Bill 198 Rates and Risk Classification Systems



No. A-10/03
- Auto
Property & Casualty
[To the attention of all insurance companies licensed
to transact automobile insurance in Ontario]

The purpose of this bulletin is to announce the following as outlined in the White Paper - Automobile Insurance Affordability Plan for Ontario: Next Steps:


  1. Insurers are expected to take into account the cost impact of the reforms from Bill 198, Keeping the Promise for a Strong Economy Act (Budget Measures) and the changes to regulations in their rate filings; a simplified rate filing package has been developed to assist insurers in filing for rate decreases.

  2. The Superintendent is conducting a review of insurers'risk classification systems and underwriting practices.

  3. In the determination of rates, insurers are directed to not unfairly penalize consumers for inadvertent NSF cheques or insurer changes to territorial boundaries.

Cost Savings Due to Bill 198 and regulations

As announced in Bulletin A-04/03, provisions of Bill 198 and associated regulations will become effective on October 1, 2003, with changes to requirements for paralegals becoming effective November 1, 2003.

Insurers are expected to reflect the cost impact of the Bill 198 reforms in future rate filings. The significant changes are outlined below:


Changes to Third Party Liability

  • Increase of the deductibles which apply to Insurance Act awards for pain and suffering from $15,000 to $30,000 and for Family Law Act awards, from $7,500 to $15,000.

Changes to Accident Benefits

  • Introduction of the Pre-approved Framework (PAF) Guidelines that is expected to reduce the number of assessments and related disputes.

  • Introduction of a process for claimants and insurers to jointly select a designated assessment centre (DAC) within the claimant’s geographic region.

  • Introduction of a fast track DAC review process for PAF issues and a paper review by DACs.

  • Requirement of prior approval of assessments under s.24 of the Statutory Accident Benefits Schedule (SABS) except in certain circumstances.

  • Restriction of settlement of SABS claims for future benefits until one year after the accident.

  • Increase of accountability within the automobile insurance system and reduction of potential for abuse of the SABS process and occurrence of fraud by: introduction of requirements that claimants sign treatment plans, expansion of list of unfair or deceptive acts or practices, introduction of examinations under oath, and establishment of a code of conduct for paralegals.

  • Introduction of further health provider fee schedules.

Changes to Physical Damage

  • Application of comprehensive deductible to theft claims.

  • Clarification of the application of the deductible where there has been total loss of the vehicle.

  • Clarification of use of Original Equipment Manufacturers (OEM) parts in vehicle repairs.

  • Elimination of mandatory pre-insurance inspections.

Rate Filings


Due to the expected cost savings of Bill 198, a simplified rate filing guidelines package has been developed. Insurers may use this simplified filing package for filings received by the Financial Services Commission of Ontario (FSCO) until September 30, 2003.


If an insurer does not file for a rate decrease, rates for the insurer may be reconsidered under section 415 of the Insurance Act.



Simplified Filing Criteria


The conditions for filing under this simplified format for changes are:


  • On an all coverages combined basis, the rate change must be a decrease.

  • The rate change for a particular coverage must be applicable to each territory.

  • There may be no change to any other rate differentials, surcharges, discounts or rating rules.

If changes other than the Simplified Filing Criteria described above are being proposed, the insurer is to use the standard Section 412 or Section 413 Filing Guidelines, as appropriate. Simplified filings will be given priority in their review by FSCO.



Territorial Rating


As announced in the White Paper, the government is concerned that insureds are being unfairly penalized as a result of changes in territorial boundaries. Insurers should take this into account when considering any changes. The issue of territorial rating will be addressed as part of the review of risk classification variables and underwriting rules, to be completed by October 2003.



FSCO Contacts


If you have any questions about this bulletin, please contact your rate analyst in the Automobile Insurance Division.

Bryan P. Davies
Chief Executive Officer and Superintendent of Financial Services
July 29, 2003


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