FSCO updates guidance on territorial rating

Ontario’s insurance regulator has posted a bulletin outlining rules for territorial rating for auto insurance.The Financial Services Commission of Ontario (FSCO) bulletin supercedes rules put in place in 2000, with the regulator noting, “there were concerns that there was a trend by insurers to increasingly segment territories by postal code and that territories being proposed may not satisfy the statutory standards set out in the Insurance Act (i.e., be just and reasonable, reasonably predictive of risk and distinguish fairly between risks)”.FSCO had released a discussion paper on the guidelines in late 2000, but found opinions divided, so sent the task to two joint industry/government committees in 2002 and 2003. The new guidelines come into force immediately, FSCO says.Among the new rules:- new territories must be based on at least three years of date and 2,500 vehicles annually;- no more than 55 territories can be used for Ontario, and no more than 10 for Toronto alone;- each territory must have a common boundary;- rates for adjoining territories should not vary by +/-10%;- a common territorial definition should be used for all coverages; and- large claims should be capped so as not to distort the analysis of claims costs.