Confusion regarding Fall 2014 3b

user10_Exam6Cuser10_Exam6C
in FSCO.PPA

Hello, im not sure how to compare the info given to the simplified guidelines.

Territory 4 had a change of -15%, doesn't this fall outside of the acceptable range for territorial relativity changes (-15,5)?

Comments

  • chrisboersmachrisboersma

    There was an interesting question in the forum regarding a comparison between the simplified filing rules and the regular filing rules:

    • simplified rules permit territorial changes within (-15%, 5%)
    • regular filing rules permit territorial changes within (-10%, 10%)

    So, a regular filing would not be approved if there were a territory with a -12% change. But a simplified filing would get approval. Seems wrong, doesn't it? There was a question in the forum about this. See the question and my answer

    https://www.battleactsmain.ca/vanillaforum/discussion/59/fsco-filing-requirements

  • chrisboersmachrisboersma

    It's also worth pointing out the study material do not have the current filing guidelines in KPMG Regulatory Oversight for Ontario [2012] (-10% to 0%). But this range should be an "acceptable" answer as it is what we are asked to study/memorize. I don't believe the minor guidelines are part of the exam. The question references both the KPMG answer and the official (Minor filing guidelines)

    Those who actually do Ontario filing would know the latter (-15%). Those who only study for this exam should know the former (-10%)

  • user10_Exam6Cuser10_Exam6C

    Okay, not quite sure what the final answer is...but do you mean to say that the -15 can still be considered within the range?

  • chrisboersmachrisboersma

    Not referenced on the exam. Current regulations

    Initial Rate Change Requirements

    • On an all coverages combined basis, the proposed overall rate level change must be less than or equal to 0.0%.
    • Any existing territorial base rate or differential change must be between –15.0% and +5.0%.
    • Any other changes to existing differentials or risk classification elements must be between -15.0% and +5.0% with no off-balancing. Each change to a differential is to be measured with reference to the current differential after re-basing the average proposed differentials to the same average current differentials for each coverage.
    • Changes to existing risk classification elements including discounts, rating variables and rating rules are permitted. A rationale must be provided for any change.
    • The introduction of a new discount is permitted, except for any usage-based (telematics) discount. A discount being proposed must be identical to a discount already approved for another insurer and currently being used in the Ontario market.
    • No changes to the rating algorithm are permitted, except when new discounts are being proposed by the insurer.

    ~ https://www.fsco.gov.on.ca/en/auto/filing-guidelines/Pages/ppa-simplified.aspx

  • bkmlocksbkmlocks

    Hi @graham , regarding @user10_Exam6C 's question above, I agree that -15% should be considered outside the range of (-15%, 5%) and hence not eligible for simplified guidelines. I am not sure if this was addressed before, but was the answer in the examiner's report wrong for this question?

    On a different note, I saw that in the battlecards, another requirement for simplified guidelines would be:

    • Individual changes < 15 %

    I actually did not see this anywhere in the guidelines. Is this requirement from an older version and hence no longer applicable?

    https://www.fsco.gov.on.ca/en/auto/filing-guidelines/Pages/ppa-simplified.aspx

    Thank you very much and happy thanks giving :)

  • grahamgraham

    Technically -15% is outside the range (-15%, 5%), but I don't think FSCO makes that distinction. The website does say between -15% and 5% but I'm guessing exactly 15.0% is still ok. What probably happens in practice anyway is that there would be a few insureds who got a change of -15.5% or something close so the insurer would just fudge some of the factors to get it properly within (-15%, 5%). But I suppose on exams, you just never know when the graders are trying to trick you. If it were me, I would quote the range and briefly explain my reasoning if it looks like there could be doubt.

    To find the cap of 15% on individual changes, you have to click on a link in the FSCO document to go to an external website and then click on another link to get the actual simplified guidelines. The direct link is below. Then under (c) Cumulative Changes, it states that individual changes can be no more than 15%.

    Happy Thanksgiving to you too.

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