections 410 to 417 of the Insurance Act (the Act), R.S.O. 1990, Chap. I.8, as amended, set out certain requirements pertaining to rates and risk classification systems for automobile insurance.  The Automobile Insurance Rate Stabilization Act, 2003, as amended (AIRSA) applies to insurers and contracts of automobile insurance with respect to the Personal Vehicles — Private Passenger Automobile category of automobile insurance.  As stated in Regulation 664, sections 410 to 417 of the Act apply to contracts and endorsements to contracts of automobile insurance on Ontario Automobile Policy (OAP 1) or Ontario Drivers Policy (OPF 2), but do not apply to contracts insuring "fleets".  (Please refer to Regulation 664 for the definition of fleet.)
 
Section 7 of AIRSA allows the Superintendent to order an insurer to apply to the Superintendent for approval of the risk classification system, and the rates it intends to use for the Personal Vehicles — Private Passenger Automobile category of automobile insurance.
 
If an insurer is using the CLEAR (Canadian Loss Experience Automobile Rating) rate group system established by Insurance Bureau of Canada or a form of CLEAR for assigning vehicle rate groups as part of its risk classification system, the insurer must submit a filing within the time specified by FSCO following approval of the vehicle rate group tables by FSCO.
 
There is a natural rate group drift based on the CLEAR methodology which takes into consideration the annual changes in the vehicle rate groups that are assigned and the additional premium that is collected as a result of policyholders replacing older vehicles for newer vehicles.
 
All insurers are required to implement the 2017 CLEAR Vehicle Rate Group Table and adjust the base rates in the following steps:
 
  1. Balance Accident Benefits coverage and Physical Damage coverages base rates uniformly across all rating territories so the rate level impact as a result of implementing the 2017 CLEAR table is balanced to 0.0% at the individual coverage level and overall level; and
  2. Further adjust Accident Benefits coverage and Physical Damage coverages base rates uniformly across all rating territories by using IBC estimated rate group drifts.
The conditions for filing under this format are:
 
  • Implement the 2017 CLEAR Vehicle Rate Group Table.
  • No change to CLEAR Accident Benefits rate group assignments and no change to CLEAR Accident Benefits rate group differentials.
  • Use CLEAR Physical Damage rate group assignments without changes to company current rate group differentials.
  • Base rate changes to Accident Benefits and Physical Damage coverages to achieve rate level neutrality.
  • Base rate changes to Accident Benefits and applicable Physical Damage coverages only to account for the IBC estimated rate group drifts.
  • Overall rate level change must be less than or equal to 0.0%.
  • No changes to differentials, discounts and surcharges, rating rules, rating algorithm, or any other risk classification elements.

Filing Process

 
The CLEAR Simplified filing must contain the following informational sections in this order:

 

  1. Table of Contents
  2. Summary of Information (Appendix A) – refer to ARCTICS
  3. Certificate of the Officer/Designate (Appendix B [PDF Document] Size: ## kb)
  4. Off-Balance and Rate Group Drift Calculation
  5. Rating Algorithm
  6. Base Rates, Differentials and Discounts/Surcharges
  7. Dependent Categories (if applicable)
  8. Automobile Manual Pages – Vehicle Rate Group tables
  9. Rating Examples (Appendix C) – refer to ARCTICS
Filings must be submitted by using our web-based filing system called ARCTICS.  If you require a password, please contact the “ARCTICS Main Contact” for your company who can arrange for access.
 
Upon receipt of a filing, the insurer will receive an electronic acknowledgement of receipt from FSCO.  The filing will then be reviewed for completeness based on these Filing Guidelines and the insurer will be informed of any information required to complete the filing.  Until such time as a filing is complete, the statutory time periods governing approval of filings do not begin to run.

 

Once a filing is complete, FSCO will review the technical components of the filing.  FSCO may request further information from the insurer.

 

Once an insurer has received notification of approval from FSCO of its filing, it must:

 

file one complete copy of its automobile insurance  manual, containing the revised risk classification system with FSCO in electronic format (or CD) within 30 days according to the Filing Guidelines for Automobile Insurance Manuals.

 

The insurer may be subject to regulatory action by FSCO if it fails to provide the required information within this time frame.
 
Note
 
FSCO may receive access requests under the Freedom of Information and Protection of Privacy Act (FIPPA) for any record in its custody or control. Section 17 of FIPPA recognizes that certain types of information supplied in confidence by third parties should be exempt from disclosure in the event of an access request if disclosure could result in the harms listed in Section 17. These types of information may  include algorithms, base rates, differentials and any information included under Sections 4 through 7 of the filing requirements.
 
If you think that Section 17 of FIPPA might be applicable to a request for access to your rate filing, please list or stamp all of the pages of the filing that are confidential and give the reasons for the confidentiality. While this exercise does not guarantee that records will not be disclosed, it will be useful in assisting FSCO in responding to an access request.

 

B. Guidelines

These guidelines are for the Private Passenger Automobile (PPA) category only.  The format of the filing should be as follows:

Section 1: Table of Contents

This section contains a listing of the contents of Sections 2 through 9 of the filing and should be in sufficient detail to serve as a reference, by page number, for the location of specific elements of the filing.  We require that you use FSCO’s Web Based filing system called “ARCTICS” to file your submissions electronically.

Section 2: Summary of Information 

The summary section contains certain key information on the nature of the proposed rate level.  The form to be used can be found on ARCTICS (Appendix A).

Section 3: Certificate of the Officer/Designate

Each filing must be accompanied by an original signed authorized Certificate of the Officer/Designate or alternatively the electronic Certificate in ARCTICS must be completed. A copy of the Officer/Designate form is attached as Appendix B. Authorized officers are the President, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, or Chief Agent for Canada. Alternately, the President, Chief Executive Officer, Chief Operating Officer, or Chief Financial Officer may authorize a designate to sign the Certificate of the Officer/Designate. The Designate must be Vice-President rank or above. A copy of the authorization letter should be attached with the Certificate of Officer.

Section 4: Off-Balance and Rate Group Drift Calculation

The aggregate premium may be increased or decreased through the introduction of a new CLEAR table on an insurer’s own distribution of business. The filing must account for these through the use of off-balance procedures or by accounting for the premium change in its rate level. Companies are required to balance Accident Benefits coverage and Physical Damage coverages base rates uniformly across all rating territories so that the rate level impact as a result of implementing the 2017 CLEAR Vehicle Rate Group Table is balanced to 0.0% at individual coverage level and all coverages combined level.
 
The rate level impact calculation and the base rates balancing calculation should be based on the latest in-force premium. The company should provide a brief description of the in-force data used. If the latest in-force data is not available and an alternative dataset is used for the rate level impact calculation and base rates balancing calculation, the company should provide the reason and specify the source of the underlying data. All data used in the process of calculating the off-balance must be exhibited and labelled.  The calculation of the off-balance amount must be shown.  All judgments associated with the process of calculating the rate level impact and base rates balancing should be disclosed and supported. Base rate changes should be supported by off-balance factors.
 
In order for FSCO to review the reasonableness of the rate level impact and verify the accuracy of the balancing procedure as well as the required rate group drift adjustment, companies may be asked to provide the rate group distribution for each coverage and estimated rate level impact in EXCEL format.
 
The balancing calculations should make use of the insurer's own distribution of business.  Should the insurer find it necessary to rely on outside data or a different source of internal data, the filing must identify the source of the data and provide an explanation of its applicability in the instant circumstance.
 
The base rate adjustment for reflecting the rate group drifts can only apply to Accident Benefits coverage and Physical Damage coverages uniformly across all rating territories. The estimated rate level impact as a result of reflecting this rate group drifts must be accounted for in the overall rate level change. IBC estimated rate group drifts are:
 
Standard Accident Benefits: -0.94%
Direct Compensation - Property Damage: 3.80%
Comprehensive: 3.76%
Collision: 3.20% 
 
Details of the base rate calculation and rate level change calculation must be provided in Appendix A Question 4.b. and 4.c.
 
The filing must clearly describe and show how current manual territorial base rates by coverage are transformed into proposed manual territorial base rates through the application of the proposed rate change in combination with any balancing.  This section must also clearly describe and show how the rate level impact of changes to base rates, differentials, discounts and surcharges, and rating rule changes are used to calculate the current and proposed Average Rate on a per coverage basis.  This calculation must reconcile with Question 4.c. under Appendix A.

Section 5: Rating Algorithm

Each insurer is required to file its current rating algorithm for all coverages, including the application of discounts and surcharges, 6-month policy and Optional Accident Benefits calculations.

Section 6: Base Rates, Differentials and Discounts/Surcharges

a. Base Rates

Each insurer must file current and proposed base rates or territorial differentials for all coverages.
 
In order for FSCO to review the reasonableness of the rate level impact and verify the accuracy of the balancing procedure, companies may be asked to provide the current and proposed base rates or territorial differentials in EXCEL format.
 

b. Differentials

Each insurer must file its current differentials for all coverages.
 

c. Discounts and Surcharges

Each insurer must file its current discounts and surcharges for all applicable coverages.

Section 7: Other Than Private Passenger Automobile - Dependent Categories

For those categories of automobile insurance that are dependent on the rate filing submitted, please provide the following:
 
  1. The rate level effects of the proposed changes.
  2. The calculations that validate the rate level effect of the proposed changes.
  3. A copy of the rating rule that stipulates the linkage to the category of automobile insurance.
  4. Rating examples must be completed for the dependent category of automobile insurance. Rating examples can be found in the Help Screen of ARCTICS.

Section 8: Proposed Manual Pages - Vehicle Rate Group Tables

A complete set of CLEAR vehicle rate group pages that the company wishes to adopt must be submitted with the filing. Otherwise, the filing will not be considered complete. A final and complete set of automobile manual pages in electronic format containing the approved risk classification system must be submitted through ARCTICS within 30 days after the rate filing has been approved. The insurer is required to include a copy of the most current vehicle rate group tables in the complete manual. Refer to the Filing Guidelines for Automobile Insurance Manuals for instructions. The insurer may be subject to regulatory action by FSCO if it fails to provide the required information within this time frame.

Section 9: Rating Examples

Appendix C to the Private Passenger Automobile Filing Guidelines - Major sets out the rating examples for completion.  Please refer to the Excel templates found on the Help Screen of ARCTICS for instructions.


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