Rate Daze: Auto insurance rating systems becoming complex beyond understanding, lawyer says

Toronto, Ontario — The current Canadian auto insurance rating system is so complex, a lawyer who recently spoke at a recent insurance industry event said that “There are concerns that these systems will be so complex over time that we don’t understand them.”

Carole Piovesan, co-founder of data law and consulting firms INQ Law and INQ Consulting and speaker at last Thursday’s 2023 FSRA Exchange event, described the technologically-advanced measures the insurance industry is taking to avoid further rating complications, as first reported by Canadian Underwriter.

“And we’re putting in place certain mechanisms to try to avoid that, including a whole new market around creating AI systems to assess AI systems, to explain those systems.”

According to reports, the Financial Services Regulatory Authority of Ontario (FSRA), which typically only reviews inputs, such as rate factors, will now put an eye toward outputs as well.

Tim Bzowey, FSRA’s executive vice president of auto/insurance products, acknowledged that FSRA has, despite meeting all standards, misaligned its focus from where it should be.

“If I’m interested in consumer outcomes, I think by definition I have to be much less interested in rating input,” Bzowey said. “So, I don’t think I would say we would go so far as to ignore them…But I think it’s also fair to say that our current regime in the name of fairness makes an effort to restrict inputs.

“If principles-based regulation to FSRA is about consumer outcomes, then necessarily the work we do in my shop needs to be a lot more about that and a lot less about checking the math of the actuarial professional submitting the filing,” Bzowey added. “We’re moving in that direction. We’ve taken a lot of steps in that direction. But any reform of the rate regulation framework is going to require much, much more be done without a doubt.”


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