FSCO.TechNotes

Question 1

What classes of auto insurance does FSCO’s Tech Notes bulletin apply to?

Answer 1

Non-fleet automobile insurance on:
- Ontario Automobile Policy (OAP1)
- Ontario Driver’s Policy (OPF2)

Question 2

Identify the 5 categories of filing guidelines in FSCO’s Tech notes bulletin

Answer 2

1. PPA Filing Guidelines - Major:
   - Used when an insurer is initially entering the PPA insurance market
   - or when changing existing automobile insurance rates but the changes proposed do not meet the criteria for the Simplified Filing Guidelines
2. PPA Filing Guidelines - Simplified
   - Used for changes that satisfy the simplified filing guidelines
3. PPA Filing Guidelines - CLEAR Simplified
   - Used when implementing the current year CLEAR vehicle rate group (VRG) table
4. Other than PPA Guidelines - Major
   - When an insurer is initially entering the insurance market for a category other than PPA
5. Other than PPA - Minor
   - Used when insurer is filing for changes to rates or risk classification system for other than PPA.

Question 3

Identify legislation requirements for non-fleet auto rate filings in ON

Answer 3

• Just and reasonable
• Solvency of insurer cannot be impared
• Not be excessive in relation to the financial circumstances of the insurer

Question 4

Identify legislation requirements for non-fleet auto risk classification in ON

Answer 4

• Just and reasonable
• Predictive of risk
• distinguish fairly between risks

Question 5

Identify 5 items of required information in an Ontario Major rate filing

Answer 5

Loss-Related Information
1. Loss Data
2. Loss Development
3. Loss Trend
4. Treatment of Large Losses
5. Catastrophe Provision
6. Automobile Insurance Reform Adjustment Factors

Premium-Related Information
7. On-Level Premium
8. Rate Group Drift

Other Standard Components of Rate Changes
9. Finance Fees/Charges
10. Tax Rates
11. Expenses
12. Underwriting Profit Provision
13. Investment Returns and Cash-Flow Rate
14. Credibility

Important Types of Changes within a Filing
15. Indicated Rate Changes and Proposed Rate Changes
16. Territory, Class, Driving Record and Other Differential Changes
17. Territorial Definition Changes
18. Vehicle Rate Group Changes

Miscellaneous Information
19. Predictive Models
20. Usage-Based Insurance Pricing (UBIP) Programs
21. Introduction of New Discounts/Surcharges or Differentials
22. Dislocation and Capping Premium Increases (Rate Capping)
23. Auto Insurance Manual Pages

Question 6

Identify 2 requirements for loss data in an Ontario rate filing

Answer 6

• Must be specific to Ontario
• Must be at the major sub-coverage level
  (valuation data for loss reserving purposes may not satisfy this requirement), for ex: TPL - BI, TPL - DCPD

Question 7

How long a period must be used in estimating the large loss provision and why?

Answer 7

No specific number of years but should be long enough to minimize statistical variations

Question 8

Do rate filings have to show Automobile Insurance Reform Adjustment Factors?

Answer 8

Yes, must explain how loss data has been adjusted for insurance reforms for the effective period of the rates

Question 9

Do rate filings have to use on-level premiums?

Answer 9

Yes

Question 10

What conditions must be met if an Ontario insurer is proposing to make territorial definition changes?

Answer 10

• Ontario ≤ 55 territories, City of Toronto ≤ 10 territories
• All territories must be contiguous (can’t have a territory that doesn’t touch another)
• New territories require 3 years of insurer data and 2500 annualized average vehicles over the period
• New adjoining territories do not vary by more than +/- 10%
• Territory coverages are the same for all coverages
• Large claims should be capped in establishing territorial rates

Question 11

What items must be included in an initial UBIP filing?

Answer 11

• What driving behaviours are being measured (ex: acceleration or deceleration rates, speed, distance traveled)
• How this data is measured (Ex: frequency, occurence, relevant threshold)
• How this data is normalized and categorized for rating purposes (ex: total occurences, averaged)
• Loss data to support proposed UBI discount (ex: claim severity, claim frequency and loss costs)

Question 12

Identify UBIP program costs in a rate filing

Answer 12

Start up costs for the UBIP program
Ongoing expenses such as:
- data transfer and analysis
- marketing
- third party provider contracts

Question 13

Once a new discount is approved, how long must an ON insurer continue to offer the discount and why?

Answer 13

3 years - to ensure stability in the market before the insurer can withdraw it from its risk classification system

Question 14

When is rate capping in ON not permitted?

Answer 14

• Base rate changes only
• Broker portfolio transfers or acquisitions
• Premium decreases (negative capping)