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Alberta to discontinue industry-wide adjustment of auto insurance grid rates


October 26, 2007   by Canadian Underwriter


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Alberta is planning to scrap its industry-wide adjustment of grid prices in its auto insurance product, according to Dennis Gartner, the assistant deputy minister of pensions, insurance and financial institutions of Alberta.
The industry-wide adjustment applies to the provinces grid prices only.
In its place, the government is contemplating some kind of file-and-approve system, including some kind of benchmark to help insurers determine whether they must make simplified or full filings.
Gartner made his comments during his slide presentation at the Insurance Bureau of Canadas regulatory symposium in Toronto on Oct. 26.
Gartner described the provinces practice of using an industry-wide adjustment for grid prices only as something the insurance industry really doesnt support.
He said the proposed change was motivated by the results of a premium regulation review that Alberta conducted to help monitor the effects of the provinces auto reforms in 2004, when the rate grid for auto insurance was first introduced.
One of the issues we looked at was the size of the grid pool is it too big? Gartner asked. We wanted to make it smaller.
The recommendations from the review are intended to shrink the size of the grid pool from about 8% to 5%, he noted. Specifically, the 2007 review made the following recommendations related to the provinces auto insurance grid premiums. They are to be carried out over the next two years:
Year 1: Eliminate the five lowest grid steps (Steps 11 to 15), and reduce the premium for step 10 from 50% to 45% (the same as for Step 9).
Year 2: A premium reduction for Steps 9 and 10 would go from 45% to 40% (the same as for Step 8). A review at this time would look at the need for any proposed premium increase.


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