The Financial Services Commission of Ontario (FSCO) is releasing updated filing guidelines for submitting changes to automobile insurance rates and risk classification systems. The last set of comprehensive guidelines were released in 2001 and these updated guidelines reflect any regulatory or legislative changes since then as well as improve the clarity of information required as part of the filing process.
Also, FSCO is releasing updated Technical Notes to assist insurers in preparing rate filings. These filing guidelines and Technical Notes are effective immediately and supersede previous versions. Changes to the filing guidelines have been reviewed with FSCO's Rating and Underwriting Technical Advisory Committee.
Technical Notes are considered to be part of the application (filing) for approval and authorization of rates and risk classification systems under the legislation. FSCO last released Technical Notes to insurers in January 2003 with Bulletin No. A-01/03.
Benchmark assumptions have been updated and provided to assist insurers in preparing filings. These benchmark assumptions are based on a review of commonly used assumptions by insurers in filings, as well as FSCO's own actuarial analysis. The assumptions can change, as additional industry data becomes available.
Here are some key points to take note of when preparing rate filings:
Claims experience - insurers should ensure that the most up-to-date claims experience is used.
Premium trend - insurers need to consider the rate level impact of the rate group tables when determining their premium trend. The Vehicle Information Centre publishes the estimated rate group drift of the CLEAR vehicle rate group tables by coverage, but insurers should take into consideration their own rate group distribution by coverage when estimating the premium trend.
Automobile Insurance Reform Factors – insurers should review their own company loss data to validate the adjustment factors that affect loss costs as a result of the automobile insurance reforms.
Other Than Private Passenger Automobile Filing Guidelines - An insurer will be required to use the major filing guidelines where a rate change of 10% or more is proposed and the insurer has not submitted a filing for the category in the last three years. This is a new requirement and consistent with FSCO's view that insurers should regularly review the adequacy of rates for all categories of automobile insurance so that consumers are less likely to experience large rate changes. Also, risk profiles included in these filing guidelines have changed and FSCO may require you to complete and submit the revised profiles.
To assist insurers, we have also included a ARate Filing Checklist for Major Filings@ within the Technical Notes that insurers can use at their discretion. Using this checklist may help ensure that the filing being submitted contains all the necessary information and will be deemed complete upon receipt by FSCO.
FSCO requires that each insurer that uses the CLEAR vehicle rate group system submit a filing for private passenger automobile insurance within two months of FSCO's annual approval of the updated CLEAR tables. Please refer to the enclosed CLEAR Simplified Filing Guidelines for details as to when the simplified process can be used. If an insurer does not qualify for the simplified process, the insurer must file using the Major Filing Guidelines.
Rate Manual Pages and Updates
A draft set of manual pages containing all proposed rating rule changes or definition changes must be provided in the filing. A draft set of rate manual pages that contain the rates by territory, class, driving record, vehicle rate group table etc is optional at the time of submitting the filing. Any proposed changes to the manual pages should be denoted by a side bar ( | ).
A final set of manual pages in hard copy and electronic format (e-mail or CD) containing the approved rates and risk classification system must be submitted within 30 days after approval of the rate filing. A cover page must be provided referencing the approved filing as well as contact information. The entire rate manual must always be submitted. The files submitted electronically should be organized in a logical order and labelled descriptively. All rate manual pages must include the date of print, effective dates of proposed rates and page numbers, accordingly.
One of FSCO's key priorities for 2006/07 is to "improve delivery of service" across the regulated sectors. One of the initiatives under that priority is to "conduct additional training for auto insurers on the use of the ARCTICS system to facilitate the submission of more auto insurance filings by electronic means."
FSCO's web-based ARCTICS system is in full operation and can be used by insurance companies once the proper authority and password are provided. This system is beneficial for both insurers and FSCO by improving efficiency, communication and consistency. See the attached summary on ARCTICS for further information on the system and for training opportunities.
Insurers are encouraged to engage in open dialogue with staff from the Automobile Insurance Services Branch on filings or potential filings. Full understanding of issues is important in timely review and approval of filings.
Should you have any inquiries regarding this Bulletin, please contact your rate analyst in the Automobile Insurance Services Branch at FSCO. Please note that this Bulletin, the Filing Guidelines and the Technical Notes are posted on FSCO's website at: www.fsco.gov.on.ca.
Chief Executive Officer and
Superintendent of Financial Services
December 29, 2006
Filing Guidelines for Automobile Insurance Rate and Risk Classification Filings
French version of attachments is available upon request.