FSRA’s summary of consultation on Ontario private passenger automobile annual review based on industry data as of December 31, 2023

1

Aviva Insurance Company

“In the executive summary (page 4), the report states that “General inflation and/or a recession may cause consumers to “do less”, leading to a reduction in vehicle usage. We expect that a reduction in vehicle usage would lead to a reduction in the future claims frequency rate.” We agree that this is a possibility, but also believe there are other impacts to this scenario that are not discussed. For example, recessions may also lead to increased fraud and crime that result in increased auto insurance costs. If the inflation/recession scenario is discussed directly in the report, other plausible impacts should be noted for consideration as well.

In the executive summary (page 3), the report states “We believe 2022-2 may be the start of a “new-normal” with remote and hybrid work models commonplace, and the pandemic restrictions behind us”, resulting in significant adjustments for pre-COVID experience for DCPD, AB, and Collision coverages (new normal factors of 0.743 to 0.832 for accident year 2019). While remote and hybrid work models are commonplace since 2022, they continue to evolve. For example, the Government of Canada issued a directive requiring three days per week in the workplace for all public servants starting only in September 2024. Companies are also continuing to assess their hybrid work models post-2022. Further, section 6 of the report shows claim frequencies continued to increase for almost all coverages between accident years 2022 to 2023, although we do note the report’s methodology may capture the increased frequency as loss trend over the new-normal. We believe the comment regarding 2022-2 as the start of a new-normal still remains very open to interpretation.”

2

Co-operators General Insurance Company

FRSA Annual Review_CGIC Response

3

Consumer Advisory Panel (CAP)

CAP response to consultation on Ontario Private Passenger Vehicles Annual Review Final

4

Edward Gruscyk Insurance Agency Ltd (Agency)

“Why does the government not get more involved with the various shipping ports on a daily basis to monitor the shipments of stolen vehicles?

Why does Government not mandate that auto manufacturers be more accountable for installing theft deterrents in vehicles or simply banning keyless starting?

Why does the government not mandate that vehicles starting with keys rather than keyless starts be not involved in surcharging due to high theft frequencies for models of the same brand or model? IE/ ford f150 xl has a key start but other models of fordf150 have a keyless start. Thus, ford f150 xl is not a target vehicle for thieves.”

5

Facility Association (FA)

FA Submission FSRA Annual Review 2024 v(final)

6

Insurance Bureau of Canada (IBC)

2024 - 09 Sept 16 - IBC Submission-FSRA Benchmarking Report 2024

7

TD Insurance

TD Insurance response to the FSRA 2024 Ontario Private Passenger Vehicles Annual Review

Flexibility in Rate Level Indication Calculation

FSRA should consider expanding the areas where it permits more flexibility for companies when selecting assumptions supporting their rate applications, first and foremost their profit provision. (FA)

This comment was addressed by FSRA in the “2021-H2 Consultation Summary”.

Future Trends on Physical Damage Coverages

“With uncertain economic condition and the increasing loss ratio for optional coverages, we would suggest FSRA consider increasing the future trends for physical damage coverages.” (FA)

This comment was addressed by FSRA in the “2022-H2 Consultation Summary”.

Use of Benchmarks and Rate Regulation Principles

“We also believe regulators should allow the filing insurer to set their prices and market share on their views of ultimates and their selections of models describing frequency/severity/loss costs over time and as projected into the future. The rate review process should focus on whether the filing insurer’s process to arrive at their forecast was reasonable (and consistent with the insurer’s previous views / process / approach unless an explanation is provided as to what has changed and why). If so satisfied, we believe regulators should accept the filing insurer’s view, even if it differs from the view of the regulator’s actuary.”

“FA’s long‐standing position has been that that benchmarking exercises should be used to inform regulators of considerations for rate filings, rather than to set specific targets, caps, or floors with respect to any one particular assumption. This approach opens the opportunity for insurers to reflect their own assessment of future costs in providing their product / service to the consumer, and allows them to set their rates based on their assessment of the competitive market in which they operate.” (FA)

This comment was addressed by FSRA in the “2021-H2 Consultation Summary”.

Use of Confidence Interval

“FSRA expects the upper bound of the range for a given coverage to capture the majority of insurer rate filings. At the same time, some insurers may face trend factors above this range based on the unique nature of their customer base. It is important that FSRA equally consider filings above the upper bound based on their reasonableness, rather than treating the upper bound as a cap.”

“It is critical that FSRA permit a wide range of projected COMP trend factors, even if they are above this upper bound. While insurers do not account for past losses when setting future rates, there is likely to be increased uncertainty around the future injury claims environment in Ontario. It is critical that FSRA continue to recognize that there are a wide range of acceptable actuarial assumptions when insurers are setting future rates.” (IBC)

“TD Insurance welcomes the addition of confidence intervals around the loss trend point estimates as it gives a directional sense about how volatile trends are in the current environment but is concerned about the potential use of those intervals by FSRA. It is important to note that they don't capture differences between insurers when it comes to things like claims operations, methodology to determine loss trends in conjunction with reform, COVID and inflation adjustments as well as potential mix of business shifts over time.” (TD)

FSRA’s expectations for insurers on the use of Benchmarks have been clearly set out in this iteration of the Guidance as well as in the following previously published Guidances:

• "2020-H2 Guidance”

• “2021-H2 Guidance”

• “2022-H2 Guidance”

FSRA regulates Ontario automobile insurance rates and uses ratemaking Benchmarks as one input in reviewing insurer’s auto insurance rate filing applications based on statutory requirements. Benchmarks are not intended to be used to set specific targets, caps or floors on actuarial assumptions.

Recession and Fraudulence

Consideration

“Recessions may also lead to increased fraud and crime that result in increased auto insurance costs. If the inflation/recession scenario is discussed directly in the report, other plausible impacts should be noted for consideration as well.” (Aviva)

“It is critical that FSRA continue to be aware of the potential for increased fraudulent activity if Ontario enters a recession.” (IBC)

As indicated in the Guidance, insurers are expected to consider unusual economic changes, such as the surge in inflation and recession, in predicting future claim costs.

FSRA will continue to monitor inflation and other economic factors affecting claim costs. Material changes in future trend rates will be reflected in the mid-year benchmarks update.

Auto Theft

“Why does the government not get more involved with the various shipping ports on a daily basis to monitor the shipments of stolen vehicles?

Why does Government not mandate that auto manufacturers be more accountable for installing theft deterrents in vehicles or simply banning keyless starting?

Why does the government not mandate that vehicles starting with keys rather than keyless starts be not involved in surcharging due to high theft frequencies for models of the same brand or model? IE/ ford f150 xl has a key start but other models of fordf150 have a keyless start. Thus, ford f150 xl is not a target vehicle for thieves.” (Agent)

Thank you for taking interest in our Ontario Private Passenger Vehicles Annual Review.

These questions are outside the scope of the Annual Review and beyond FSRA’s jurisdiction. FSRA has followed a thorough review process for all rate filings, including these surcharges. Surcharges must be supported by detailed evidence showing increased risk before they are approved.

Affordability and Accessibility of Insurance

FSRA should promote the expansion of Usage-Based Insurance (UBI) programs and consider implementing regulations to limit the frequency and size of premium increases to improve the affordability and accessibility of insurance.

Thank you for taking interest in our Ontario Private Passenger Vehicles Annual Review.

Although these recommendations are outside the scope of the Annual Review Guidance, FSRA will consider them in relation to its broader strategy to reform the regulation of rates and underwriting.

FSRA looks forward to future collaboration with the CAP on its priorities in the auto insurance sector.

Transparency in Rate Setting

FSRA should mandate that insurers provide clear explanations of how premiums are calculated and conduct regular audits of insurers’ rate-setting practices to increase rate-setting transparency.

Impact of Legislative Reforms on Consumer Rights

FSRA should establish a framework to monitor the impact of legislative changes on consumers, particularly on vulnerable groups. FSRA should ensure that dispute resolution processes remain accessible and fair, with clear guidance to help consumers navigate the system effectively.

Accessible Information for Consumers

To improve consumers’ accessibility for information, FSRA should consider creating a report that provides insights for consumers about their auto insurance policies and industry trends. Further, FSRA should incorporate a definitions section to clarify professional terminology for all stakeholders, including consumers.

Fraud and Abuse

FSRA should develop and enforce standards for fraud detection to ensure fairness, transparency, and non-discrimination. FSRA should regularly review insurers’ fraud detection programs and require insurers to implement corrective actions when unfair treatment or discrimination are identified.

Opportunities for Collaboration

CAP suggests that FSRA staff work closely with CAP’s Auto Insurance Working Group on briefing rate-setting assumptions, developing consumer-centric policy recommendations, exploring new risk factors, and helping consumers make informed decisions to ensure FSRA’s regulatory approach remains aligned with consumer interests. (CAP)