SGI Canada Moving To Individualized Ratings

In a news release this summer, SGI Canada announced that they will be moving to Individualized ratings.

From SGI: 

"Technology is making it increasingly easy for consumers to shop online for insurance.
This has attracted new competition for both brokers and SGI CANADA. To stay ahead
of competitive forces, SGI CANADA is making some important changes to the rating of
home and personal auto products. Starting in January 2014, we will be moving these
products to individualized rating.

Individualized rating helps SGI CANADA compete more effectively by providing
customers with fairer and more accurate rates. New rating formulas will be much more
complex, incorporating by-peril rating and finer segmenting of rating variables. In this
environment, it will be extremely difficult, if not impossible, to calculate premiums
manually by referencing rate tables and associated multipliers."

Here are some of the most frequently asked questions

What is individualized rating?

Individualized rating is really just the concept of charging a fairer, more accurate rate that is more reflective of the risk being assumed. It uses more complex rating models and formulas, to come up with a more accurate premium. We are doing this to some extent already with our current rating tables and formulas, using various multipliers, discounts and surcharges but these models are now considered relatively simple and were developed before the analytical tools became so sophisticated.

What technology will I need to be using in an individualized rating environment?

Generating a premium quote for new business in an individualized rating environment involves the use of some technology. For the Home Pak product, existing rate-quoters have the ability to incorporate the more sophisticated formulas, with no real change to the line BOSS application can also be used to obtain the applicable premium. For the Personal Auto Pak product, the Quick Rate tool can be used to generate the applicable premium. This too can then be easily converted to a new application. Check the broker website for details and vendor contacts for various quoting tools.

What is black box underwriting?

Black box underwriting and individualized rating are not the same thing however, they do often go hand-in-hand. Individualized rating is the concept of charging a fairer, more accurate rate that is more reflective of the risk being assumed. Black box underwriting is a tool commonly used in an individualized rating environment to return the premium to the broker.

puts are entered, and an output is returned with very little knowledge of how the inputs are used to produce the output. In underwriting terms, information about a risk is gathered and entered into a rate-quoter. A corresponding premium is then returned to the broker. The broker does not know how the risk factors contribute to the calculation of the premium but the complexity of the model is intended to produce a more accurate premium for that particular risk.

What products will this apply to and when? Does this apply to Agro?

This will apply to Home Pak policies (including all Home Pak plans on Agro Pak policies) and private passenger vehicles and light farm trucks under Personal Auto Pak policies, starting January 1, 2014.

Will my customers’ premium be going up or down?

As we move towards individualized rating, we will essentially be removing the subsidies
that are inherent in the current rating systems. As such, some customers will pay less
than before and some will pay more. A rate capping mechanism was introduced in 2013
for the Home products, capping premium increases on renewal at no more than 10%.
This is intended to help cushion the impact of getting those existing customers who are
under-priced relative to their risk to where they should be, as we continue to refine and
improve our rating formulas.

If you have any questions about car insurance policies in Saskatchewan, don't hesitate to e-mail us at: support(at)galoninsurance(dot)ca or call our office in Regina at (306) 525-0888 or in Saskatoon at (306) 244-7000.