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What Are Underwriting Rules? -

July 26, 2013

Underwriters are responsible for looking into factors that might affect the possibility of loss and incurring expenses later on that a insurance company would have to pay out. Underwriters rely on statistics and data gathered from past claims to calculate the probable exposure and expenses of providing auto insurance to a certain individual.

It's important to keep in mind when renewing or shopping for an auto insurance policy that a company's underwriting rules apply to everyone.

Although they vary from one company to another, some common rules consider:

Convictions/License Suspensions

By law, underwriting rules in Ontario must be filed with FSCO. Rules that aren't approved by FSCO are not legal grounds for a company to refuse you insurance. If a company does refuse you a new or renewal of an insurance policy, they must outline the reasons for the refusal. Any rules that are not in line with the Insurance Act or ones that haven't been approved by FSCO are strictly prohibited. Other factors that are prohibited include:

Although factors such as age, sex, marital status and location are not permissible factors for underwriting, they are allowed for determining an insurance rating to decide what an individual will pay for insurance coverage.

What Insurance Companies Can't Use to Determine Rates

Insurance companies operate on systems that include underwriting rules - rules that decide whether or not they can refuse an individual car insurance. However, there is a set of information that cannot be used in deciding these rules, as well as deciding how much an individual should pay for auto insurance. These include, but are not limited to, credit history, bankruptcy, employment status, whether or not an individual owns a credit card, the length of time you have lived in one location, accidents where you are less than 25% at fault where the accident occurred on or after September 1, 2010, not-at-fault accidents, whether your vehicle is owned or leased, or whether there was a period of time where you had no automobile insurance coverage.

All automobile insurance companies must follow the same protocol for changing rates, which includes an approval process before the rates are allowed to be changed. For example, companies operating in Ontario must file a rate change request with FSCO, which will then legally approve individual companies' insurance rates.

So what happens in the approval process? FSCO employs analysts who look at data from insurance companies to determine whether the new rates are rational and won't disadvantage a company's customers. The data they use to determine these decisions include each company's financial records, which include the costs of insurance premiums, claims costs, and other documented company costs. FSCO also factors in what the company bases their numbers on - for instance, they look at why the company decided to set the rate they did as well as their underwriting criteria (what they use to refuse a consumer auto insurance).

Additional Resources & Advice

Looking for more information on car insurance Ontario? We've prepared some guides to help you:

Visit our Insurance Tips & Information Centre for more useful tips and guides on auto insurance.