CLEAR - Canadian Loss Experience Automobile Rating

What is CLEAR?

There are a number of factors used to determine how much your auto insurance will cost, including, for example, where you live, your driving record and the type of car you drive. To determine what effect the specific type of car you drive will have on your insurance premiums, insurers use the Canadian Loss Experience Automobile Rating (CLEAR) system to assess how likely it is that that type of car will be involved in a claim, and what that claim is likely to cost.

Based on insurance claims data, CLEAR offers an accurate and credible assessment of the expected and actual claims loss experience for each make, model and model-year of car. Simply put, every model of car and light truck for every model-year is grouped according to assessed risk – expected claims frequency and cost, and the likelihood the vehicle will be stolen. The higher the CLEAR number, the higher the risk.

The concept behind the CLEAR system is simple:

• Lower Claims Risk = Lower Rates
• Higher Claims Risk = Higher Rates

Before CLEAR

Previously, insurers had only the manufacturer’s suggested retail price (MSRP) and some very basic information about vehicle damageability and repairability to assess the type of car when determining premiums. That is, vehicles with similar MSRPs would be classified into the same rate group and result in equivalent insurance premiums. Generally, the greater a vehicle’s MSRP, the higher the premium charged.

The MSRP-based rating system resulted in a number of inequities, because it ignored facts such as:

• Most Collision claims result in repair rather than replacement of the vehicle, and vehicle price is not the only predictor of repair costs.
• The added costs of features like anti-lock brakes, airbags, and theft deterrent systems, which lower the likelihood of claims and/or claim costs, shouldn’t necessarily result in higher premiums.
• Vehicle price, by itself, is not always the best predictor of either claim frequency (i.e., likelihood of being involved in a claim), or severity (i.e., average claim cost).
• Vehicles do not all depreciate at the same rate.
• Vehicles may exhibit different track records for different types of claims.

Why CLEAR is good and fair

CLEAR allows vehicle insurers to predict future claims more accurately and fairly and reward vehicle owners for buying vehicles that experience fewer claims and smaller losses.
One vehicle, for example, may have anti-lock brakes, dual airbags, side-impact door reinforcements, anti-theft devices and premium tires. Of course, such a car will cost more than a similar vehicle with fewer loss-prevention features. But, it would be unfair to charge a higher insurance premium for the vehicle that is better designed and equipped.

Data sources and adjustments

CLEAR uses insurance claims data to accurately and credibly reflect the expected and actual claims experience of each make, model and model-year of vehicle. All rate groups are updated annually to reflect such factors as aging and experiential changes. The methodology is described here.

The data are provided by IBC, le Groupement des assureurs automobiles (GAA), the Insurance Corporation of British Columbia (ICBC), the Manitoba Public Insurance Corporation (MPIC), Saskatchewan Government Insurance (SGI), and Société de l’assurance automobile du Québec (SAAQ). After being checked for consistency, the data are normalized (i.e., mathematically adjusted) to eliminate influences that are not directly linked to the vehicles. Information about vehicle characteristics is obtained directly from automobile manufacturers and importers.

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