Alberta regulator posts revised guidelines related to insurers switching to unbundled or segmented rating programs

An Alberta driver’s insurance premium should not increase by more than 10% per year solely as a result of their insurance company switching from a traditional rating program to an unbundled or segmented rating program, the Alberta superintendent of insurance has announced among its revised rating program guidelines.
Alberta’s superintendent of insurance posted the new guidelines on its Web site on Apr. 14, in response to the emergence in Canada of “unbundled or segmented auto insurance rating programs.”
Such programs rely on advanced analytics to more accurately determine the premium for a consumer, based on complex combinations of individual risk factors.
Alberta’s superintendent of insurance already conducts an initial screen of rating applications. But in light of the emergence of unbundled or segmented rating programs, the regulator says the rating applications must follow revised expectations, as outlined in the new guidelines.
There are five such guidelines:
•The algorithms and relativities used in ratings programs are just and reasonably predictive of risk.
•The algorithms and relativities used in rating programs distinguish fairly between risks. For example, an insurance company cannot charge different prices to different people for reasons other than claims costs and experience (for example, based on demand, willingness to pay or income levels).
•The rating program would not impair the solvency of the insurer or provide excessive returns for the insurer
•Changes in rates are reasonable. Rating programs that include a change in the weighting of a factor related to driving behaviour must be reasonable, the regulator says. The new guidelines further spell out expectations that “the weight of a rating factor related to driving behaviour should diminish over a reasonable period of time.” For example, accidents and claims should have “limited impact” on premium after six years; convictions should have limited impact on premium after three years; and surcharges related to Criminal Code convictions may apply for up to four years following conviction.
•Consumers are effectively advised about the premium changes.