The purpose of this bulletin is to advise insurers using CLEAR on the requirement to update their CLEAR rate group tables on an annual basis and to submit filings that reflect those updates for approval. This bulletin supercedes Bulletin No. A-03/02 issued by the Financial Services Commission of Ontario (FSCO) in May 2002.
2005 CLEAR Rate Group Tables
FSCO has finalized its review of the 2005 CLEAR vehicle rate group tables prepared by the Insurance Bureau of Canada (IBC) and has determined that the tables are appropriate for use by insurers. Based on the IBC analysis, the impact of the Ontario rate group drift, by coverage, is estimated to be as follows:
The rate group drift for 2005 outweighs the future loss trends for the physical damage coverages.
In order to recognize the rate group drift that is produced by CLEAR, FSCO requires each insurer in Ontario that uses CLEAR for assigning rate groups to submit a filing for private passenger automobile insurance by May 6, 2005 to implement the 2005 CLEAR tables.
The attached CLEAR Simplified Rate Filing Guidelines package has been developed to assist insurers in filing. Only after the filing has been reviewed and approved by FSCO, can the CLEAR tables be used by the insurer.
Appendix D of the CLEAR Simplified Rate Filing Guidelines outlines the rate group drift estimated by the IBC, the expected loss trends by coverage developed by FSCO, and the benchmark base rate adjustments. The loss trends were reviewed by an Actuarial Advisory Committee consisting of FSCO and company representatives. Insurers submitting filings can use the benchmark base rate reductions as outlined in Appendix D to adjust base rates for physical damage coverages without providing further details. If this information is not used, insurers must provide detailed actuarial assumptions to arrive at the base rate adjustments.
For adjustments to rates other than for physical damage coverages, or for changes to a risk classification system, an insurer must submit a separate filing using the appropriate filing guidelines.
In future years, within two months of approval of updated CLEAR tables by FSCO, insurers using CLEAR will be required to adopt the new tables in filings using either the simplified filing guidelines, or the major filing guidelines, as appropriate in the circumstances.
If you have any questions about this bulletin, please contact your rate analyst in the Automobile Insurance Services Branch.
Bryan P. Davies
Chief Executive Officer and Superintendent of Financial Services
April 21, 2005