ERICA M. HAMILTON COMMISSION SECRETARY Commission.Secretary@bcuc.com web site: http://www.bcuc.com SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, BC CANADA V6Z 2N3 TELEPHONE: (604) 660‐4700 BC TOLL FREE: 1‐800‐663‐1385 FACSIMILE: (604) 660‐1102 Log No. 33783 VIA EMAIL June 14, 2010 ICBC – 2010 REVENUE REQUIREMENTS EXHIBIT A‐3 TO: Registered Interveners (ICBC‐RR‐RI) Re: Insurance Corporation of British Columbia Project No. 3698599/Order G‐85‐10 2010 Revenue Requirements Application On Thursday, June 10, 2010, the Commission emailed to the Insurance Corporation of British Columbia the enclosed Matters of Interest in respect of further commentary at the upcoming Review Working Session. Yours truly, Original signed by: Erica M. Hamilton CMcM/dg Enclosure cc: Ms. June Elder, Manager Regulatory Affairs Insurance Corporation of British Columbia june.elder@icbc.com, regaffairs@icbc.com; donnie.wing@icbc.com ICBC‐2010 Revenue Requirements/A‐3_Matters of Interest ICBC’s 2010 Streamlined Revenue Requirements Application BCUC Matters of Interest relating to the June 17, 2010 Workshop •
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Given that developing losses using traditional actuarial methodologies is a subjective exercise, please demonstrate via a claims run‐off exhibit by coverage how accurate the previous ultimate loss estimates have been at successive valuations. How are the following items that would be expected to reduce the claims trends for 2010, factored into the trend analysis: tougher legislation for drinking driving expanded intersection cameras, DRP penalties to discourage bad driving, Sea to Sky highway improvements, the Canada Line, Road Safety MOU, Distracted Driving Programs and enhanced driver licensing security measures? Please provide additional discussion relating to the prospective loss adjustment for Intersection Safety Camera (ISC) savings, specifically covering the following issues: rationale for crash sites being lower for new sites than existing sites, support for the average cost per crash forecasts, weather the frequency reduction estimates are based on the initial cohort of sites and if so to please provide progression of historical frequency rates. Please provide rationale for category percentages selected for the HST prospective adjustment. How has the trend to warmer winters been factored into the trend analysis? •
For any changes or after the fact modifications that have been made to the trend analysis please provide and explanation of why the changes were made. •
Please provide additional concrete analysis to support that the trend analyses are not conservative but are aimed to provide an unbiased "best estimate" of costs and revenues. Is possible to incorporate into the trend analysis an estimate of a factor with no historical data points. If yes, how does ICBC make these types of estimates? Please provide additional information, not included in Chapter 6, on measures to moderate BI court award. •
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Premiums: Retrospective rating adjustments were previously implicitly included in historical and projected premium amounts. What impact does the previous methodology have on the indication? Premiums: Please discuss the average premium model for Trailers of low R² value of 76% which suggests a poor fit to the model. •
Exposure: Given that personal exposure is forecasted by summing the modeled exposure for the underlying business segments, is it ICBC’s opinion that individual business segment models for personal exposure have better fit (R² and F‐statistic values)? Additional details on individual business segment models and their fit statistics, including significance tests for explanatory variables (T‐scores) would be helpful. For Loss and Expenses please provide additional information on: • ULAE percentages being selected on a 3 year average when a 2 year average was used previously. • The origin of the exposure growth rate used in the Basic Commercial Per‐Policy Broker Fees • It appears that for certain business segments the personal and commercial split of data for frequency and severity modeling has resulted in a much lower “fit” to frequency and severity models than in previous filings. Please elaborate on the following: • the option of combining personal and commercial data for business segments where there is insufficient data to produce meaningful econometric models or where models selected produce lower R² values than when combined data is used • how combined personal and commercial models change current frequency and severity estimates and ultimately the final indications. • the use of back testing on the models selected? • the significance levels of coefficients for the econometric models (T‐scores). •
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Given the size of the MCT, would it be reasonable to discontinue the provision for maintaining MCT until MCT falls to more reasonable levels? Is there anything in the government directives or Commission decisions which would preclude the Commission from reducing or eliminating the provision for maintaining the MCT in 2010? How much is that provision? In ICBC’s Quarterly Report filed with the BCUC on May 28th the Year‐End outlook (December 31, 2010) estimates the MCT to be 168.5%. Please provide a discussion on what ICBC expects the MCT to be at the end of either PY 2010 or December 31, 2011, including a details on how the ‐1.9% rate reduction applied for is expected to slow down the growth in the MCT as experienced since 2006 when it was 121%.