DECISION 2017 NSUARB 188 M08325, M08326 and M08327 NOVA SCOTIA UTILITY AND REVIEW BOARD IN THE MATTER OF THE INSURANCE ACT.

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1 DECISION 2017 NSUARB 188 M08325, M08326 and M08327 NOVA SCOTIA UTILITY AND REVIEW BOARD IN THE MATTER OF THE INSURANCE ACT - and - IN THE MATTER OF APPLICATIONS by CO-OPERATORS GENERAL INSURANCE COMPANY, COSECO INSURANCE COMPANY and CUMIS GENERAL INSURANCE COMPANY for approval to modify their rates and risk-classification systems for motorcycles BEFORE: Murray E. Doehler, CPA, CA, P.Eng., Member APPLICANTS: CO-OPERATORS GENERAL INSURANCE COMPANY, COSECO INSURANCE COMPANY and CUMIS GENERAL INSURANCE COMPANY FINAL SUBMISSIONS: November 7, 2017 DECISION DATE: December 1, 2017 DECISION: Applications are approved.

2 -2- I INTRODUCTION [1] Sister companies Co-Operators General Insurance Company (CGIC or Company), COSECO Insurance Company (COSECO) and CUMIS General Insurance Company (CUMIS) filed supporting documents and materials (Applications) with the Nova Scotia Utility and Review Board (Board) for approval to modify the rates and riskclassification system for motorcycles. The Applications, dated October 4,2017, were filed electronically on the same date, and the original documents were received on October 5, [2] Information Requests (IRs) were sent to CGIC on October 11, 25 and 26, 2017, and responses were received on October 23 and November 1, [3] As a result of a review by Board staff, an original staff report dated November 6, 2017, was prepared and provided to CGIC for review and they responded with a correction on November 7, A revised report (Staff Report) dated November 7, 2017, was subsequently sent to CGIC, and they had no further comments. [4] The Board did not deem it necessary to hold an oral hearing on the Application. II ISSUE [5] The issue in these Applications is whether the proposed rates and changes to the risk-classification systems are just and reasonable and in compliance with the Insurance Act (Act) and its Regulations.

3 -3- III ANALYSIS [6] The Companies sought approval to change the rates and risk-classification system for motorcycles. The Applications were made in accordance with the Board s Rate Filing Requirements for Automobile Insurance - Section 155G Prior Approval (Rate Filing Requirements). [7] CGIC, COSECO and CUMIS are sister companies. While not having the same rates and risk classification systems, COSECO and CUMIS propose to move their rates closer to those for CGIC. The analysis included in the Application was done using the combined data of the three companies. Given this relationship, the focus of the Board s review of these Applications was on the CGIC Application. [8] CGIC had a mandatory filing date of June 1, 2018, for motorcycles, which are usually grouped as part of the miscellaneous vehicle insurance contracts. The COSECO and CUMIS deadlines were May 1,2019, and June 1,2019, respectively. While the CGIC Application did not contain any actuarial analysis due to the small number of total exposures for all three, the Company compared its rates to those approved by the Board for IAO Actuarial Consulting Services Inc. (IAO). The Board has allowed this analysis to meet the requirement for a mandatory filing for CGIC for miscellaneous vehicles in the past. Board staff recommends that the Board should set the next mandatory filing date to be October 1, 2020, for motorcycles, for all three companies. [9] The proposed effective dates for CGIC are April 8, 2018, for new business and May 18, 2018, for renewal business. [10] The proposed effective date for COSECO and CUMIS is May 1, 2018, for new and renewal business.

4 -4- Rate Level Changes [11] CGIC proposed changes to base rates that vary by coverage but not territory. These changes produce an overall all-coverages combined decrease of 2.7%. CGIC based its rate changes on a comparison of the average premium by coverage under its current rates to those where each motorcycle was rated using IAO rates. These rates were effective July 1,2017 and were the most recent rates approved by the Board. CGIC also considered its competitive position when making its rate decisions. [12] CGIC also proposed changes to the risk-classification system for motorcycles, introducing some new rating variables, and changing differentials for others. [13] COSECO and CUMIS proposed the adoption of the same algorithm and rates as proposed for CGIC with the following exceptions: The group discount offered by each company will be applied on top of the proposed CGIC rating; The Co-operators Blue Discount will not apply to COSECO or CUMIS; All Perils coverage will not be offered by COSECO or CUMIS; The way accidents and convictions are being considered/assigned to determine driving record or surcharge will not change due to systems limitations; and The proposed capping rule will not apply to COSECO or CUMIS. [14] The changes proposed result in an overall increase of 19.7% for COSECO, and an overall reduction of 13.9% for CUMIS. [15] CGIC indicates it will write motorcycle risks that meet its underwriting criteria. The Company is, therefore, actively writing the policies rather than accommodating a private passenger vehicle application. This application does not change that focus. It does reflect a plan to become more competitive, and to better segment the risks to allow for a better pricing of the risk. The changes also seek to harmonize its approach in Nova Scotia with that in other jurisdictions.

5 -5- [16] CGIC did not conduct an actuarial analysis of its rate level need for these vehicles. The Company argued that its number of exposures was too small to produce a meaningful analysis, to which Board staff agree. [17] Instead, CGIC compared the average premium, by coverage, to that which would be produced if the Company used the Board approved IAO rates. CGIC used the rates approved in the Board s Decision [2017 NSUARB 45], released earlier this year. [18] Given that the Board has allowed such comparisons to be used to set rates in past applications for other insurers, the only issue that exists for the Board is whether the proposed changes are supported by the comparisons and other information that the Company provided. [19] In general, where the Company proposed changes, those changes were in the direction of the differences between the average premiums by coverage rated using its current rates and those using IAO rates. For mandatory coverages, CGIC proposed no reduction to rates where IAO premiums were lower. When considered together, the CGIC average premium for mandatory coverages was comparable to that for IAO. These rates, therefore, appear reasonable to Board staff. [20] For optional coverages (i.e., physical damage coverages), where CGIC average premiums were higher than those using the IAO rates, CGIC proposed a partial move to the lower rates. The Company opted for smaller reductions (10%) as it believed the suggested changes from the comparison would be far too large to introduce now. This approach, to Board staff, is prudent in the circumstances. [21] The Board approves the rate changes for motorcycles as filed.

6 -6- Risk Classification Changes Territorial Analysis [22] Currently, CGIC does not rate motorcycles by territory. CGIC proposes to create a rating variable that distinguishes between urban and rural territories. Of its current 11 territories for private passenger vehicles, the Company will map three to the Rural category and eight to the Urban category. [23] CGIC provided indications for the Urban and Rural differentials for Third Party Liability, Collision, Comprehensive & Specified Perils, and Accident Benefits. These indicated differentials were part of the Generalized Linear Models (GLM) analysis that CGIC used to determine indicated differentials for the new and current rating variables. Based upon this analysis, CGIC set the Urban differential to and selected a lower Rural differential, that varied by coverage. [24] CGIC off-balanced the impact of the introduction of these territory differentials (or the Urban/Rural variable) through the base rates as part of the classification changes discussed below to make them revenue neutral overall. [25] Board staff state that CGIC has provided sufficient support for its proposed territories, the selected differentials, and the associated off-balance of the impact. The Board approves the territories, the differentials and the off-balancing, as filed.

7 -7- Motorcvcle Risk-Classification System [26] In this Application, CGIC is proposing to make changes to its motorcycle rating variables and the associated differentials. These changes resulted from the GLM analysis undertaken using a combination of CGIC, COSECO and CUMIS data. The data for motorcycles was from Ontario, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Quebec, Alberta and Nova Scotia. The approach used more data, making the model more credible. [27] CGIC included a Company variable and a Province variable within the GLM as controls to isolate any influence arising from the differences between companies and between provinces. [28] The analysis was done separately for Liability (i.e., Bodily Injury', Property Damage-Tort, and Direct Compensation Property Damage), Accident Benefits, Collision, and Comprehensive & Specified Perils. [29] The indicated differentials from the multivariate GLM analysis were credibility weighted using the current differentials as the complement. CGIC outlined its selected credibility standards, all of which is reasonable to Board staff. [30] In those cases, where the use of the indicated differentials would result in an anomaly (or inversion) or would create large rate dislocations, CGIC selected differentials that varied from the indications. [31] CGIC off-balanced the combined impact of all the proposed classification analysis changes. The proposed changes, therefore, are revenue neutral, when considered together.

8 -8- [32] The classification changes for Vehicle Age and Engine Size that CGIC proposed are set out below. Vehicle Age [33] CGIC proposed the introduction of a Vehicle Age rating variable for Collision and Comprehensive & Specified Perils. While there are limitations in the Act on the use of a vehicle s age to cancel coverage, terminate coverage or refuse to issue coverage, there is no restriction on its use as a rating variable. [34] The Company allowed individual vehicle ages up to 19 years to be included in the model, as is, but grouped risks 20 or more years older together to avoid having the model extrapolate extreme factors based on very few exposures. [35] The GLM produced an indicated curve of differentials. Rather than determining a credibility weighted value at each point in the curve, the Company assigned the credibility for the entire block of data to each point (i.e., a common credibility approach). CGIC believes it is better to use the credibility of the curve rather than having a different credibility at each point. [36] Based upon the credibility weighted indications, CGIC selected the indicated differentials for vehicles up to ten years old. For vehicles ten or more years old, CGIC chose to use a common factor that represented the average factor from the model for those vehicles. This approach allowed for the use of a common factor while still recognizing, in part, the curve developed by the model.

9 -9- [37] This approach is considered to be reasonable by Board staff. The Board approves the introduction of the Vehicle Age rating variable for the Collision and Comprehensive & Specified Perils, and the associated differentials, as filed. Engine Size [38] CGIC currently uses Engine Size as a rating variable for Liability. The proposal would expand the current 750+ cc segment into six new segments. This change allows for a better assignment of premium to motorcycles with larger engines. The variable is also included for Accident Benefits, but all differentials are currently set to The proposal changes these differentials, to allow the rating variable to have an impact. [39] CGIC also proposed the introduction of Engine Size as a rating variable for Collision and Accident Benefits. While Ontario Accident Benefits coverage is much richer than that for Nova Scotia, CGIC explains that the Province control variable should account for such differences. With that aspect removed, the Company observed an average curve of loss of similar shape across all provinces. [40] Using the common credibility approach described earlier, CGIC determined credibility weighted indicated differentials for each coverage for this variable. The Company then selected differentials that reflected the direction of the indication but, due to concerns about too much dislocation, were lower than indicated. This was especially true for the larger engines sizes. Some additional deviations for the Accident Benefits differentials were made to align the Nova Scotia differentials with those used in other jurisdictions.

10 -10- [41] Board staff state that CGIC has provided sufficient support for the selected differentials. The Board approves the proposed changes to the Engine Size rating variable for Liability and Accident Benefits, and the proposed introduction of Engine Size as a rating variable for Collision, including the associated differentials, as filed. Harley Davidson Variable [42] CGIC proposed the introduction of a rating variable for Harley Davidson motorcycles for Collision and Comprehensive & Specified Perils. The Company developed indicated differentials for Harley Davidsons versus all other brands. When credibility weighted, the analysis suggested that the differentials for Harley Davidsons vehicles should be slightly more than the 20% extra premium that CGIC selected (i.e., the differential is for Harley Davidsons). [43] The Company was asked whether the Canadian Loss Experience Automobile Rating (CLEAR) table for motorcycles, which CGIC is proposing to adopt, does not already reflect additional risk for Harley Davidsons. CGIC explained that its GLM model, which held the CLEAR differentials fixed, showed that there was an additional signal in the data to warrant the inclusion of this surcharge. [44] Board staff state that CGIC has provided sufficient support for this new variable and its associated differential. The Board approves it, as filed. Sport Variable [45] CGIC proposed the introduction of a rating variable for motorcycles described as Sport motorcycles. The Insurance Bureau of Canada publishes a vehicle

11 -11 - description list that identifies which motorcycles are Sport motorcycles. CGIC used this table to assign the Sport indicator in its model. [46] The Sport variable will apply to Liability, Accident Benefits, Collision, and Comprehensive & Specified Perils. The Company developed indicated differentials for Sport motorcycles versus non-sport motorcycles for each coverage. Using a weighted average of these differentials, the Company developed a single differential for All Coverages combined. The Company selected a differential for Sport motorcycles, which essentially applies a surcharge of 15% for these vehicles. This surcharge is slightly lower than the indicated amount. [47] As with the Harley Davidson variable, CGIC explained that its GLM model, which held the CLEAR differentials fixed, showed that there was additional signal in the data to warrant the inclusion of this Sport surcharge. [48] Board staff stated that CGIC has provided sufficient support for this new variable and its associated differential. The Board approves it, as filed. Exposure [49] CGIC proposed the introduction of a rating variable, Exposure, that reflects the number of kilometres driven in a year. CGIC did not rely on a GLM analysis citing a lack of data that could be populated in the model for this variable. Instead, the Company used its judgment to select the exposure bands and the associated differentials. CGIC explained its choices were not too aggressive, allowing it time to acquire the data while providing some small benefits to those who do not drive very many kilometers each year.

12 -12- [50] Board staff questioned CGIC why it assumed that driving less would necessarily result in better loss experience. For example, is it possible that someone driving only a little each year would be less experienced and potentially pose more of a risk than someone who logs a lot of motorcycle miles every year? CGIC explained: Indeed, it is possible that fewer miles means less road experience and potential for more accidents/claims for an inexperienced driver, which we expect to be captured by the class (years licensed) variable. With this variable, we are gathering information about annual mileage driven which is not necessarily associated with less road experience. We expect this variable to capture the fact that fewer annual mileage means less exposition to loss due to the vehicle being less driven on the road, regardless of the road experience of the driver. Since motorcycles are mostly associated with pleasure uses, some insured may be driving their motorcycle only a few times a year and we want to recognize their reduced exposition to losses when compared with other drivers who are using their motorcycle on a more regular basis. [IR-1, Question 4] [51] CGIC explained that in other provinces, some of its competitors were using this variable. The proposed variable and the differentials are similar to those used by other competitors in those provinces. CGIC provided, as an example, an insurer that was using discounted rates for lower mileage, in Quebec. [52] Board staff state that CGIC has provided sufficient support to justify this initial attempt to reward some clients while gathering more evidence about the true relationship for Exposure. The Board approves the proposed introduction of the Exposure variable, and the differentials, as filed. Class [53] CGIC uses Class as a rating variable for Liability and Collision, currently. The Company proposed to add the rating variable to Accident Benefits in a bid to

13 -13- harmonize Nova Scotia with other jurisdictions. Class, for motorcycles, reflects the number of years licensed. [54] CGIC explained the extension to Accident benefits: Accident Benefits is a coverage that is akin, in some respect, to Bodily Injury in terms of what it covers. Therefore, its segmentation could also be similar to Bodily Injury itself. Since Years Licensed (class) reflect the driving experience of the insured, this can affect the propensity and severity of bodily injuries in general which then justifies using the rating element for this coverage. Therefore, the Accident Benefits Class differentials proposed are the same as those for the Bodily Injury coverage, except that the differentials over were capped to limit the dislocation on our book of business. [IR-2, Question 1] [55] CGIC further explained that the selected differentials were based on an analysis made in Newfoundland and Labrador when the Company sought approval for the same change there. The Company provided the information used in that application in its response to the second information request. [56] Board staff support, and the Board so approves, the proposed application of the Class variable, and the associated differentials, for Accident Benefits, as filed. Limit of Liability Changes [57] CGIC proposed the introduction of some additional liability limits for Bodily Injury and Property Damage Tort. The new limits are $200,000 and $300,000 and are being added to harmonize with other provinces. Because the minimum liability limit in Nova Scotia is $500,000, the addition of these new limits has no applicability as they cannot be used here. [58] The changes reduce the differential for $500,000 and increase the differentials for values over $1,000,000. CGIC also proposed the revamping of the SEF#44 liability limit differentials. Values for $200,000 and $300,000 have been added

14 -14- to the existing limits. The revised values harmonize Nova Scotia with the CGIC offerings in the other provinces. [59] Based on an $18 base rate for SEF#44, these changes range from a decrease of $1 to an increase of $4. [60] Board staff support, and the Board so approves, the proposed changes to the SEF#44 liability limits and the associated differentials, as filed. Deductible Changes [61] CGIC undertook an analysis of its deductible differentials. Rather than using a GLM analysis, the Company used the Loss Elimination Ratio method to determine the differentials. A separate analysis was performed for Collision and another for Comprehensive and Specified Perils combined. [62] To recognize the correlation between deductibles and vehicle values, CGIC conducted its analysis twice; once for all vehicles and once for high valued vehicles. The analyses produced indicated differentials. When making its selections for deductible amounts of $1,750 and below, CGIC used the results from the all vehicles analysis. For higher deductibles, the higher valued vehicle analysis was used. [63] Board staff state that CGIC has provided sufficient support for its chosen differentials. The Board approves the proposed differentials, as filed.

15 -15- Adoption of CLEAR Motorcycle Tables [64] For physical damage coverages, CGIC currently assigns a vehicle rate group (VRG) by using a Cost Price New table. The Company proposed abandoning this approach in favour of using the CLEAR motorcycle tables and the associated differentials. [65] CGIC tested both its current VRGs and the CLEAR VRG and the associated differentials in its GLM model. The Company concluded that the CLEAR tables explained more of the signal in the data or, in other words, contributed more accuracy to the model. [66] To adopt the CLEAR table, CGIC had to remove its current VRG table and differentials first, and then replace them with the CLEAR table and the differentials. Once the decision to adopt the CLEAR table was made, these differentials were fixed in the GLM analysis when reviewing the other rating variables. [67] CGIC also proposed the addition of VRG as a rating variable for Accident Benefits. [68] Where the CLEAR table does not provide a value or where the table assigns a code of A, CGIC will use the appraised value of the vehicle and the Insurance Bureau of Canada Value Rated table to determine the appropriate VRG to use. [69] CGIC will also adopt the Insurance Bureau of Canada Add-on Value Rated table to determine an adjustment to the rate group based on the value of customizations, where such work had been done to the motorcycle. [70] The impact of the change in VRG table and differentials was off-balanced as part of the classification changes so that all these changes are revenue-neutral when considered together.

16 -16- [71] Board staff support the adoption of the CLEAR motorcycle table with its associated differentials, and the adoption of the Insurance Bureau of Canada Value Rated Table and Add-on Value Rated Table. The Board approves this change, as filed. Discounts and Surcharges Driver Training Discount [72] CGIC proposed a change to the eligibility requirement for this discount. The Company has concerns that the current wording would allow for the discount to apply if the insured had only driver training on a private passenger automobile. The changes in the requirement will specify that the training be in a practical motorcycle driver training course (i.e., on-road). [73] CGIC was not able to identify which, if any, of its current risks would see the discount removed, and therefore, the impact of the change could not be determined. [74] This change seems reasonable as the training required for a motorcycle is different from that for an automobile. Staff recommend, and the Board approves, the change to the eligibility criteria for this discount. Stay & Save Discount [75] CGIC offers, for private passenger automobiles, a 10% discount on the premium for Liability, Accident Benefits, Collision and Comprehensive & Specified Perils, where the client has resided at the same principal residence address for 24 or more continuous months. The Company proposed the extension of this discount to motorcycles, at the same level.

17 -17- [76] Because the indicator used to determine if the discount applies to private passenger automobiles is not in the motorcycle database, the exact impact of the discount is unknown. To administer the discount, however, CGIC will make sure that information is passed from the private passenger database to the motorcycle database. [77] To estimate the impact, CGIC assumed the percentage of motorcycles that would qualify for the discount would be the same as that observed for private passenger vehicles. The information provided suggests that around 90% of private passenger vehicles qualify. By factoring in the 10% discount these clients would obtain, CGIC was able to estimate an impact for each coverage. CGIC then used these estimates to determine an off-balance factor to apply to the base rates to make the introduction of this discount revenue-neutral. [78] Board staff state that CGIC has provided sufficient and reasonable support for the proposed introduction of the Stay & Save Discount for motorcycles. The Board approves the introduction of the discount, as filed. Co-operators Blue Discount [79] This discount applies to CGIC only and not to COSECO or CUMIS. [80] CGIC offers this 10% discount to employees, advisors, staff of advisors, or retirees of CGIC or their spouses. The discount currently applies to motorcycles but not to Property Damage Coverage. CGIC proposed making motorcycles eligible for the discount for Property Damage.

18 -18- [81] CGIC explains that it is looking to harmonize its motorcycle discounts across jurisdictions. This discount is offered on Property Damage for motorcycles in other provinces. [82] CGIC estimated the impact of the addition of this discount based on the number of such risks that qualify currently. This impact, which was small, was offbalanced through the base rates for Property Damage to make the change revenue neutral. [83] The group to whom the discount applies is an eligible group under the Regulations. As such, a group discount is allowed. The extension of the 10% discount to Property Damage for motorcycles to this group is appropriate in the circumstances. The Board approves the extension of the Co-operators Blue Discount to Property Damage for motorcycles, as filed. Multi-Product Discount [84] CGIC offers a 20% discount for private passenger vehicles where the insured also has insurance under another line (e.g., life insurance, home insurance, etc.) with CGIC. CGIC proposed the extension of the discount to motorcycles but only at 10%. The Company selected the lower level to be consistent with the discount that applies in other provinces. COSECO requires the other insurance be with COSECO and CUMIS requires the other insurance to be with CUMIS. [85] Due to a systems limitation, the discount for motorcycles will apply to Uninsured Automobile and not to SEF#44. For private passenger vehicles, the opposite

19 -19- is true. This approach is being taken because the COSECO and CUMIS systems cannot process discounts on endorsements including SEF#44. [86] The impact of the addition of the discount at the 10% level was off-balanced through the base rates for each coverage to make the change revenue-neutral. [87] Board staff recommends, and the Board so approves, the introduction of the Multi-Product Discount, at the 10% level, to motorcycles, as filed. At-fault Accidents Surcharges [88] CGIC proposed a change to the surcharge schedule that it uses to reflect multiple at-fault accidents. Currently, surcharges apply once a client has had three accidents within the past three years using a motorcycle or matching vehicle type by any driver listed under the policy. [89] Under the proposal, CGIC will adopt the private passenger automobile atfault accident surcharge schedule for motorcycles and matching vehicles (e.g., mopeds). The change will not apply to vehicles using motorcycles rates (e.g., dirt bikes), to which the current surcharge will continue to apply. [90] The new schedule will use a five-year period instead of the current threeyear period when counting at-fault accidents. As well, the surcharge will start to apply after the second at-fault accident. A 150% surcharge will apply if there are two at-fault accidents. If there were three at-fault accidents, the surcharge increases to 225%. Any further accidents add 25% to the surcharge.

20 -20- [91] The change represents a very large jump in the at-fault accident surcharges. When asked why the private passenger automobile surcharge is more appropriate than the current one, CGIC responded: Unfortunately, due to a lack of credible data to estimate these surcharges, we couldn t estimate the appropriateness of either current or proposed surcharge schedule. Therefore, the goal of this modification is more to harmonize the surcharge with PPA and with other provinces. Also, some insureds currently receive the PPA Accident surcharge, while none are receiving the current MC Accident surcharge. We believe it makes more sense to consider a longer period of time (5 years instead of 3) as it is more in line (even if not perfectly) with the period considered for driving records. [IR-1, Question 15] [92] In this information request response, CGIC states it has no vehicles to which the surcharge would apply. The Company also does not expect to issue contracts to someone who would have this risk. The change is in the event a renewal would have these characteristics. The rules regarding Risks Not Written, would not allow a new business risk with any at-fault accidents to be written nor any renewing risks with two or more at-fault accidents in the past five years. Using the current scale, no risks would ever qualify for the surcharge given these rules. Under the new schedule, it is possible a renewing risk would require a surcharge. [93] With no risks subject to the surcharge, the change has no immediate impact, and no off-balancing was required. [94] CGIC stated the goal of the change was to harmonize it with the private passenger vehicle surcharges and with that used for motorcycles in other jurisdictions. [95] Despite the lack of definitive evidence that the proposed scale is actuarially justified, motorcycles, unlike other miscellaneous vehicles, are used in a manner like private passenger automobiles. That is, they are used for commuting, pleasure use, and driving on the same roads and, and least in the summer, the same road conditions. If the

21 -21 - private passenger vehicle surcharges are appropriate for automobiles, then it can be concluded that harmonizing the surcharges is reasonable. [96] Given that very few insureds will be subject to the surcharges because of the tight guidelines for accepting such motorcycle risks, Board staff recommend approval of the change in the surcharge schedule, as filed. However, it is recommended that the Board require CGIC, in its next filing for motorcycles, to outline its experience under the new schedule and to provide evidence from a broader experience base (perhaps all provinces) of the appropriateness of the new motorcycle surcharge schedule. [97] COSECO and CUMIS will use the same surcharge schedule for at-fault accidents, but will not use the same method to record accidents and convictions on the driving record due to systems limitations. [98] The Board approves the change in surcharge as filed and requires CGIC to file its experience under the new schedule with the next mandatory application. Premium Dislocation Cap [99] CGIC proposes the introduction of a 15% premium dislocation cap that will apply at the vehicle level. The cap will apply only to premium increases. [100] CGIC explains that the capping will only be in effect until the client reaches the correct premium. There is no sunset clause for the capping. The Company estimates that, on average, risks will be capped in less than two years. [101] CGIC indicates that the proposed cap moves the impact of the changes from an overall decrease of 2.7% to an overall decrease of 6.8%.

22 -22- [102] The Company has supported its decision to mitigate the impact of its proposed changes via a premium dislocation cap. Board staff recommend the approval of the proposed cap for CGIC, as filed. [103] The cap will not apply to COSECO or CUMIS. When asked why, CGIC explained a cap would delay getting COSECO and CUMIS risks aligned or harmonized with CGIC. Because the number of insurance contracts for COSECO and CUMIS are very small, CGIC further explained, there will be fewer insureds impacted by the rate change. [104] The Board approves the premium dislocation cap as filed. Rate Manual Review [105] The Companies provided revised Automobile Insurance Manual pages to reflect the proposed changes. Board staff have reviewed the proposed Automobile Insurance Manuals on file and found no instances where the Company is in violation of the Regulations. IV FINDINGS [106] The Board finds that the Applications comply with the Act and Regulations, as well as the Rate Filing Requirements. [107] The financial information submitted by the Company satisfies the Board, pursuant to Section 1551(1 )(c) of the Act, that the proposed changes are unlikely to impair the solvency of the Companies. [108] The Board finds the proposed rates are just and reasonable.

23 -23- [109] The Applications included full actuarial indications and the required territorial analysis; therefore, they qualify to set the new mandatory filing date for motorcycles for the Companies to October 1, [110] The Board approves the effective dates for CGIC of April 18, 2018, for new business and May 18, 2018, for renewal business. The Board also approves, for COSECO and CUMIS, the effective date of May 1,2018, for new and renewal business. [111] The Companies are required to file an electronic version of its updated Automobile Insurance Manual within 30 days of the issuance of the Order in this matter. [112] An Order will issue accordingly. DATED at Halifax, Nova Scotia, this 1st day of December, ' :T />' ^ ---- ~ ' -' 'O Murray E. Doehler