MANITOBA PUBLIC INSURANCE AI.4 VEHICLE CLASSIFICATION SYSTEM Standard insurance industry practice is to use a classification plan to assign risk categories to different insurance risks. The classifications are prescribed in Regulation under The Manitoba Public Insurance Act. A risk classification plan is needed because a meaningful statistical measure of risk cannot be derived on a per unit basis. It is necessary to combine units that are expected to have the same risk together, in order to derive a statistically valid measure of the risk, its cost, and subsequently the rate that should be charged. The same rate is then applied to all units of that group. In this manner, rates paid as a group accommodates costs incurred as a group. Classifications are designed based on a number of statistical, operational, social and legal criteria. Statistically, a classification system must be stable and allow for history to reflect expected costs. Operationally, classification must be practical and easily identifiable. For example, all-purpose insurance provides a simple definition of vehicles which are used to attend work, school or for business purposes. Pleasure insurance provides a simple definition of a different risk, where the vehicles are not used on a regular basis for these activities. Social and legal considerations may include a variety of factors, such as evolving legislation and human rights issues. For Basic Autopac, the vehicle classification plan closely follows normal industry practice. The classification plan consists of four components; rating territories, insurance uses, vehicle rating factors and driving records. Details on classification adjustments for 2014/15 and their impact on customer rates can be found in Volume II Ratemaking. Page 1
AI.4.1 Rating Territories The province is divided into four geographical rating classes (territories) and an additional rating class based on the vehicle owner s status as a commuter living in Territory 2 and driving regularly into Territory 1 for work, school and some business uses. Each of these territories has distinctive rates which reflect differences in patterns of loss experience. This means motorists pay premiums which relate to the risk associated with insuring a vehicle in a particular geographic area of the province. There are no changes to the rating territories or their boundaries for 2014/15. The definitions of the rating territories are provided in Attachment 1 to this section. AI.4.2 Insurance Uses Motorists are required to insure their vehicles in various use categories. These categories take into consideration the varying degrees of risk associated with the different purposes for which vehicles are used. Insurance uses with high claims costs will be rated higher than uses experiencing lower claims costs. There are no changes to insurance uses for 2014/15. Insurance use definitions are located in Attachment 2 of this section and insurance uses by major class are located in Attachment 3. AI.4.3 Vehicle Rating Factors AI.4.3.A Rate Groups The rate groups into which vehicles are assigned reflect such factors as the vehicle make, model, age, gross vehicle weight, engine size, declared value and Canadian Loss Experience Automobile Rating (CLEAR). These factors have a bearing on the cost of claims for particular types of vehicles. Page 2
Passenger Vehicles and Light Rated Trucks The Canadian Loss Experience Automobile Rating (CLEAR) system is used for the assignment of rate groups to passenger vehicles (cars, passenger vans and sport utility vehicles) and light trucks. The CLEAR system, produced by the Insurance Bureau of Canada (IBC), uses actual loss experience data from across Canada to determine relative loss cost indices for specific makes and models of vehicles. These indices take into account the varying costs of repairs, collision claims, comprehensive claims and injuries associated with different types of vehicles. These are used to establish rate groups on which passenger vehicle and light truck premiums are based. The CLEAR system provides rewards, in the form of lower premiums, to consumers who purchase safer, less damage prone and more theft resistant vehicles. Increased consumer demand should encourage manufacturers to build such vehicles. The CLEAR system is thus a loss prevention initiative, as well as a method of achieving equity in the vehicle rating system. IBC annually updates rate groups to account for changes in loss costs for vehicles. Generally three factors cause the CLEAR recommendation to be adjusted: Actual experience for new vehicles is developed Loss costs for repair decrease as vehicles age; and, New trends emerge such as higher theft rates for a particular make and model. CLEAR provides specific recommendations for each make and model year of vehicle for 16 model years. CLEAR provides separate rate group recommendations for collision, comprehensive and injury. Since the Basic Autopac product combines these coverages, the CLEAR recommendations are weighted to obtain the rate group applicable in Manitoba. For collision and comprehensive, the CLEAR recommendations range from a rating of 1 to 99. The Corporation has assigned a weighting allocation of 80% to the collision Page 3
recommendation and 20% to the comprehensive recommendation based on the ratio of collision to comprehensive claims costs in Manitoba. For injury rating recommendations, IBC provides recommendations ranging from 24 to 43. The Corporation assigns an injury rating of 1 to 5 based on the IBC injury rating. IBC AB Rating MPI AB Rating 24 to 26 1 27 1 28 2 29 to 31 2 32 to 33 3 34 3 35 3 36 to 37 4 38 4 39 4 40 5 41 to 43 5 For 2014/15, rate group adjustments were not applied to passenger vehicles or light trucks as the CLEAR recommendations were not available. As a result, the Corporation is transitioning to a one year lag in using CLEAR rate group adjustments and the 2014 rate groups for passenger vehicles and light trucks were kept the same as 2013. New vehicles will be assigned rate groups as they enter the local market. The rate groups will be based on CLEAR recommendations, as they become available. Rate groups assigned to passenger vehicles for 2014/15 are contained in Volume III AI.5, Parts 1A and 1B. The rate groups assigned to light trucks for 2014/15 are contained in Volume III AI.5, Parts 2A and 2B. Page 4
The Heavy Truck Rated as Light Rate Group Table, contained in Section AI.5 Part 3, is used to rate farm and fishing trucks with a gross vehicle weight (GVW) in excess of 4,540 kg and with a body style of chassis mounted camper, crewcab, crewcab service truck, extended cab, extended cab service truck, light delivery, light pickup, panel van, service truck or sport utility vehicle. Since 2004/05, the rate groups in this table have been determined based on the average light truck rate group for each model year in the current heavy rated as light truck population. Rate group adjustments to Heavy Truck Rated as Light Trucks are undertaken based on a combination of two factors: the change to rate groups based on CLEAR recommendations from IBC and the average rate group for each model year based on the current represented population for these trucks. As rate groups are not changing for 2014, only the current represented population of these trucks was used to adjust the rate groups. Based on the population change for 2014/15, there were only two changes to the 2014/15 rate groups for heavy truck rated as light trucks. The 2013 model year increased by one rate group while the 1996 rate model decreased by one rate group. The rate groups for heavy trucks rated as light trucks for 2014/15 and 2013/14 are as follows: Model Year 2014/15 2013/14 2014 and Later n/a* 2013 32 31 2012 31 31 2011 30 30 2010 30 30 2009 30 30 2008 30 30 2007 30 30 2006 29 29 2005 28 28 2004 28 28 Page 5
2003 28 28 2002 27 27 2001 26 26 2000 21 21 1999 17 17 1998 11 11 1997 7 7 1996 6 7 1995 4 4 1994 2 2 1993 2 2 1992 to 1986 1 1 1985 and Prior 0 0 *Not available until December 2013 Heavy Trucks Heavy trucks are trucks with a GVW of more than 4,540 kg (with the exception of Heavy Rated as Light Trucks). There are three broad classes of heavy trucks that have different physical damage requirements: Trucks (including farm and fishing trucks with body styles other than chassis mounted camper, crewcab, crewcab service truck, extended cab, extended cab service truck, light delivery, light pickup, panel van, service truck or sport utility vehicle) weighing between 4,541 kg and 16,330 kg GVW, which carry physical damage coverage. Trucks (excluding farm and fishing trucks) weighing more than 16,330 kg GVW, which do not carry physical damage coverage. Farm and fishing trucks with body styles other than chassis mounted camper, crewcab, crewcab service truck, extended cab, extended cab service truck, Page 6
light delivery, light pickup, panel van, service truck or sport utility vehicle weighing more than 16,330 kg GVW, which carry physical damage coverage. As in previous years, heavy truck rate groups are being adjusted down one rate group per model year. This allows for new model year vehicles to be assigned the highest rate group and vintages other model year vehicles. The structure of the Heavy Truck Rate Group Table for 2014/15 and 2013/14 is as follows: Model Year 2014/15 2013/14 2015 and later 17 2014 16 17 2013 15 16 2012 14 15 2011 13 14 2010 12 13 2009 11 12 2008 10 11 2007 9 10 2006 8 9 2005 7 8 2004 6 7 2003 5 6 2002 4 5 2001 3 4 2000 2 3 1999 1 2 1998 and prior 1 1 Page 7
Buses Buses are assigned rate groups based on the value declared by the owner, up to $50,000. There are no changes to the rate group structure for buses. The rate groups assigned to buses are shown in Volume III AI.5 Part 4. Motorcycles Motorcycles, Mopeds and Mobility Vehicles are currently assigned rate groups 0 to 9 based on owner declared values from $1,000 or less to $50,000. There are no changes to the rate group structure for motorcycles, mopeds and mobility vehicles. The rate groups assigned to motorcycles are shown in Volume III AI.5 Part 4. Motorhomes Motorhomes are assigned rate groups based on the value declared by the owner, up to $50,000. There are no changes to the rate groups assigned to motorhomes. The rate groups assigned to motorhomes are shown in Volume III AI.5 Part 4. Trailers (excluding semi-trailers) Trailers are divided into two categories: those with a declared value of $2,500 and lower; and those with declared values between $2,501 and $50,000. Trailers valued over $2,500 are assigned rate groups based on owner declared value. There are no changes to the rate groups assigned to trailers. The rate groups assigned to trailers are shown in Volume III AI.5 Part 4. AI.4.3.B Other Vehicle Rating Factors In addition to rate groups, some vehicle types are also rated using other vehicle rating factors. Vehicle rating factors group together vehicles with similar risks. Trucks are classified into three gross vehicle weight (GVW) categories: 4,540 kg or less 4,541 to 16, 330 kg Page 8
16,331 kg or more Buses are classified by seating capacity: 20 seats or less 21 to 35 seats 36 to 50 seats 51 seats or more Motorcycles are classified into three engine size categories: 500 cc or less 501 to 1,000 cc 1,001 cc or more Motorcycles are also classified by bodystyle. Bodystyles are grouped into five bodystyle rating categories for rating purposes: Touring Rating: includes bodystyles Touring, Trike, 3-Wheel Motorcycle and Standard Sidecar. Sport Rating: includes bodystyles Sport and Naked Sport. Sport Touring Rating: includes bodystyles Sport Touring and Adventure. Motorscooter Rating: includes bodystyles Motorscooter and 3-Wheel Scooter. Other Rating: includes bodystyles Cruiser, Dual Purpose, Motard, Enduro, Other and Standard. Motorcycle bodystyle definitions can be found in Attachment 4 to this section. There are no changes to vehicle rating factors for 2014/15. AI.4.4 Driving Record The driving record component of the classification plan is designed to adjust rates based on the driving convictions and claims history of the customer. Customers with a prior history of claims or poor driving records are a higher risk and consequently pay higher rates. Page 9
The driving record portion of the vehicle classification plan has two components: Vehicle Premium Discount Fleet Safety Program AI.4.4.A Vehicle Premium Discount The Corporation implemented the Driver Safety Rating (DSR) program, as prescribed in legislation, on March 1, 2010. The DSR Scale ranges from a high of 15 merits to a low of 20 demerits. In order to receive a vehicle merit discount, the vehicle must be insured in one of the following use categories: All Purpose Mobility Vehicle All Purpose Moped Pleasure Moped All Purpose Motorcycle (all bodystyle rating categories) Pleasure Motorcycle (all bodystyle rating categories) All Purpose Motorhome Pleasure Motorhome All Purpose Passenger Vehicle Pleasure Passenger Vehicle Farm Passenger Vehicle Common Carrier Local Passenger Vehicle Common Carrier Passenger Vehicle within 161 km in Manitoba All Purpose Truck Pleasure Truck Artisan Truck (GVW less than 16,331 kg) Farm or Fishing All Purpose Truck (GVW less than 4,541 kg or a body style of chassis mounted camper, crewcab, crewcab service truck, extended cab, extended cab service truck, light delivery, light pickup, panel van, service truck or sport utility vehicle) Common Carrier Truck within city or municipality Common Carrier Truck within 161 km in Manitoba For 2014/15, no changes are proposed to the vehicle premium discount scale. The vehicle premium discount scale can be found in Volume I AP.1. Page 10
Further information on the DSR program can be found in Volume III AI.3 Driver Classification System. AI.4.4.B Fleet Rebates and Surcharges The Corporation s fleet rebate/surcharge program applies where an owner has 10 or more vehicles registered on the first day of any customer month and the number of days the fleet vehicles are insured meets or exceeds the minimum number of days. All vehicles are included in a fleet except: Insurance exempt vehicles Taxis Liveries Motorcycles, Mopeds, and Mobility Vehicles Trailers Vehicles with PIPP coverage only Off-road vehicles Fleet rebates and surcharges are determined by the loss experience of the fleet. Loss experience is the ratio between all losses paid by Manitoba Public Insurance and the fleet premiums paid to Manitoba Public Insurance. Except for comprehensive claims, which are fully included in the calculation of the loss ratio, claims are included according to the degree of responsibility. For example, if the fleet vehicle is held 40 percent responsible for a claim, only 40 percent of the cost of the claim (including all costs for which the fleet driver is responsible) is assessed to the fleet. The maximum amount used for any one loss is $25,000. Fleet assessments may be adjusted based on increases or decreases to claims amounts which were not included in the previous year s fleet assessment. Fleet rebates and surcharges vary, depending on the loss ratio. The current fleet rebate scale ranges from a 1 percent rebate (69 percent loss ratio) to a maximum 33 percent rebate (37 percent or lower loss ratio), and the fleet surcharge scale ranges from a 1 percent surcharge (80 percent loss ratio) to a maximum 50 percent surcharge (129 percent or more loss ratio). Page 11
For 2014/15, there are no changes proposed to the existing fleet rebate or surcharge scales. The rebate and surcharge scales can be found in Volume I AP.1. Page 12