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Rate Filing Requirements for Automobile Insurance

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					      Rate Filing Requirements
      for Automobile Insurance

     Section 155H – Expedited Approval




Originally Published by the NSIRB February 28, 2007
Updated for Nova Scotia Utility and Review Board January 23, 2009




Document: #154197
Nova Scotia Utility and Review Board (UARB)–Rate Filing Requirements–155H Expedited Approval


Filing Format

Subject to any technical notes published by the Nova Scotia Utility and Review Board (UARB or the
Board), an application under section 155H of the Insurance Act (Act) should contain the information
sections as outlined below and in the order outlined below to constitute a complete application.

        Section       Description
            1         Table of Contents
            2         Certifications (Officer and Actuary – Appendix B)
            3         Contact Person Information
            4         Summary of Information (Appendix A)
            5         Support/Justification of Proposed Changes
            6         Discount/Surcharge Changes
            7         Revised Manual Pages
            8         Final Rates
            9         Dependent Categories (if any)
           10         Rating Profiles (Appendix C)
           11         Financial Data

Numbered tabs 1 – 11 must be used to divide paper copies accordingly. Electronic copies must
clearly identify each such requirement, each starting on a separate page within the document(s).
Pages must be numbered using “<Section>.<Page>” format (e.g. 10.5 represents the 5th page of
section 10). The pages must be three-hole punched and presented in a 3 ring binder of size
compatible with the thickness of the document. Seven hardcopies must be submitted to the
address noted below:

          Nova Scotia Utility and Review Board
          3rd Floor, 1601 Lower Water Street
          P.O. Box 1692, Unit “M”
          Halifax, NS, B3J 3S3

In addition, an electronic copy of the entire application must be forwarded to
uarb.board@gov.ns.ca. For large files, please contact the general office phone number to ensure
the mailbox is capable of handling the file size. In lieu of email, a CD with the electronic copy can
be sent to the address noted for the paper copies. Appendix E presents the electronic copy
requirements.

On September 28, 2004, the NS Insurance Review Board (NSIRB) issued a decision (04-006) for
the generic hearing on confidentiality. The NSIRB indicated that information contained in sections 8
and 14 of the then current filing requirements would not be routinely disclosed. These filing
requirements represent a departure from those upon which the decision was based. For
clarification, the UARB views the following sections under these requirements to be equivalent to
the information contained in the former sections 8 and 14:

     Sections 6 and 8 in their entirety
     Section 4 excluding questions 1, 2 and 9
     Section 5 excluding table required under 5.b.1
     Section 7 excluding revised manual pages




Section 155H -Expedited Approval Filing Requirements – Effective February 28, 2007         Page 2
Nova Scotia Utility and Review Board (UARB)–Rate Filing Requirements–155H Expedited Approval


These sections will be subject to the NSIRB order on confidentiality (i.e. not routinely disclosed).
Companies requesting confidentiality of additional sections of the filing must submit their request in
the covering letter stating the reasons. The UARB will review the request.


Section 1 - Table of Contents

The table of contents must show the main headings noted above plus the key headings within each
of the sections. It must be detailed enough to allow the reader to quickly isolate key information.


Section 2 - Certifications

2.a. Certificate of Officer

An original signed certificate of an authorized officer of the Company must accompany each
application. A form of the Certificate of Officer is attached as Appendix B1. Authorized officers are
the President, CEO, COO, CFO, any vice-president, the treasurer, or the corporate secretary or
Chief Agent for Canada, for the Company.

The Certificate of Officer must identify a person authorized by the Company to act as the contact
person for the Company, in accordance with section 3.

2.b. Certificate of Actuary

If the application includes rate indications, it must be accompanied by an original certificate of a
Fellow of the Canadian Institute of Actuaries. A copy of the required form is attached as Appendix
B2.


Section 3 - Contact Person Information

The Company must set out the name, title, company name, business address, telephone number,
fax number and e-mail address of the individual authorized to act as contact on behalf of the
Company. The named contact person must be prepared to respond to UARB questions and accept
correspondence from the UARB on behalf of the Company relating to this application. All
questions on the application will be directed to this individual and all questions/replies for the UARB
dealing with the application must be channeled through this person.

The contact person must be readily available to answer UARB inquiries in the time requested by the
Board and must be able to accept and respond to correspondence with the UARB, by email.


Section 4 - Summary of Information (Appendix A)

The summary section contains certain key information on the nature of the filed rate level. The form
to be used is attached to this document as Appendix A.




Section 155H -Expedited Approval Filing Requirements – Effective February 28, 2007         Page 3
Nova Scotia Utility and Review Board (UARB)–Rate Filing Requirements–155H Expedited Approval


Specific instructions to complete Appendix A are outlined below:

   •   In responding to Question 1, check all the items that are applicable to the application. While
       1.1 & 1.2 are mutually exclusive, other changes (1.3 through 1.5) may apply
   •   In responding to Question 2, proposed effective dates are to be listed for both new and
       renewal business. If there are any changes to the proposed effective dates, the Company
       must notify the Board. In determining renewal dates, the notice periods in the Act must be
       taken into consideration.
   •   In responding to Question 3, the indicated rate level change for each coverage, and on an
       all coverages combined basis, must be disclosed:
            o where changes to base rates are proposed, except if such changes to base rates
               result solely from off-balancing differential or discount changes; or
            o where changes to differentials are proposed, if such changes result in an overall rate
               level change.

   •   In responding to Question 3, the impact of all proposed changes to rates, including base
       rate changes, differential changes, and discount or surcharge changes, must be disclosed
       under the proposed rate level change column. The impact by coverage must be calculated
       and disclosed.
   •   In responding to Question 3, the premium weights must be disclosed in percentage terms
       and must be at the current rate level.
   •   In responding to Question 4a, prior rate level changes must be shown. The All Coverages
       Combined Rate Level Change must be based on the on-level premium weights that were
       applicable at the time of the rate change.
   •   In responding to Question 4b, the Average Cumulative Rate Change is calculated by:
           o taking the All Coverages Combined Rate Level Change from the response to
              question 3;
           o   taking each All Coverages Combined Rate Level Change that occurred after January
               1 of the year up to the proposed renewal effective date from the responses to
               question 4a,
           o   and then using the following formula:

               [   Π (1 + i) (1 - d) ] - 1
                   all i, d

       where: i = the proposed rate level increase or approved rate level increase(s) that occurred
                  after January 1 of the year in which the proposed rate change is expected to be
                  effective for renewal business; and
               d = the proposed rate level decrease or approved rate level decrease(s) that
                   occurred after January 1 of the year in which the proposed rate change is
                   expected to be effective for renewal business.

   •   In responding to questions on dislocation (Questions 7a through 7c), the Company must
       take into account any capping procedure that has been identified in the response to
       Question 6.



Section 155H -Expedited Approval Filing Requirements – Effective February 28, 2007        Page 4
Nova Scotia Utility and Review Board (UARB)–Rate Filing Requirements–155H Expedited Approval



Section 5 - Support/Justification for Proposed Rates

The Company must provide support for changes to the base rates filed under section 155H of the
Act. The application must include a narrative description of all ratemaking steps for each of the
specific rate changes proposed.

Rate indications should be provided. At a minimum, detail must be provided for third party liability,
accident benefits, uninsured automobile, collision, comprehensive, all perils, specified perils and
SEF 44 (underinsured automobile), even if a rate level change is not proposed for each of
these coverages.

The UARB expects that the Company will utilize the same methodologies and consistently
derived assumptions in each application. Where methodologies or the process for
developing assumptions are changed from prior applications, the Company must provide
the impact of the changes on their indicated rate levels. That is, any change in either the
approach or the underlying data source from the prior rate application must be disclosed
and the impact of any changes in approach must be disclosed.

When the proposed rate/differential changes differ from the indications, the reasons for the
deviation must be explained in detail.

The Board understands that in some circumstances actuarial data is limited and the development of
rate indications is not feasible. In these circumstances, the Company must provide other forms of
support for the proposed changes including but not limited to market surveys, competitive position
analysis, and supportive information from other jurisdictions, etc.

Applications under section 155H may not include changes where the Board has issued simplified
filing requirements, namely “Adoption of New CLEAR Tables”, “Changes to Commercial Rate
Group Tables”, “Interurban Trucks(Classes 51, 61, and 99)”, “Endorsements”, and “Inexperienced
Drivers and Risk Sharing Pool” These changes must be separately filed in accordance with the
appropriate requirements.


5.a.   Proposed versus Indicated Rates (if applicable)

5.a.1. Changes to the Ratemaking Methodology

If the Company has changed its rate making methodology since its last application with the Board, a
description of and the reason for the change must be provided. An estimate of the impact of these
changes should be included. The Company should identify the data considered (i.e. year and
source - Company versus industry, NS versus Atlantic, etc.).


5.a.2. Table

A table showing the proposed and indicated rate level changes for the whole province must be
presented.




Section 155H -Expedited Approval Filing Requirements – Effective February 28, 2007         Page 5
Nova Scotia Utility and Review Board (UARB)–Rate Filing Requirements–155H Expedited Approval


5.a.3. Rationale for Deviations

The Board understands that rate level indications are but one piece of information used by
companies in establishing the proposed premium level. As such, a Company may deviate from its
rate level indications. However, the Company must provide the Board with sufficient information
concerning the reasons for the deviation.


5.a.4         Key Assumptions

If the Company has changed methodology for developing key assumptions, the Company should
describe the rationale for and the impact of the change.


5.b.          Proposed versus Current Average Premiums

5.b.1. Table(s)

A table showing the proposed and current average premiums should be provided in the form of the
territorial exhibit shown below. The Excel template for this table can be downloaded at the Board’s
website (www. nsuarb.ca). If the Company uses territories other than the statistical plan territories,
another table showing all territories must also be provided.

                                                      Territorial Change Exhibit


 Company Name:                                                                 Type of Vehicle:
 Implementation Dates - New Business:                                          Renewal Business:

                                            Table 1 - "Current" Written Exposures
    Stat.      Liability     SEF 44      Accident     Unins.    Collision   Compre-        Specified   Health   Comb-
  Territory                               Benefit     Auto.                 hensive         Perils      Levy     ined
    500                                                                                                                 -
    501                                                                                                                 -
    502                                                                                                                 -
    503                                                                                                                 -
  Province            -            -              -            -           -          -            -       -            -


                                             Table 2 - "Current" Average Premium
    Stat.      Liability     SEF 44      Accident     Unins.     Collision  Compre-        Specified   Health   Comb-
  Territory                               Benefit      Auto.                hensive         Perils      Levy     ined
    500
    501
    502
    503
  Province



                                            Table 3 - Proposed Average Premiums
    Stat.      Liability     SEF 44      Accident     Unins.    Collision Compre-          Specified   Health   Comb-
  Territory                               Benefit     Auto.                hensive          Perils      Levy     ined
    500
    501
    502
    503
  Province


                              Table 4 - Proposed Percentage Change (+/-) in Average Premiums
    Stat.      Liability     SEF 44      Accident   Unins.    Collision    Compre-    Specified        Health   Comb-
  Territory                               Benefit   Auto.                   hensive    Perils           Levy     ined
    500
    501
    502
    503
  Province


 Tables 1 and 2 are comprised from IBC data for




Section 155H -Expedited Approval Filing Requirements – Effective February 28, 2007                                          Page 6
Nova Scotia Utility and Review Board (UARB)–Rate Filing Requirements–155H Expedited Approval




5.b.2. Rationale for Proposed Changes

The Company must identify the rationale used for selecting the proposed rates included in the
application. If the Company used market surveys or other competitive analyses in determining the
level of the proposed rates, copies of these surveys and analysis must be provided to the Board.
When a Company does not provide (or determine) rate level indications, the rationale and
associated information must be in sufficient detail so the Board can assess the appropriateness of
the proposed rate changes.


5.c    Risk-Classification Factor Differential Changes

An application under 155H may not include the addition or deletion of or changes to risk-
classification factors. This includes changes to territorial definitions. The Company must file under
155G in this case.

If the Company is proposing no changes to risk-classification factor differentials, omit the
requirements under this subsection (5.c).

For each risk-classification factor differential that changes, a table comparing the current, indicated,
and proposed differentials must be provided. The written premium distribution and the exposure
distribution by each risk-classification factor for which the differentials are changing must be
included. When the proposed differentials differ from the indicated differentials, the reasons for the
deviation must be provided.

5.d.   Rating Based on Group Membership

With the exception of a change in the level of the discounts for existing group classes, an
application involving changes to, elimination of or addition to a risk-classification system based on
group membership must be made under section 155G of the Act.

When no changes to existing group discount levels are proposed, omit the requirements
under this subsection (5.d).

A comparison of current, indicated and proposed discounts or rates must be provided for each
coverage when a change is proposed. The written premium distribution and the exposure
distribution by discounts or rate level must be included. The rationale for the changes to the group
discount percentages must be provided in sufficient detail to allow the Board to assess its
appropriateness.




Section 155H -Expedited Approval Filing Requirements – Effective February 28, 2007           Page 7
Nova Scotia Utility and Review Board (UARB)–Rate Filing Requirements–155H Expedited Approval


Section 6 - Discount/Surcharge Changes

An application introducing or eliminating a discount/surcharge or altering the eligibility for a
discount/surcharge must be made under section 155G. Only changes to the amount of the discount
or surcharges under the current classification factors are allowed under Section 155H applications.

If the Company is making no changes to the level of discounts or surcharges, omit the
requirements under this section (6).

A comparison of current, indicated and proposed discounts or surcharges must be provided for
each coverage for which discounts or surcharges are changing. Included in this must be the written
premium distribution and the exposure distribution for the discounts or surcharges. The Company
should provide the rationale for the proposed changes in sufficient detail to allow the Board to
assess the appropriateness.

A current and a proposed distribution of the Company’s book of business affected by the discount
or surcharge change must be provided.


Section 7 – Revised Manual Changes

Rating rules are those rules or definitions by which a risk is assigned to a specific rating cell or
defining whether a discount or surcharge is applicable. Examples include rules by which territory,
vehicle use or driving record is assigned. Rating rules are part of a Company’s risk-classification
system. All changes to rating rules must be filed under section 155G. That is, a section 155H
application may not include rating rule changes.

Proposed rate manual pages (including the new rate pages) that describe proposed changes
allowable under these requirements must be included with the application. In addition, for each rate
manual page that is changing (except for actual rate pages), the Company should identify the page
number, the current wording that is to be changed and the proposed wording.

A final set of manual pages containing the approved rates and risk-classification system must be
submitted within 30 days after the rate application has been approved.




Section 155H -Expedited Approval Filing Requirements – Effective February 28, 2007         Page 8
Nova Scotia Utility and Review Board (UARB)–Rate Filing Requirements–155H Expedited Approval


Section 8 - Final Rates

Please note, proposed changes to algorithms should not be filed under section 155H but must be
filed under section 155G.


8.a.   Calculation of Final Rates

The application must clearly describe and show how current manual territorial base rates are
transformed into proposed manual territorial base rates through the application of the proposed rate
change in combination with any off-balance.


8.b.   Calculation of Rate Level Change

The application must clearly describe and show how the rate level impact of changes to base rates,
differentials and discounts or surcharges, in combination with any off-balance which may be
applied, are used to calculate the overall rate level change on a per coverage basis. This
calculation must reconcile with the Proposed Overall Rate Level Change from Question 3 in Section
4 (see Appendix A).

8.c.   Dislocation and Capping

The Company must take into account the impact that proposed rate changes will have on
consumers. Information on rate dislocation is required in Appendix A. Capping must be considered
in minimizing rate dislocation. Any capping procedure must be fully described in this section.


Section 9 - Dependent Categories

When other categories of automobile insurance are dependent on the category for which this
application is submitted, the Company must identify the dependent categories.

The Company should state whether the relationship between the dependent category and the
category being filed has changed or not. If the relationship has changed, the Company should
explain the rationale for and the impact of the proposed change.

In all cases, where the Board rating profiles include a profile for the dependent category of
automobile insurance, that profile should be included with those required under Section 10.




Section 155H -Expedited Approval Filing Requirements – Effective February 28, 2007        Page 9
Nova Scotia Utility and Review Board (UARB)–Rate Filing Requirements–155H Expedited Approval


Section 10 - Rating Profiles (Appendix C)

Appendix C sets out rating examples covering the categories of automobile insurance (21 PPV, 3
Misc. Vehicles and 3 Commercial profiles). The Company must file those rating examples that are
affected by the application. These rating examples may not be the same examples required in
future applications. The Board may require additional and/or different rating examples as a
consequence of the review process.

The rating examples must be completed according to the risk description specified. The Company
must provide both current and proposed rating criteria for each of the rating examples. The rating
territories must be those defined in the Company's rate manual.

Any additional information pertaining to the rating example must be disclosed with a detailed
description for each affected rating example.

Specific instructions and key assumptions that must be adopted when completing these rating
examples are:

   •   All rates are to be stated on an annual basis. If annual policies are not issued, the rates
       must be converted to an annual basis.

   •   All risks must be rated strictly according to the information provided. DO NOT provide
       preferred rates unless the criteria as stated fit the eligibility rules for a preferred class. If so,
       provide only the preferred rates, and state so.

   •   Clearly identify all applicable surcharges/discounts that apply to each of the coverages.

   •   If the Company does not write a particular limit or deductible level for a described profile,
       provide the premiums using the closest limit/deductible and note the applicable
       limit/deductible on the profile.

   •   If the Company provides group discounts, provide the individual non-group rate plus the
       rates with the highest discount applied.

   •   For multiple operator risks, provide premiums by coverage by operator using separate
       sheets. In addition, the total policy premium combining all operators must be submitted.

   •   If, based on the Company’s underwriting rules, a risk profile described in a specified rating
       example is not written, that fact is to be indicated, and rates need not be provided for that
       example. However, the Company must explain why the rating example is not appropriate
       under the circumstances.

   •   If a rating example does not describe a unique rate, the Company is to provide the highest
       and lowest rate that could be charged on the described risk, and disclose the assumption
       underlying the difference.

   •   Include the premiums for all perils only if collision and comprehensive are not offered.




Section 155H -Expedited Approval Filing Requirements – Effective February 28, 2007               Page 10
Nova Scotia Utility and Review Board (UARB)–Rate Filing Requirements–155H Expedited Approval


Section 11 - Financial Data

To speed the review process, the Board requires financial information to be filed regardless of
whether the Board has the information on file from past applications. Specifically, the Board
requests the following pages from the applicable Office of the Superintendent of Insurance Annual
Return (i.e. P&C-1 or P&C-2) for the past 5 years:

   Page       Description
   20.10      Assets
   20.20      Liabilities and Equity
   20.30      Statement of Income
   20.40      Statement of Retained Earnings
   20.60      Notes to Financial Statements
   60.30      Analysis of Claims Paid and Unpaid
   67.10      Provincial Exhibit – Premiums Written
   67.20      Provincial Exhibit – Premiums Earned
   67.30      Provincial Exhibit – Claims Incurred

As well, page 10.60 – “Summary of Selected Financial Data for five years” from the most recent
P&C-1/2 is required. This exhibit should cover the years for which the above pages are provided.

In addition to this information, Appendix D outlines a table that must be completed using the
information from the pages listed above. The table is replicated below. Note, the sample in the
Appendix assumes the most recent year P&C-1/2 is 2007. The years in the sample table below
should be adjusted as new P&C-1/2 becomes available.

Selected Financial Information

                                                                                   Source:
                                          2003   2004    2005    2006    2007    OSFI P&C-1/2

ROE                                                                               p10.60, r48

Claims Ratio
 Year of Account                                                                  p10.60, r30
 Year of Accident                                                                 p10.60, r31

Company - Automobile Total
 Incurred Claims & Adj Expenses (A)                                             p67.30, c19 r29
 Earned Premiums (B)                                                            p67.20, c19 r29
 Ratio (A)/(B)

Nova Scotia - Automobile Total
 Incurred Claims & Adj Expenses (C)                                             p67.30, c03 r29
 Earned Premiums (D)                                                            p67.20, c03 r29
 Ratio (C)/(D)

Expense Ratio                                                                     p10.60, l33




Section 155H -Expedited Approval Filing Requirements – Effective February 28, 2007      Page 11
Appendix E: Electronic Copy Requirements- Filings under Section 155H-Expedited Approval


Appendix E - Electronic Copy Requirements

An electronic copy of the application must accompany the required seven hardcopies. The
electronic application consists of the following components

[a]    Application Document (Excluding section 10 and 11)

This section consists of an electronic version of the actual pages provided in the hard copy of the
application. Ideally, this version is a PDF file or a word document. Other formats will be considered.
Sections 10 and 11 should be provided as shown below.

[b]    Section 10 (Rating Profiles)

The rating profiles for the Company must be presented in Excel spreadsheet format. Copies of the
blank templates are posted on the UARB website. This requirement allows for easier compilation
for comparison purposes. The sheet must contain both values and formula as opposed to values
only.

[c]    Section 11 (Financial Information)

The required pages from the OSFI P&C 1 or 2 need not be sent electronically. A completed Excel
Sheet containing the required table (from Appendix D) must be sent.




Appendix E: Electronic Copy Requirements- Filings under Section 155H-Expedited Approval

				
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