Regulator seeks feedback on auto rating, underwriting

Ontario’s financial services regulator is consulting on new guidance related to auto insurance rating and underwriting regulation.

FSRA says the proposed guidance will help by “reducing regulatory lag and streamlining processes, so that premiums can be more closely matched to claims trends.”

“This guidance marks an important milestone in FSRA’s Automobile Insurance Rating and Underwriting Regulation Reform Strategy,” Glen Padassery, executive vice president of policy and auto insurance at the Financial Services Regulatory Authority of Ontario (FSRA), tells Canadian Underwriter. “It will help ensure Ontario drivers are paying the right price for the right auto insurance coverage.

“For insurers in Ontario, it means greater clarity of expectations and standards, streamlined processes and enhanced flexibility and innovation.”

FSRA invites stakeholders to review the proposed guidance and submit their feedback. The consultation period will close Nov. 15.

For the consultation, FSRA is focusing on the first three chapters of the proposed guidance:

 

Fair Consumer Outcomes

Establishes clear principles and defines fair consumer outcomes. Insurers will be accountable for setting fair rates that are accurate and taking steps to mitigate the risk of unfair discrimination and bias. Additionally, consumers will have access to clear, transparent information about how these rates are determined.

“For example, if FSRA observes market dynamics and trends or expects that a specific approach to rating and underwriting will lead to an overall decline in the ability of consumers to access automobile insurance, it may refuse to approve a filing or request that it be varied,” the guidance says.

 

Automobile Insurance Rating and Underwriting Operations, Controls and Governance

This chapter describes FSRA’s expectations on high standards for governance and operational practices for rating and underwriting. FSRA will evaluate these practices in terms of their alignment with fair consumer outcomes.

“FSRA will be evaluating operational functions like the quality of data governance and model risk management which help ensure consumers are getting coverage at the right price, a core FSRA principle,” the regulator tells CU.

“Strong governance up to the board level with clarity around roles and responsibilities will result in high accountability for embedding our consumer principles into decision-making.”

 

Accreditation, Proactive Supervision and Assessment Approach Guidance

Describes FSRA’s process for evaluating insurers against the practices set out in Chapter 2 (auto rating and underwriting operations, controls and governance).

“Insurers that choose to pursue accreditation will need to demonstrate that they meet the standards for accreditation in the areas outlined in the guidance,” FSRA says. “If successful, they will earn additional flexibility in their filing processes, which may include accelerated decisions on rate changes. Accredited insurers will be supervised on an ongoing basis to ensure that the high standards of accreditation are maintained.”

FSRA says in a release their proposed approach “promotes greater transparency of the factors that influence auto insurance rates, helping consumers make informed choices about their insurance. FSRA’s approach focuses on improved rating accuracy and strong consumer protection measures.”

The regulator will publicly consult on the fourth — and final — chapter of the guidance in 2025. The fourth chapter outlines the regulator’s new filing approach.

It will also host a webinar on the topic on Oct. 16 featuring Michelle Dodokin, FSRA’s head of auto insurance supervision and Cong Wang, the regulator’s chief actuary, auto insurance operational risk supervision.

 

Feature image by iStock.com/anyaberkut