FSCO filing requirements

[Deleted User][Deleted User]
in FSCO.PPA

Hello,

In the FSCO reading, the simplified guidelines mention that a change in the region of [-15% to 5%] for territory differentials are acceptable.
As such, in Fall 2014 question 3b), the rate change will be approved according to this.
However, in Fall 2015 1b) the rate change of -14% will not be approved because it is greater than 10%.
My question is why would a range of [-10% to - 15%] be accepted for simplified filings but not not regular filings?
Shouldn't the regular filing rules take precedence over the simplified filing rules, leading to the rejection of the rate change as in Fall 2014?

Thank you!

Comments

  • grahamgraham

    The first thing I did was double-check the current simplified and regular filing guidelines since these exam questions were from 3-4 years ago. It does indeed appear that these territorial rules are still in effect for both types of filings.

    I agree it does seem sensible for the regular filing rules to take precedence over the simplified rules, but unless there is an error in the FSCO publications, this is not the case, at least for the territory rules. Without asking FSCO, there's no way to know for sure why it's like this but I tried to think of a reason and here's what I came up with:

    • A simplified filing is permitted if the filing doesn't contain big changes. (That's just my way of conceptualizing it.) For example, the overall change must be < 0% and there can't be changes to the rating algorithm except for discounts. (There is actually a long list of items that must be satisfied if you look at the actual FSCO publication.)
    • So, given that all these other conditions must be satisfied, they might be willing to relax the regular rules in certain areas, territories for example. A regular filing permits an overall rate increase, but a simplified filing doesn't. That means the range of changes within individual rating variables in a simplified filing will tend to be skewed negative more so than for a regular filing. If FSCO also required that no territories were < -10%, fewer filings would qualify for the simplified filing and they may not want this. A simplified filing saves money for the insurer & FSCO (and eventually the customer) so they may want to encourage simplified filings even if that means being a little less strict on negative changes.

    Anyway, those are my thoughts.

  • [Deleted User][Deleted User]

    Thank you, Graham.
    That explanation makes a lot of sense to me.

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