Narrator: Del Dyck, the Executive Director of Alberta’s Auto Insurance Rate Board, said moving from an industry-wide rate setting to a file and approve process is one of their priorities in 2009. ILSTV spoke with Del and asked him to explain the differences between the two systems.

Del Dyck: The current industry-wide rate setting process looks back at what the average premium for basic coverage was in Alberta in the prior years, for example, 2008. Then what happens is actuaries then look at the past trends for frequency and severity of accidents to predict future trends and then they come up with an average future premium required to meet these trends. So the difference between the average premium for the prior year and the expected average premium for the future year is the increase that the Board could establish for industry-wide. So all companies would have an opportunity to increase rates or decrease rates by that amount.

On the file and approve process, it would eliminate this one-size-fits-all approach. It would require insurers, if they’re wishing to change their rates, to individually submit an application to the Board. The Board would analyze each application on a company-specific basis, based on established criteria for claims costs, for admin expenses, for profit and they’d make a decision for each specific company.

So with the industry-wide adjustment process, it’s on an annual basis and it takes effect November 1 each year. On a file and approve process, it would be as companies see the need to change their rates either up or down. They could come forward to the Board. They could come more than once a year, they could come every second year, depending on what the market conditions are.