Canadian Underwriter

Ontario regulator considering ‘file and use’ for private passenger auto

August 2, 2019   by Greg Meckbach

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A “file-and-use” system for private passenger auto rate changes could be coming to Ontario if a proposal from the province’s Financial Services Regulatory Authority comes to fruition.

“We are close to introducing a new standard rate filing process that will operate on a ‘file and use’ basis,” wrote Tim Bzowey, FSRA’s executive vice president of auto insurance, in a recent FSRA newsletter. “This means insurers can, when acting within FSRA defined boundaries, implement rates in a matter of days.”

In a securities filing released July 31, the Co-operators General Insurance Company described how FSRA could streamline the rate regulation process.

Ontario legislature at Queen's Park in Toronto, Ontario government

“With the help of an advisory group consisting of senior industry professionals, including from The Co-operators, [FSRA] recently proposed a new ‘file and use’ standard rate filing process that will allow insurers to increase their rates up to a specified amount, every 12 months, more efficiently and effectively,” Guelph, Ont.-based The Co-operators said, adding the proposed new process is awaiting approval by FSRA.

It is not clear when FSRA is expected to make a decision. Canadian Underwriter asked a FSRA spokesperson Thursday but had not heard back as of Friday afternoon. It is also not clear whether a change to legislation would be needed.

A file and use system “should save weeks and, in some cases, months, of time between seeking and implementing new rates,” Bzowey wrote in the FSRA newsletter.

Ontario has a file and use system for commercial auto but not for private passenger. For private passenger, insurers need approval from FSRA before rate changes actually take effect, and insurers say this leads to long delays in getting new rates to clients.

The Co-operators referred to the proposed file and use system in a section on emerging legislation and regulatory events in its management discussion and analysis of its financial results for the three months ending June 30. The MD&A was posted July 31 to the System for Electronic Document Analysis and Retrieval (SEDAR), a Canadian Securities Administrators website.

“FSRA’s proposed file and use is a huge improvement on the current situation,” an Insurance Bureau of Canada spokesperson wrote Friday in an email to Canadian Underwriter. “We are very happy how collaborative and engaging FSRA has been through the process.  Our view will be that a more competitive operating environment leads to more competition, more innovation products including discounts, more price stability, and more market entrants.”

FSRA took over regulatory duties from the Financial Services Commission of Ontario (FSCO) on June 8.

In its budget document released this past April, the Progressive Conservative government did not specifically commit to a file and use system of auto rate regulation, though “red tape” was a recurring theme. The government did say it is working with FSRA to improve the way auto insurance rates are regulated.

Under a file-and-use system, insurers would still have to file a proposed rating or underwriting change, along with substantiation, but the filing would be “deemed approved” after a certain period of time, IBC said in an earlier document.

IBC advocated in 2016 for a file-and-use process for private passenger auto in the “Red Tape Challenge,” in which the government invited industry groups to identify processes that make it a burden for companies to comply with regulation.

A review of rate regulation will be done jointly with FSRA, the government said in its 2018 Ontario Economic Outlook and Fiscal Review.

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