Technical Notes for Automobile Insurance Rate and Risk Classification Filings



No. A-12/01
- Auto
Property & Casualty

To the attention of all insurance companies licensed to
transact automobile insurance in Ontario


The Financial Services Commission of Ontario (FSCO) is releasing updated Technical Notes to assist insurers to prepare rate filings and to provide criteria for filing under the Respond to Market (R2M) process for 2002.



Technical Notes are considered to be part of the application (filing) for approval or authorizationof rates and risk classification systems under sections 410(3) and 413(2) of the Insurance Act. An example of a filing that qualifies for the R2M process is included in the Technical Notes for assistance.


FSCO last released Technical Notes to insurers in February 2001 with Bulletin No. A-2/01.


These revised Technical Notes include updated benchmark assumptions to assist insurers inpreparing rate filings. These Technical Notes also reflect the updated criteria for the R2M system that were communicated in a letter to Chief Executive Officers dated December 3, 2001. The criteria for the R2M process are based on the renewal effective date of rate changes as stated in the R2M filing guidelines issued in February 2001. Changes made to the Technical Notes from the February version are denoted by a side bar ( | ).


The filing guidelines that were issued with Bulletin No. A-2/01 in February 2001 are still current.

Summary points


Outlined below are items to consider to help speed up the review process by FSCO.


Rate stability - insurers are encouraged to make small changes in their rates regularly to ensure rate adequacy and that consumers experience stable rates. As prudent business managers, insurers should be aware of their own rate indications, regardless of whether these calculations are required to be filed with FSCO. The R2M process for private passenger automobile insurance allows insurers to implement changes quickly, with a detailed filing required after two years, provided other conditions are met. Also, there is a simple filing process that insurers can use, for other categories of automobile insurance (e.g. snow vehicles, motorcycles) provided rate changes are less than 10%. Please refer to the Section 413 Filing Guidelines - Minor for this simple filing process.


Data - accurate and current data is fundamental in determining rate indications and in ensuring a timely review process. Insurers with data quality problems or that are using reserving data, as opposed to rate-making data, can expect that FSCO’s review process for major filings will be longer.


Premium trend - insurers need to account for the rate level impact of the rate group tables in their major (non-R2M) private passenger automobile insurance filings.


Tax rates - have been reduced in Ontario. Current assumptions for tax rates are found in the Technical Notes that can be used in rate filings.



Should you have any inquiries regarding this Bulletin, please contact your rate analyst in the Automobile Insurance Division at FSCO. Please note that this bulletin and the Technical Notes are posted on FSCO’s website at:


Philip Howell
Chief Executive Officer and
Superintendent of Financial Services (Acting)

December 19, 2001


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