ONTARIO’s new regulator has introduced principles-based changes to the application process for private passenger auto insurance rates that establish a modified file and use approach.

The Financial Services Regulatory Authority of Ontario, which had identified streamlining the auto insurance rate regulation process as one of its priorities for 2019-20, said the new system will reduce the regulatory burden and create better outcomes for consumers.

The regulator said it has developed — in collaboration with an advisory group that was established earlier this year — several principles that will form the basis for its approach to auto insurance rate regulation.

The principles include consumer focus, sustainability, transparency and disclosure, simplicity, responsiveness and innovation.

“FSRA will evaluate how insurers use these principles in their businesses as part of its monitoring of the auto insurance system,” the regulator said in a guidance document released earlier this month.

FSRA said it will consider standard filings under the new modified file and use system only if they meet certain conditions:
■ The proposed overall rate level change must be less than or equal to 5%, calculated on a capped and uncapped basis;
■ The standard filing’s proposed changes must not result in a rate increase of more than 15% to any one customer at renewal (insurers may use capping to meet this requirement), and
■ FSRA must have approved a major filing within the last three years.

The regulator said an insurer may submit standard filings as frequently as required, provided that the cumulative combined overall rate level change for all approved standard filings does not exceed 5% in any 12-month period and also that the cumulative combined effect of all approved standard filings does not result in a rate increase of more than 15.0% in any 12-month period to any one customer at renewal.

Insurers are prohibited from changing territorial definitions or introducing new rating models under the modified file and use approach.

FSRA said it will send an acknowledgement when an insurer has successfully submitted a filing, provide notice within five business days that a filing is eligible and complete and it will notify the insurer of its decision within 25 business days after submission of the filing.

If the regulator does not provide notice of a decision regarding a standard filing within 25 business days, it will consider the filing approved and will provide notice of approval.

FSRA said it may require an insurer to submit a major filing in place of a standard filing, or reject a standard filing outright, for any reason before the deemed approval date.

In either case, FSRA said it will provide the rationale for its decision in writing.

Ryan Stein, the Insurance Bureau of Canada’s executive director of auto insurance policy and innovation, said the new standard filing rate process will provide insurers more opportunity to compete on price — and, in turn, positively impact consumers.

“This is a lot more flexible process for rate change,” he said last week. “From the insurer perspective it is positive but most importantly it’s positive for auto insurance customers.”

He said that prior to the changes, insurers sometimes would have to wait months for a price change — regardless of the size.

He said the differentiation between complex and simpler auto filings is important.

“FSRA is no longer treating each filing the same and is recognizing that there are different degrees of requests — some that will require more looking into and others that warrant a quicker approval,” Mr. Stein said. “Filings with under 5% rate change can proceed through this more flexible, shorter process and there will be more opportunity to compete.”

The IBC and member insurers were observers on the FSRA working group that formed the basis for its auto insurance rate regulation.

Mr. Stein said the industry was unanimous in its will to proceed with the new standard filing process.

“The industry wanted a more flexible rate regulation process and IBC believes that this is positive for Ontario drivers, gives more opportunity for companies to compete and innovate and that it will be beneficial for consumers.”

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