The Canadian Loss Experience Automobile Rating

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CLEAR
The Canadian Loss Experience Automobile Rating
Arthur Tabachneck, Ph.D., Manager Abdul Sattar
Al-Khalidi, Ph.D., Senior Statistician Statistical
Research and Development
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Canada
Total Area 3.9 mil sq miles
Population 33 mil
Total Area 3.7 mil sq miles
Population 298 mil
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Insurance Bureau of Canada (IBC)

• Created in 1964 over concern that poor
  underwriting practices, caused by inadequate
  information, were threatening the ability of
  insurers to meet claims liabilities
• Trade organization which serves as the voice of
  over 90 of the non-government PC insurance sold
  in Canada
• Lobby governments for changes to public policy
• Formulate industry positions
• Offer organized insurance crime investigative
  services
• Collect, validate and store information
• Provide a forum for member companies to achieve
  the PC insurance industrys common vision

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Government vs Non-Government Auto Insurance in
Canada
Non-Government Insurers
BI Only
Mandatory Coverages
Government Insurers
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Total Private Passenger Vehicles 18,123,885
0.021 mil vehicles
0.003 mil vehicles
0.024 mil vehicles
4.2 mil vehicles
0.25 mil vehicles
0.076 mil vehicles
0.53 mil vehicles
2.2 mil vehicles
2.2 mil vehicles
0.62 mil vehicles
0.45 mil vehicles
0.66 mil vehicles
6.8 mil vehicles
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IBCs Department of Statistical Research and
Development

• Manage databases of the entire countrys auto
  premium and claims information
• Build and maintain databases of VIN, VIN
  groupings and vehicle characteristics
• Assist IBCs investigative efforts with all
  needed analytical services
• Conduct analytical research to help identify any
  emerging trends
• Develop and apply statistical models to normalize
  data and estimate anticipated normalized claim
  data
• Provide advisory make/model/model year-specific
  Collision, Comprehensive, Property Damage and
  Accident Benefit ratings for all Canadian
  government and non-government insurers

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Canadian Loss Experience Automobile Rating (CLEAR)

• What

• Why

• How

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CLEAR
What it is
automobile insurance rating developed in 1989 by
a working group of actuaries, CIPs, IT
professionals, statisticians and
underwriters equitable and defensible based on
each make/models pure vehicle experience risk
rate groups (symbols) symbols are convertible to
differentials (rating factors) Lower risksLower
rates
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CLEAR
Why it was developed
most claims result in repair not
replacement price is only one of many possible
predictive factors cost saving features shouldnt
increase insurance premiums crash test results
may not reflect overall experience a vehicles
experience may change over time because there are
over 200 insurers, and only 18 million vehicles,
Canadian insurers have to share their data to
enable credible predictions
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CLEAR
Why it was developed
Low relationship between price and theft claim
cost
Honda CR-V 4 Dr AWD MSRP 31,529
Subaru Forester 2.5 X Wagon AWD MSRP 30,543
Relative Loss Cost 126
Relative Loss Cost 388
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CLEAR
Why it was developed
Low relationship between price and collision
claim cost
Subaru Impreza WRX 4 Dr AWD MSRP 39,335
Volkswagen Passat GLS V6 4 Dr MSRP 36,113
Relative Loss Cost 295
Relative Loss Cost 51
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CLEAR - How it works

• Body style
• Drivetrain
• Wheelbase
• Weight
• Engine displacement
• Engine horsepower
• MSRP
• Indexed MSRP
• Type of brakes
• Theft deterrent system
• Track width
• Height
• Types of airbags
• Manufacturer

• Seating capacity
• Brake assistance
• Ground clearance
• Traction control
• Stability control
• Types of headrestraints
• Seatbelt pretensioners
• Lane departure warning
• Tracking system
• Parts marking
• Engine type
• Engine placement
• Age
• General model and model

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CLEAR - How it works
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CLEAR - How it works
Vehicle Characteristics
Loss Cost Data
Recent Claims Experience
NVAP Results
Loss Cost Estimates
Experience Adjustment
Formulae

Modelling
VINlink
Review Process
Controls and Balancing
Rate Group Tables