1
Q
What is “Going Forward 2” (GF2)?
A
Risk management programs to help producers manage income volatility from market conditions, weather related events and natural perilsAgricultural
2
Q
What are the six programs of GF2?
A
- AgriInsurance2. AgriStability3. AgriInvest4. AgriRecovery5. Western Livestock Price Insurance6. Advance Payments ProgramAgricultural
3
Q
What’s the purpose of AgriInsurance?
A
Protect against production losses.Guarantees a predetermined level of production.Agricultural
4
Q
What’s the purpose of AgriStability?
A
Pays when production declines more than 30% from historical margin.Pays out 0.7 * (average year - current year)Agricultural
5
Q
What’s the purpose of AgriInvest?
A
Deposit matching program that allows producers to accumulate funds that can be used to manage income shortfalls or make investments to manage farm risks.Agricultural
6
Q
What’s AgriRecovery?
A
Disaster relief framework done on a case-by-case basis for natural disasters like disease, pests or weather related events.Federal and provincial govt funding only.Agricultural
7
Q
What’s Western Livestock Price Insurance Program?
A
Protects against unexpected price declines of livestock.Agricultural
8
Q
What’s Advance Payments Program?
A
Provides producers with access to short term low interest loans in order to improve cash flow management.Federal funding only.Agricultural
9
Q
What are some of the regulations surrounding GF2?
A
-coverage can’t exceed 90% of losses-premiums must be actuarially sound-certificate of an Actuary must be provided: -Probable yield methodologies -Premium rate methodologies -Assessments of self sustainabilityAgricultural
10
Q
Optional agricultural benefits?
A
NAME?
11
Q
What are five adjustments required for historical yields to reflect current production?
A
- changes in farming or mgmt practices2. changes in insurance program design3. trends in technology and genetic improvements4. changes in data sources5. variations in mix of insureds over time and across geographical regionsAgricultural
12
Q
Two requirements for an agricultural program to be considered self-sustainable?
A
- recover from the 95th percentile deficit, on average, within 15 years2. recover from the 95th percentile deficit, with 80% probability, within 25 yearsAgricultural
13
Q
Which coverages does GRID apply to?
A
Basic coverages (TPL and AB).Alberta
14
Q
What happens if a driver has an at fault accident on the GRID scale?
A
The driver moves 5 steps up the grid.Alberta
15
Q
What happens if a driver gains an additional year of experience in Alberta re: GRID?
A
The driver moves one step down the GRID range and receives an additional -5% (up to a max of 50%).Alberta
16
Q
Workers with asbestos-related injuries used to be compensated through workers comp. What changed?
A
In 1973, plaintiffs were successful in holding the manufacturing companies strictly liable for failure to warn of unreasonably dangerous product.AAA Mass Tort
17
Q
What are four features of asbestos litigation?
A
- Plaintiff groups: combine several defendants resulting in complex and expensive cases.2. Forum shopping: filing claims in perceived pro-plaintiff jurisdictions3. Multiple Defendant cases: workers worked with numerous asbestos-containing products during careers so name multiple defendants.4. Peripheral defendants: some states have jointly and severally liable so peripheral defendants now bear majority of the costs.AAA Mass Torts
18
Q
What are three asbestos trends/conclusions identified in RAND study?
A
- claims filed annually increased sharply in the mid to late 1990s2. nonmalignant injuries account for most of the growth3. asbestos litigation is inefficient (42% goes to plaintiffs)4. defense costs may rise because of: -more complex suits -defendants are abandoning settlement strategies -coverage disputes with insurers and reinsurersAAA Mass Torts
19
Q
What’s the concern for non-seriously injured and unimpaired asbestos claimants?
A
- if they don’t proceed with a lawsuit today, compensation may be depleted from claims happening now-future health uncertainty- continuing expenses for ongoing medical monitoringAAA Mass Torts
20
Q
What’s the concern for plaintiff’s attorneys re: asbestos claims?
A
NAME?
21
Q
What are the primary concerns for peripheral asbestos defendants?
A
NAME?
22
Q
What is an example of a federal asbestos reform and what are the concerns around it? Who funds it?
A
FAIR Act: proposed to establish no-fault trust fund which claimants meeting asbestos exposure and medical criteria get compensation.Funded by corporate defendants, insurers, and existing bankruptcy trusts.Concerns:-How many claims will be filed?-Is funding adequate?-Should the federal govt contribute?-Will it be operated efficiently?AAA Mass Torts
23
Q
What are three state level reforms re: asbestos?
A
- inactive dockets and pleural registries to preserve the right of those who don’t currently meet specific medical criteria to pursue litigation in the future2. medical criteria statues3. restrictions of case consolidation and venue rulesAAA Mass Torts
24
Q
What are two uses of credit score?
A
- rating2. underwritingAAA Credit Scores
25
What's joint and several liability? What are the pros?
Allows the plaintiff to recover damages from multiple defendants collectively or from each defendant individually.Increases efficiency in legal system.ATRA
26
What are the suggested reforms from ATRA?
1. repeal in favour of rule of proportionate liability (based on fault)2. bar application of joint and several liability for non-economic damages3. bar recovery from defendants who are less than a certain percentage at faultATRA
27
What's the collateral source rule?
Evidence may not be admitted at trial to show that plaintiff's losses have been compensated by other sources.Allows for double dipping.ATRA
28
What are punitive damages? What are the issues around them?
Used to punish the defendant for intentional or malicious actions and to deter future similar conduct.Issues: -frequency and size has greatly increased-difficulty prediction whether punitive damages will be awardedATRA
29
What are the reforms ATRA suggests for punitive damages?
1. est liability trigger based on actual malice2. require clear and convincing evidence3. requiring proportionality awards4. enact federal legislation to address problem of multiple punitive damage awardsATRA
30
What's wrong with the current appeal bond? What does ATRA suggest?
When appealing a verdict, have to post an appeal bond (sometimes equal to 105% of the verdict) and it can force bankruptcy.ATRA suggests an appeal bond waiver that limits the size of appeal bond when company is not liquidating its assets or attempting to flee.ATRA
31
What are the reforms ATRA suggests to address jury services?
1. eliminating occupational exemptions2. ensure only those who experience true hardship are excused3. establishing trial fund to pay jurors who serve long civil trials4. providing jurors flexibility in scheduling their service and limit time at court per dayATRA
32
What are the four main types of insurers?
1. individual underwriters: does not act as an insurer or have any liability on the policies issued2. joint stock companies: for profit, controlled by board3. mutual insurance companies4. reciprocal organizations: orgs that have joined together for the exchange of insurance. Issues no policies itself but no participant can take out insurance unless he offers it in return. Members are individually liable.Baer
33
What are the three classes under individual underwriters?
1. Underwriting members: allowed to accept risks on own account2. Subscribers: act as brokers on behalf of public and place risks with underwriting members3. Associates: lawyers, claim adjusters, and others who perform services for members and subscribers.Baer
34
How do rating bureaus help prevent insurance companies from becoming too competitive?
1. Use IBC to gather statistics and advise companies about future premium rates2. Authorized to fix the terms/conditions of insurance contracts (ie: insurers can't compete on contract)Baer
35
What are the five objectives of IBC?
1. discuss general insurance2. collect and analyze statistical info3. study legislation4. research and pilot programs to provide service for public5. promote better public understanding of insuranceBaer
36
What are the 5 main focuses of Canadian Insurance?
1. Solvency2. Canadianization3. Government revenue4. Regulating the Contract: promote marketing integrity and improve insurance contract5. Direct control over marketing practices: promote honesty and competence of insurance intermediariesBaer
37
What are the three reasons for strict financial regulation of canadian insurance?
1. bankruptcies in 1860s and 1870s shook public confidence2. legislators believed short term price competition is not in public's best interest3. manage large pools of pre-paid premiums Baer
38
How does the Canadian insurance industry promote solvency?
1. controlling the creation of domestic insurers and licensing of foreign insurers2. limiting the types of investments insurers could make3. providing periodic filing of financial info4. giving a govt dept authority to ensure complianceBaer
39
What are the three levels of insurance regulation?
1. legislation2. regulation by lieutenant governor in council3. guidelines by the superintendent (favored because provides more flexibility and less likely to be misinterpreted by the courts)Baer
40
What's the role of the CCIR?
Encourage uniform practices in the industry through industry-wide rules and common teaching and testing materials for insurance agents.Work closely with Superintendent and industry.Baer
41
What's an indemnity contract?
Where amount receivable is measured by extent of pecuniary loss.Baer
42
Describe the Glynn v. Scottish Union case.
Gylnn and wife got in accident as a result of negligence by Sutherland. Gylnn got settlement from Sutherland and also managed to get insurer to pay for medical expenses (double recovery).Insurer appeals because contract was one of indemnity and therefore shouldn't be about to double-dip.Verdict: indemnity contract so subrogation allowed and insurer wins.Baer
43
Describe Regal Filmns v. Glens Falls case.
Insurance policy protecting against fire, lightning, wind, etc but titled "inland marine policy". Policyholder made fire claim but it was resisted because proof not provided in 60 days. Under Part IV of Insurance Act, proof must be made as soon as "practical" but insurer doesn't believe falls under Part IV because it's an inland marine policy.Policy doesn't specify the loss has to be caused by "incident to marine adventure" so plaintiff wins.Baer
44
What are the four ways to handle multiple recovery situations?
1. Election: person decides if wants to collect money from wrongdoer or collateral source2. Cumulation: can collect from both sources3. Reimbursement: insurance is second player4. Relieving the Tortfeasor: wrongdoer has to pay what insurance doesn't (insurance is first payer)Baer
45
Which recovery methods prevent double recovery?
#NAME?
46
Describe the Fletcher v. MPI case
Both people suffered severe injuries but had not purchased underinsured motorist but thought had purchased maximum coverage. Verdict: plaintiffs awarded damages as defendants were found negligent.Baer
47
What are three criteria to determine if there's a duty of care?
1. reliance2. reasonableness of reliance3. was the reliance expected?Baer
48
Provide three reasons why government agents have less duty to advise than private company.
1. employees not specialists in risk advice2. employees don't have to be licensed as agents3. private company agents provide info AND advice, public just provide infoBaer
49
Describe the Broadhurts & Ball v. American Home case.
Broadhurts & Ball had primary liability policy with American home and excess policy with Guardian.B&B sued.American Home acknowledged obligation to defend but Guardian denied duty because accused B&B of knowing about lawsuit when bought coverage.Verdict: American Home and Guardian to equally share defense costs b/c both have duty and can create the best defense together.Baer
50
Describe the Dillon v. Guardian case.
Dillon hit five year old with his car and sued for $100,000. Policy limit was $50,000.Counsel said could settle for 45 or 46 but decided to go to trial where Dillon owed 80. Dillon sued Guardian for remaining costs.Verdict: Dillon wins. If given opportunity to settle in policy limits, must take risk on themselves if decide not to take it {absolute liability}Baer
51
What's a "reporting professional"?
The person using the work of the otherCIA CSOP
52
What's a "specialist professional"?
The person who's work is being usedCIA CSOP
53
Describe the details in the case with Hughes and BC Credit.
Hughes was insured with Federated and he found out that Economical had sought his credit info prior to his renewal.He did not give consent .Economical ordered to provide all home insurance policyholders notice that credit score may be obtained for assessing future risk and had to review consent forms.Economical challenged delegate's order b/c would impose hardship and cost on BC brokers.Separate case (Goepel) forced Economical to provide notice about credit scores.CIA CSOP
54
What are the five reasons to have government participation in Insurance?
1. Filing Insurance Needs Unmet by Private Insurance: unmet due to affordability or availability -govt can subsidize with taxes2. Compulsory Purchase of Insurance: mandatory to meet social responsibility -govt may operate as "take all comers" in competition with private insurers3. Convenience: easier for govt to set up program quickly than private market4. Efficiency: belief they can operate at lower cost than private market5. Social Purpose: **main reason** -ex: building codes/zoning could require private insurers to offer flood to new construction but govt would still be required for old flood prone areasCAS
55
What are the three ways government can be involved in insurance?
1. exclusive insurer (social security)2. partnership with private insurers (flood, terrorism)3. competition with private insurers (workers comp)CAS
56
What are three criteria for evaluating performance of government insurance programs?
1. Is it necessary or does it achieve a social purpose that can't be provided by private insurance?2. Is it social welfare or insurance? Social welfare has benefits based on demonstrable need and is funded by tax resources. Insurance is paid to all who suffer loss and is funded by premiums.3. Is the program efficient? Accepted by the public?CAS
57
Why are caps on non-pecuniary or general damages necessary?
1. claims of severely injured can be limitless2. non compensatory because no money can provide true restitution but goal to make life more endurable3. plaintiff will be fully compensated for future loss of income and care costs4. exorbitant awards can produce unaffordable increases in insurance and social costsDavidson
58
What case has gone above the trilogy cap for non-pecuniary loss?
Fenn v. City of PeterboroughPlaintiff was awarded $125,000. Decision was not appealed so Supreme Court was not given the option to comment.Davidson
59
What did we learn from Lindal v. Lindal case? (trilogy...hint)
Awards are not compensatory so it's not fair to compare injuries of different plaintiffs.Cap should be indexed for inflation.Davidson
60
What was argued in the Lee v. Dawson case?
Cap discriminates against seriously injured victims of negligence who do not receive full compensation compared to other injured victims.Court's response is that general damages are not meant to be fully compensated. Compensation should not depend on seriousness of injury but to make life more bearable.Davidson
61
What are the arguments against the cap on general damages?
1. language used was "rough upper limit" not rule of law2. sky-rocketing awards have proven to be false3. upper limit disregards the importance of having a jury4. cap inconsistent with modern community values5. cap is arbitrary and lacking logical foundation6. cap doesn't allow for keeping up with pace of social, economic, and technological change in societyDavidson
62
What types of cases does the cap on non-pecuniary damages not apply to?
1. sexual assault cases2.defamation3. cases of negligence causing catastrophic personal injuriesDavidson
63
What are one of the issues with the cap on non-pecuniary damages?
Tends to overcompensate people with temporary or less severe injuries and under compensate those with permanent or more severe injuries.Davidson
64
What's the leading cause of insurance company failure in Canada?
Inadequate pricing and deficient loss reserves.Dibra
65
What's the definition of insolvency?
Involuntary exit from the market as a result of a winding-up order issued by the appropriate supervisory authority.Dibra
66
What are the two types of risks that can lead up to involuntarily exiting a market?
1. Insolvency Risk: assets become insufficient to meet contractual and other financial obligations.2. Liquidity Risk: sufficient assets to over obligations but high risk that assets could disappear.Dibra
67
What are the characteristics of insolvent companies in Canada?
1. size (low asset value)2. ownership (branches of failed parents)3. age (newer companies more likely to fail)4. rapid growth (sudden growth in premiums)Dibra
68
What are four types of insolvency costs?
1. policyholders lose UEP2. claims not paid in full3. costs incurred by regulators, agents, reinsurers4. lost wages, commissions, taxesDibra
69
How does the treatment of liquidation dividends differ from Canada and the US/UK?
In the US and UK, dividends are used to reduce current and future assessment needs but in Canada, PACICC returns liquidation dividends to solvent members of the industry.Dibra
70
What are four external factors influencing solvency?
1. Underwriting cycle and profitability (high correlation between soft U/W cycle and insolvencies)2. Catastrophe losses3. Economic and Financial Market Factors (key issue is not level of financial variables but volatility)4. International ExposuresDibra
71
What are the benefits to international exposure?
1. increased competition2. greater diversification3. access to international sources of capitalDibra
72
What are four company characteristics that play a role in most solvencies?
1. Governance & Internal Controls: financial reporting reduces risk, internal processes persist over time2. New Entrants: likelihood of survival increases with firm's age3. Growth: often rapid growth two years before insolvency (usually accompanied by deteriorating loss reserves)4. Firm size: insolent insurers usually small and therefore don't have great access to capitalDibra
73
What is the goal of Facility Association?
To ensure auto insurance is available for every owner and licensed driver who needs it to legally operate their vehicles.Dutil
74
Who's members of Facility Association?
All licensed insurersDutil
75
Which provinces do not have FA?
BC, MB, SK and QBDutil
76
What are the three types of mechanisms administrated by Facility Association?
Facility Association _________________l______________ l l lResidual Risk Sharing Uninsured AutomobileMarket Pools Funds(FARM)Dutil
77
What is FARM (Facility Association Residual Market)?
Residual market for personal and commercial autos who may encounter an availability problem.Dutil
78
How does FARM work?
Contracted Service Carriers issue and administrate policies and adjust claims.All policies must follow FA rates, rules, and classes which require provincial approval.Policyholder is aware of assignment.Dutil
79
What are the requirements to place a risk with FARM?
#NAME?
80
How are the results of FARM handled?
Pooled among all licensed insurers based on participation ratios.Dutil
81
Describe Risk Sharing Pools
Allows insurers to transfer certain exposures to industry-wide pools.Risks don't qualify for FARM but are higher risk.Policyholders and brokers are unaware of assignment.Financial results are pooled among all licensed insurers.Companies administrate own policies according to own rates and rules.Dutil
82
Describe Uninsured Automobile Funds.
Provides compensation when unable to have damages paid because no other insurance is available or it's inadequate.Dutil
83
What are the requirements to transfer risks to Risk Sharing Pools?
#NAME?
84
What are the unique details about Ontario Risk Sharing Pools?
Only covers 85% of every risk transferred.Can transfer up to 5% non-fleet PPA WE Dutil
85
What's unique to Alberta Risk Sharing Pool?
No limit to number of GRID policies that can be transferred.Limited to 4% non-fleet PPA WE.Dutil
86
What's unique to NB First Chance Risk Sharing Pool?
Covers exposures with at least one driver who receives the "First Chance" discount.Limited to 8% of non-fleet PPA WE.Dutil
87
What's unique to NS Risk Sharing Pool?
Covers exposures with at least one driver with less than six years of driving experience and no accidents or convictions.No limit on risk transfer.Dutil
88
What was the goal of the 2010 FSCO reforms?
To increase options for customers.FSCO
89
What are some of the changes in the 2010 FSCO reforms?
#NAME?
90
What are the conditions requiring monthly payment options in ONT?
-insurer has > 10,000 PPA in ONT-contract doesn't insure a commercial or public vehicle-contract doesn't insure 5+ vehicles under common ownership-annual premium payable >$300-at most one auto policy terminated by an insurer for non-payments during the pa
91
What are the rules around monthly payments in ONT?
-insurer may require initial payment of two monthly installments-pre-authorized payments from a financial institution-max interest is 3% if 12+ month policy, 1.5% for 6-12 month policies, and 0.5% for
92
If an insurer extends a settlement to the insured, the disclosure notice must include the following (FSCO rules)
1. insurer's offer2. description of benefits available under Statutory Accident Benefits Schedule3. statement that the insured may rescind the settlement within 2 business days of signing4. Consequences of the settlement (tax implications, insured's right to litigate, mediate, and appeal)5. Statement advising the insured to seek independent legal, medical and financial advice6. Statement for signature by the insured acknowledging the disclosure noticeFSCO
93
What qualifies for an expedited rate approval in ONT?
-rate change for PPA only-cumulative rate change for all coverages is less than or equal to 0-territorial rate changes for each coverage must be within +/-5% on the ON average change-no change to rating algorithm, differentials, discounts, or surcharges-n
94
What are some examples of things insurers are not allowed to rate on in ONT?
-occupation-level of income (employment history, credit information/history/rating, residence, bankruptcy history, net worth)-other health insurance or sick leave plan-not-at-fault claimsFSCO
95
What is a Group Marketing Plan (GMP)?
An arrangement made in writing between an insurer and a sponsor to market automobile insurance to members of an organized group.FSCO
96
What are some examples of an organized group that qualifies for a Group Marketing Plan in ONT?
#NAME?
97
Even though UBI is not necessarily driving behavior about an identifiable individual, FSCO believes the data should be treated _______?
As personal informationFSCO UBI
98
What are the requirements for a UBIP program in ONT?
must:-be voluntary-have expressed, informed consent (should not require consent for use of the information beyond that required in the UBIP)-provide adequate customer service support to provide mechanisms, procedures or forums for policyholders to question, discuss or challenge any issue or disagreement with the data collected by the devices-impact that a consumer's driving data has on premium must be clearly articulatedFSCO UBI
99
What types of information must be given to the driver about how the premium is calculated in a UBIP program in ONT?
#NAME?
100
How should the costs of a UBIP program be handled?
They should be covered by the insurance company (costs include cost of device, installation, ongoing costs of operation or maintenance).FSCO UBI
101
What must be included in filing a UBIP program with FSCO?
-which consumer behaviours are being measured?-how is the data measured (frequency, occurrence, thresholds)?-how this data is normalized and categorized for rating purposes (total occurrences, averaged)?-all relevant claim and loss data that supports the
102
What are the general data considerations with UBIP programs in ONT?
-accuracy (have to process to deal with inaccuracies in a timely manner)-security-storage (anonymize personal data when no longer needed for business need)FSCO UBI
103
What's unique about Canada's tort situation compared to other countries?
Few provinces have considered tort reforms.Harris
104
What's the industry's opinion about tort reforms in Canada?
Long overdue and necessary to produce stable and predictable marketsHarris
105
What are trial lawyers' opinions about tort reforms in Canada?
See less of an issue than in the US and are opposed to reforms. Think the changes will prevent full compensation to innocent injured parties.Harris
106
What are some areas in which tort reform is sought in Canada?
#NAME?
107
Damages are currently paid based on gross income. Why does Harris believe there should be a reform for this?
#NAME?
108
What are IBC's guidelines in regards to credit scoring?
1. comply with provincial laws2. ensure that credit information used is current and accurate3. gather prior consent to collect and use credit information4. keep credit info confidential and private5. use of credit as a sole variable6. legitimate uses of credit information are pricing, underwriting or financial7. handle complaints in accordance with federal and provincial laws8. can't refuse to quote or provide coverage if someone refuses to give consent9. extraordinary life events must be considered (re-rate if exception is approved)IBC
109
Give 5 examples of things insurers aren't allowed to include in credit scoring models according to IBC?
1. inquires by the customer for own credit info2. inquires relating to insurance3. income, gender, address, ethnicity, religion, marital status, nationality4. multiple lender inquires for the mortgage or auto lending industry made within 30 days of one another, unless only one is considered5. factors expressly prohibited in provincial regulationIBC
110
What are the 5 key elements to include in a consent request?
1. authorization to collect information from consumer reporting agencies2. nature of the information sought3. what it will be used for4. consent use period5. right to withdraw and consequencesIBC
111
Describe liability insurance and the basic philosophy behind it.
-eye for an eye-doesn't distinguish between wrongdoer by degree of wilfulness in their actions but only with level of damage caused-insurer must also defend claims made against its policyholders = delayed claims for past damages-adversarial nature, it att
112
Describe the basic philosophy behind injury insurance.
-based on social view that injured people should be assisted and compensated without regard to who may have caused the injury-largely a first party compensation system that depends on the existence of an insurance product (compensated by own insurer regar
113
Describe combined injury and liability insurance (threshold).
-some jurisdictions have "choice" plans where can pick to purchase primarily liability based or injury based policies-BC has bulk of coverage provided by liability and limited add-on injury benefits provided regardless of fault-threshold can be defined in
114
Which insurance system (liability or injury) allows double dipping?
LiabilityKPMG
115
What are the drawbacks to an insurer being the second payer under injury insurance?
1. may limit insurer's ability to manage medical care etc. to promote optimal recovery until after first payer resources are exhausted2. difficult to obtain complete data for studying costs and pricingKPMG
116
Does injury insurance pay on net or gross wages? What %?
80%-90% of net wagesKPMG
117
Does liability insurance compensate based on net or gross wages? What %?
100% gross earnings because paid in lump sum...idea that 100% gross wages is a replacement for grossing up the award to compensate for future taxes on wages loss portionKPMG
118
Why are structured settlements encouraged?
If you take the lump sum, you are penalized and will suffer the impact of income tax on investment income. Better for society because insureds can't squander lump sum payments and become a burden on society.KPMG
119
What are the six basic design requirments of auto insurance?
1.Equitable & Fair Benefits – equitable benefits in size and allocation-Provided only for legitimate losses-Seriously injured receive priority allocation of benefits-Victims and wrongdoers are treated fairly, but differently2. Affordable & Sustainable Coverage – ensure premiums are affordable and system remains stable-Costs and trends are predictable, monitored, and manageable-External costs imposed on society are minimized and controlled-Measures taken to contain premium increases close to cost of living increase3. Adequate Benefits – benefits adequate to meet needs of injured people-Recovery and economic needs of injured people are met to a socially acceptable level-Benefits reflect the losses experienced by individualscoverages and benefits are adequate and comprehensive and have choices available-Large % of premium is returned to claimants as benefits4. Personal Responsibility – ensure personal responsibility of driving behavior is promoted-Individuals causing accidents and personal injury suffer consequences-Moral values are advanced to prevent abuse of the system5. Promotion of Wellness – insurance should promote the well-being of injured people-design, distribution, etc. of benefits emphasizes speedy recovery, rehab, long term care if needed, optimum resuming of normal life6. Customer Service Orientation – ensure product and services are customer oriented-Individual rights as well as the process itself are coherent and comprehensible-Dispute resolution is efficient, independent, and credible.-Benefit delivery system is fast and efficient and provided in certain, predictable mannerKPMG
120
What do the six basic design requirments of auto insurance try to create?
1. security2. restitution3. preventionKPMG
121
What are the four objectives of P&C regulations according to the institute?
1. maintain insurer solvency2. protect insurance consumers3. ensure availability of coverage4. regulate insurance ratesKPMG
122
What are the four objectives of insurance regulation according to McKinsey & Company?
1, safety and soundness2. fair treatment of customers3. efficiency4. international competitivenessKPMG
123
What are the three rules of rates?
#NAME?
124
What are the different types of rate regulation systems in Canada?
1. Government Mandated Rates2. Prior Approval3. File and Use4. Use and File5. Flex Rating: if rate change falls within a specified range, do not require prior approval but may be subject to file and use, use and file, or file only6. File Only7. Open CompetitionKPMG
125
What type of insurance regulation does BC have?
Government mandated and open competitionKPMG
126
What type of insurance regulation does MB have?
Government mandated and open competitionKPMG
127
What type of insurance regulation does NB have?
File and Use (or Prior Approval according to NBIB)-have to file every 12 monthsKPMG
128
What type of insurance regulation does NFL have?
Prior approval and file and use (for decreases)KPMG
129
What type of insurance regulation does NS have?
Prior Approval-required to file every two years for PPA and every three years for commercial and miscKPMG
130
What type of insurance regulation does ONT have?
Prior Approval and File and UseKPMG
131
What are the requirements for a simplified filing in ONT?
-on an all coverage basis, proposed rate level change is less than or equal to 0%-any territorial base rate change is between -10% to 0%-changes to differentials must be between -10% and 0% with no off-balancing-can make changes to risk classification ele
132
What type of insurance regulation does PEI have?
File and UseKPMG
133
What type of insurance regulation does Quebec have?
Government mandated (bodily injury) and use and fileKPMG
134
What type of insurance regulation does SK have?
Government mandated (basic coverages) and open competition (optional or excess coverages)KPMG
135
What are some of the benefits of use and file over prior approval?
#NAME?
136
What type of insurance regulation does YK and NWT have?
Open CompetitionKPMG
137
PACICC asked KPMG to do a research report addressing about which three things?
1. Summary of current Canadian regulatory requirements of the actuary directed at solvency2. History of changes over the past 20-25 years in actuarial requirements as mandated by the CIA3. Effects of changes on solvency of Canadian insurersKPMG PACICC
138
How did KPMG conduct the survey for PACICC?
Asked regulators about: -DCAT requirements -requirement for actuarial report on adequacy of liab with annual return -requirement to follow MCT by OSFI -if actuarial external review (peer review) required for actuarial reports KPMG PACICC
139
Which government is responsible for the regulation of insurance companies in Canada?
Both federal and provincial governments share responsibility (Federal controls certain acts of all federally incorporated companies)KPMG PACICC
140
Who is responsible for the financial solvency supervision for federally regulated companies?
OSFIKPMG PACICC
141
What are the roles of provincial regulation and what's their responsibility?
#NAME?
142
What were the changes to the ICA as a result of failsures in the 80's and 90's?
1. surplus test provisions were strengthened by providing min (based on WP and IL)2. regulations to address excessive use of reinsurance3. actuarial certification for adequacy of all outstanding claims and UEP provisions4. duties of the AA were introduced (DCAT, valuations, etc)KPMG PACICC
143
In 1991 when the AA was introduced, what were the responsibilities outlined?
1. report on the value of actuarial and policy liabilities2. report on financial condition of the company and expected future financial condition3. report on any other material matters that effect the financial condition of the companyKPMG PACICC
144
What are three changes that occurred in the 2000s to actuarial practice or roles?
1. liabilities had time value of money taken into account2. OSFI implemented MCT3. AA reports were required to have external reviewKPMG PACICC
145
What is the Insurance Companies Act?
Defines the role of an actuary and is defined as an FCIA. Mandates the time frame of when the AA report must be completed and that they must follow generally accepted actuarial practices.KPMG PACICC
146
What are the expectations of an external reviewer?
#NAME?
147
What are the four purposes of stress testing?
1. risk identification and control2. providing a complementary risk perspective to other risk management tools3. supporting capital management4. improving liquidity managementKPMG PACICC
148
How was reinsurance reduce risk?
1. insurance risk2. volatility of financial results3. stabilize solvency4. make more efficient use of capitalKPMG PACICC
149
How does reinsurance increase risk?
1. operational risk2. legal risk3. counterparty risk4. liquidity riskKPMG PACICC
150
What are the central themes to US insurance regulation?
1. regular financial reporting2. safeguarding insurers' solvency3. ensuring fairness to consumersKPMG PACICC
151
Which state started US insurance regulation and what were the requirements?
Massachusetts in the charter Massachusetts Fire & Marine Insurance.Limited real estate holdings and required sworn financial statements from the company's management.Mayhall
152
Why was US regulation born at the state level?
Because very little in terms of resources or infrastructure at the federal level.Mayhall
153
Describe the Paul v. Virginia case.
US supreme court held that insurance was NOT commerce and therefore state regulation did not violate the 14th amendment. A NY agent's business in Virginia didn't constitute interstate commerce as the policies were mere local contracts, not real trade-able goods moving across state lines.Mayhall
154
Which case overturned Paul v Virginia ruling?
United States v. South-Eastern Underwriters Association. Supreme court found insurnace WAS subject to federal regulation under commerce clause and this opened the gates to widespread federal regulation and signalled demise of state.Mayhall
155
Why was the NAIC formed?
TO coordinate the different states activities and pool resources. Determined they should agree on uniform terminology and consider developing common reserving standards for life, fire and marine business.Mayhall
156
How did the US Congress respond to the United States v. South-Eastern Underwriters Association case?
Passed the McCarran-Ferguson Act that specifically provides that the regulation of insurance by the state is best. Mayhall
157
Describe the McCarran-Ferguson Act?
Provides that the regulation of insurance by the state is best and no federal law should invalidate, impair, or supersede any law of state government.Even with this act, federal regulation continues to encroach on state regulatory systems.Mayhall
158
What are three examples of US federal laws that apply to insurance?
1. Sherman Act (antitrust/competition law)2. Clayton Act 3. Federal Trade Commission ActMayhall
159
What are three examples of US federal measures encroaching on state insurance laws?
1. Federal HMO Act (sought to foster the creation of health maintenance organizations)2. Employee Retirement Income Security Act (est. standards for employee-benefit plans like health plans)3. Medicare+Choice programMayhall
160
What is Gramm-Leach-Bliley Financial Modernization Act?
minimum standards that state insurance laws had to meet or else face preemption by federal.Mayhall
161
What's Dodd-Frank?
Established Federal Insurance Office (FIO) which studies and collects industry info and drafts proposal for federal insurance regulatory framework.Mandates certain requirements for reinsurance credits.Establishes Financial Stability Oversight Council (FSOC) which monitors financial services markets to identify potential risks to the US financial stability.Mayhall
162
According to the British North American Act, what does the federal government have authority over?
1. regulation of trade and commerce2. taxation3. banking4. insolvency5. naturalization and aliens6. criminal lawMcDonald
163
According to the British North American Act, what does the provincial government have authority over?
1. incorporation of companies with provincial objects2. property and civil rights in the province3. generally all matters merely local or private in natureMcDonald
164
Describe the Citizen Ins vs Parson case.
Resulted because Ontario enacted The Fire Insurance Policy Act that required certain considerations be included in fire insurance policies. It was argued this was ultra vires because:-trade and commerce was federal jurisdiction-province can't legislate Privy Council interpreted trade and commerce to be BETWEEN provinces and therefore was intra vires.McDonald
165
What's the Privy Council?
Before the Supreme Court of Canada was created, this was the highest court to which cases could be appealed.McDonald
166
Describe the Insurance Reference Case.
The federal insurance Act had been enacted which required all insurance to obtain a license from the federal Government prior to carrying on any aspect of insurance in Canada. Found to be ultra vires by the Privy Council. Insurance company incorporated in one province could carry on business in another province without being regulated by the federal government (need permission from other province).McDonald
167
What are six examples of federally regulation of insurance duties?
1. financial soundness of federally incorporated and foreign companies **primary concern**2. solvency3. control over investments4. licensing of foreign insurers5. regular financial reports6. conditions for company to enter insuranceMcDonald
168
What are the provincial regulation of insurance duties re: contract matters?
1. contents of the insurance policy2. insurable interest3. payment of premiums4. designation of beneficiaries5. duty to discloseMcDonald
169
What are the provincial regulation of insurance duties re: transaction matters?
1. licensing of agents2. unfair practices3. claims processesMcDonald
170
Who's the head of the Office of the Superintendent of Finaicla Institutions Act? How do they get their role?
Appointed by the Governor General of Canada.Role is the Superintendent of Finaicla Institutions. McDonald
171
Which federal acts does the Office administer?
1. Insurance Companies Act2. Cooperative Credit Associations Act3. Trust & Loan Companies Act4. Bank Act5. Investment Companies ActMcDonald
172
How is the Office funded?
Superintendent determines expenses incurred by the Office and assigns those expense on a pro rata asis against those insurance companies that use the Acts (based on net premiums).McDonald
173
What were the impacts of the Insurance Companies Act?
1. broadened lending and investment powers of federally regulated companies2. gives insurers new power to diversify and allows flexibility to raise money by issuing shares/borrowing...leads to stronger insurers and better able to compete in international marketsMcDonald
174
What are the considerations to incorporate an insurance company under the Insurance Companies Act?
#NAME?
175
What are some of the requirements for foreign companies to be approved by the Super and Minister?
#NAME?
176
What are the three tiers of Canada's retirement income system?
1. Government administered pension programs a) Old Age Security (OAS) b) Canada Pension Plan (CPP) c)Guaranteed Income Supplement (GIS)2. Employer sponsored plans3. Individual retirement savingsShepell
177
What is Old Age Security?
Provides flat monthly benefits for Canadians 65+ who meet residency requirements.Universal (paid to everyone who qualified irrespective of income).Has "claw back" tax.Shepell
178
What are three amendments that OAS has had?
YBE frozen at $3500Max death benefit payout lowered from $3500-$2500Established the CPP Investment BoardShepell
179
True or Fales: OAS benefit may be portable with different countries that Canada has an agreement with.
TrueShepell
180
Is OAS pension taxable?
Yes, included as income for tax reasonsShepell
181
Describe the details of Guaranteed Income Supplement. Is it taxable?
#NAME?
182
Describe Allowance & Survivor's Allowance.
-provides for spouses/partners and windows of OAS pensioners receiving GIS (must be between 60 and 64 and must meet income test and residency test)-allowance ends upon separation, remarry or new common-law partnershipShepell
183
Describe the purpose of CPP.
Government sponsored plans designed to partially replace employment income in case of retirement, death, or disability.Compulsory and covers practically all employees and self-employed people.Goal is to provide 40% of pre-retirement income when comined with OAS (25% CPP, 15% OAS).Shepell
184
How is CPP funded?
50% employees, 50% employers (self employed contribute both portions)No government subsidyShepell
185
How are funds of CPP invested and by whom?
By CPP Investment Board and invested in government bonds and private assets.Shepell
186
What are the two main objectives of the CPP Investment Board?
1. manage funds in the best interests of contributors and beneficiaries under the CPP2. invest in assets with the best possible return without undue risk of loss (considering the factors that impact the CPP).Shepell
187
Are CPP benefits taxable income?
Yes.Employers contributions are tax deductible and employees receive a tax credit.Shepell
188
What's the employees contributions formula for CPP?
Employee Contribution = [min(Earnings, YMPE) - YBE] x Contribution RateShepell
189
Benefits usually begin at age 65 for CPP but what are the impacts of early/late retirement?
Between 60-65 Years Old: reduce pensions by 0.6%/monthBetween 65-70 Years Old: increase pension by 0.7% each monthShepell
190
What are some challenges with the rate adequacy of the CPP?
1. ageing population2. disability payments are higher than expected3. economic growth is less than expectedShepell
191
What are some of the changes to benefits due to ageing population?
-eligibility for AOS will gradually increase from 65 to 67-allowance/allowance for survivorship increasing from 60-64 and 62-66-can defer OAS pension up to five years to receive higher paymentShepell
192
What's the primary objective of Canadian health care policy?
to protect, promote and restore the physical and mental wellbeing of Canadians and to facilitate reasonable access to health services without financial or other barriers.Shepell
193
What are the conditions of a provincial health program?
1. public administration (non-profit basis)2. comprehensive3. universality (all residence must be covered)4. portability (from province to province)5. accessible (uniform conditions and terms with no deductibles)Shepell
194
Who funds health care?
Federally and provincial shared (with
195
Each province has their own method to cover costs not covered by the federal government for health care. Give four examples.
1. cost sharing between residents (pay premium based on income) and employers2. levy a payroll tax on employers3. general revenue4. taxation of group insurance plansShepell
196
Describe the purpose of Workers' Compensation.
Provides benefits to employees injured at work in a no-fault insurance manner, guarantees benefits and protects employers from being sued for negligence.Mandatory for all industrial occupations.Shepell
197
What are the two types of assessment basis for Workers' Comp?
1. Individual Liability: reflects actual costs of the organization (pay as you go)2. Collective Liability: employers divided into classes and rate groups according to business activity and inherent riskShepell
198
What are the two types of experience rating programs in Workers Comp?
1. Prospective: discounts and surcharges based on experience of past years2. Retrospective: assessment adjusted after the year has passedShepell
199
Is workers' comp contributions taxable? Benefits?
Employers' contributions are a tax deductible operating expense.Payments to employees are not taxed.Shepell
200
What's the objective of EI?
Provides temporary income replacement as a result of employment interruptions.Promotes active re-employment assistance to help unemployed workers find jobs.Shepell
201
What are the details of EI?
-payable to individuals unemployed due to loss of work through no fault of their own-must apply for suitable work and take training courses if asked-number of hours to qualify for unemployment benefit varies by unemployment rates-duration of benefit is ba
202
How are EI payments treated for tax purposes?
#NAME?
203
How are EI payments funded?
Financed by employee and employer contributions and general tax revenues.Shepell
204
What are the major categories of extended health care?
1. prescription drugs2. hospital accommodation3. medical services and supplies4. emergency out of province5. vision careShepell
205
Why are Extended Health Care costs rising?
#NAME?
206
What are three ways to deal with the rise of extended health care costs?
#NAME?
207
What is the purpose of OSFI's corporate governance?
communicate OSFI's expectations with respect to corporate governance of federally-regulated financial institutionsOSFI CG
208
FRFIs have different corporate governance practices depending on....
#NAME?
209
What is corporate governance?
Set of relationships between a company's management, its board, shareholders and other stakeholders.Provides structure for setting company objectives.Determines means of attaining objectives and monitoring performance.OSFI CG
210
Effective coporate governance needs ____ structural elements and _____ behavioural factors.
Hard structural elementsSoft behaviour factorsOSFI CG
211
What is the board responsible for in FRFIs?
-stewardship-direction setting-general oversight of management and operations-short term and long term objectives, strategy and plans including the Risk Appetite Framework-succession plans for Board, CEO, Senior Mgmt,-mandates, resources, budgets-org stru
212
What is the responsibility of senior management in an FRFI?
-implementing the Board's decisions-directing and overseeing operationsOSFI CG
213
An effective Board should demonstrate:
Judgement (make sound and well informed decisions, considering strategy and risk appetite)Initiative (be proactive and timely in exercising responsibilities, ready to probe, challenge, and guide senior mgmt)Responsiveness (be responsive to issues or deficiencies identified by senior management, oversight functions, regulators etc)Operational Excellence (have practices and processes that permit open discussion, debate, and advance consideration of important matters based on relevant and timely information.OSFI CG
214
What are some key points on the board chair?
#NAME?
215
What's the Board's primary interface with senior management?
Through the CEOOSFI CG
216
If internal controls are breached, what should the Board do?
#NAME?
217
Risk governance is a distinct and critical element of corporate governance. So...
should be able to identify significant risks (liquidity, credit, market, insurance, operational)OSFI CG
218
Describe risk appetite framework.
#NAME?
219
What's the role of the Chief Risk Officer?
#NAME?
220
What's the role of an audit committee?
#NAME?
221
What should the audit committee discuss with senior managment and the external auditor?
#NAME?
222
Effective oversight of the business and affairs is essential to the maintenance of an efficient and cost-effective supervisory system because:
1. helps to protect depositors and policyholders2. reduces the amount of supervisory resources needed for OSFI to meet its mandateOSFI CG
223
Describe OSFI's Supervisory Assessments
-assess FRFIs condition and monitor compliance with federal laws and regulations-OSFI's reports and findings can provide useful input to the Board's own oversight of the FRFI-effective Board understands regulatory environment (follow up on recommendations
Exam 6C
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