New Brunswick
Insurance Board
DECISION
IN THE MATTER:
Of a rate revision application for Markel Insurance Company of Canada
With respect to automobile insurance rates for
Non-Fleet Interurban Trucks
Hearing date August 24, 2011
Board: Mr. Vincent Duff Vice-Chairman
Mr. Georges Leger Board Member
Mr. Maurice Harquail Board Member
Date of Hearing: August 24, 2011
Decision Rendered: September 1, 2011
Summary
Pursuant to subsection 267.2(1) of the Insurance Act, R.S.N.B., 1973 c. I-12, the New Brunswick
Insurance Board (the “Board”) convened a written hearing on August 24, 2011by conference call to
consider the rate revision application submitted by Markel Insurance Company of Canada (the
“Applicant”) with respect to automobile insurance rates for non-fleet interurban trucks in New
Brunswick. The proposed rates would be effective October 23, 2011 for new business and
November 23, 2011 for renewal business. The Applicant is an insurance company duly licensed to
write automobile insurance in New Brunswick.
Pursuant to subsection 19.71(3) of the Insurance Act, the Board provided to the Office of the
Attorney General (“OAG”) with Notice of the Hearing. The OAG did not intervene at the hearing.
No additional documents, other than the written submissions from the Applicant, were considered
by the Board.
The Board, after examining the written submissions from the Applicant decides that the rates
proposed by the Applicant are just and reasonable for the reasons given in this Decision, except that
the Board orders that a cap equal to 20% of the previous year’s premium be applied on a per vehicle
insured basis.
1. Introduction
[1] The Board is charged by the Legislature with the general supervision of automobile
insurance rates in the province of New Brunswick. In order to fulfill that mandate the Board
exercises the powers provided by the Insurance Act. One key responsibility for the Board,
among others, is to ensure that rates charged or proposed to be charged are just and
reasonable. Under the Act, each insurer carrying on the business of automobile insurance in
the Province must file with the Board the rates it proposes to charge once every 12 months
from the date of its last filing. If the proposed rates reflect an average increase greater than
3% or if the insurer files rates more than twice in a period of twelve months the insurer must
appear before the Board.
[2] In this matter, the Applicant's rate revision request does reflect an increase
(proposed 16.86%) sufficient to render a hearing obligatory.
[3] The Applicant submits that its analysis suggests that current Markel non-fleet
interurban truck rates should be increased by +22.98% overall at a target after-tax return on
equity of 15%. The Applicant is proposing to select a rate change of +16.86% which would
provide an implied after-tax return on equity of +11.17%. The rate changes vary by type of
coverage and by territory but on average would result in an overall increase of +16.86%
from $5,161 to $6,031.
2. Evidence
[4] The Applicant indicates that based on its analysis that it should revise its overall
rates by +22.98% based on a rate revision application that considers a premium to surplus
ratio of 1.47:1 with a targeted return on equity expected of 15% (after tax). The Applicant
has selected to seek an increase of +16.86% which, all other things being equal, would result
in a targeted after-tax return on equity of +11.17%. The Applicant selected a rate change
different from the indication in order to maintain rate adequacy and appropriately
differentiate rates based on underlying exposures.
[5] The Applicant specializes in Interurban Trucks, which is a specialized line of
business. Since the volume of data in such lines is limited, it based its rate indication using
New Brunswick Interurban Truck data and did not consider industry experience. Markel
based its Loss Development Factors (LDF) on Atlantic data, except Direct Compensation
Property Damage (DCPD) and Accident Benefits (AB) for which it used Ontario and
country wide data respectively. In the Applicant’s opinion this approach is reasonable
because of the low volumes of data
[6] The Applicant's rate revision application forms the main portion of its submission
and the evidence before the Board. The pre-hearing review process utilized by the Board
included having the Board's consulting actuaries review the filing for material errors, and
conducting an analysis of the methodology utilized by the Applicant along with the
assumptions made, to ensure compliance with accepted actuarial principals. This review
indicates that the rate revision application as presented at the hearing was free of material
error and contained no significant unresolved issues.
[7] In response to questions during the review process, the Applicant advised that 35 of
its policies would experience increases ranging from 20% to 59.9% if the requested rate
increase was approved.
3. Analysis and Decision
[8] The Applicant has presented a rate revision application that proposes to increase
rates by an average of 16.86%, although this increase varies by coverage type and by
territory.
[9] If the Applicant’s rate request is approved 35 of its policies will experience increases
greater than 20%.
4. Conclusions
[10] The Board has considered all of the evidence presented.
[11] For these reasons, the Board accepts that the rate revision application of the
Applicant as presented reflects rates that are just and reasonable, but that upon renewal of
policies, capping equal to 20% of the previous year’s premium shall be applied on a per
vehicle insured basis.
____________Signed as per original____________
Vincent Duff
Vice-Chairman, New Brunswick Insurance Board
WE CONCUR:
_________Signed as per original_________
Georges Leger
_________Signed as per original_________
Maurice Harquail