Discriminatory Bias in Rates Charged by the Canadian Automobile Insurance Industry

Abstract

Automobile insurance rates in Canada are promulgated by the Canadian Underwriters' Association (the C.U.A.) and all member companies are bound to adhere to them. Other rate schedules are set out by the Independent Automobile Insurers' Conference and by the Independents, but these usually conform very closely to the C.U.A. rates, so that the C.U.A. rate manual actually provides the basis for all automobile insurance premiums in Canada [2]. Consequently, the question of whether the C.U.A. rate-making procedure yields premiums which accurately reflect risks is interesting. In this study, the determining features of the C.U.A. approach are applied to situations in which risks are known. Comparison of C.U.A. rates with actual risks then yields an assessment of the validity of the C.U.A. procedure.