Baer.Intro

Question 1

Identify the 5 objectives of IBC (Insurance Bureau of Canada).

Answer 1

1. STUDY legislation
2. COLLECT/analyze data
3. ENGAGE in research
4. DISCUSS general insurance
5. PROMOTE public understanding

Question 2

Identify 6 areas of Canadian legislations (federal/provincial) that promotes financial soundness of insurance companies. (Hint = CIRCA-F)

Answer 2

1. CREATION: oversee creation of (domestic) & licensing (foreign) of insurers
2. INVESTMENTS: restrictions on types of investments that are permitted (to
   reduce risk)
3. RATING: authorization of rating bureaus for info-sharing
4. COMPLIANCE: give Govt depts authority to enforce compliance with
   legislation
5. ADEQUACY: create boards to oversee and ensure adequacy of rates
6. FILE F/S: require regular filing of Financial Statements

Question 3

What has been the 5 focus areas of Canadian Insurance regulation since Confederation (Hint = MOTHS)

Answer 3

1. Marketing integrity & improvement of insurance contract
2. Encourage Canadian ownership
3. Collection of taxes
4. Honesty & competence of intermediaries (Ex: agents)
5. Keep insurer’s solvent to protect policyholders

Question 4

What is the ‘principle of indemnity’

Answer 4

After covered loss, return insured to former financial position (before loss), and neither penalize nor reward

Question 5

What is a ‘contract of indemnity’

Answer 5

Contract where amount recoverable is measured by insured’s pecuniary loss

Question 6

Briefly explain the important intent of doctrine of subrogation

Answer 6

Prevent over-compensation of insured

Question 7

Identify 2 ADVANTAGES and 2 DISADVANTAGES of foreign participation in the Canadian insurance industry

Answer 7

Advantages:
1. COMPETITION: produces (lower prices, higher availability) for Canadians
2. INNOVATION: good for consumers

Disadvantages:
1. Foreign parent failure is the main cause of Canadian insolvency
2. Take market share from domestic insurers

Question 8

Briefly discuss whether a life insurance contract is considered an indemnity policy.

Answer 8

No, because the amount recoverable is not measured by the loss.
The amount payable is fixed and written into the contract.

Question 9

Identify 2 conditions that an insurer must establish to be entitled to recover under an indemnity insurance contract.

Answer 9

1. Event must be covered
2. Requires proof of AMOUNT of loss

Question 10

Briefly describe how a ‘valued policy’ differs from a typical insurance policy.

Answer 10

Proof of amount of loss not required because compensation is pre-determined by contract

Question 11

What conditions (3) eventually led to public control regarding solvency

Answer 11

1. Insurer bankruptcies in the 1860s/70s
2. The recognition short-term price competition is bad
3. Insurance involves a significant savings component (prepaid premiums) & policy holders must be protected

Question 12

Briefly explain the difference between guidelines & legislation for insurance regulation

Answer 12

Guidelines are more flexible than legislation

Legislation must go through senate, house of commons, and get royal approval

Question 13

Briefly describe two mandates of the Canadian Council of Insurance Regulators

Answer 13

1. Legislation Axis:
   Ensure adequacy of Provincial Regulation
2. Practices Axis:
   Consumer protection

Question 14

How does federal legislation protect Canadian insureds of foreign insurance companies (2)

Answer 14

1. Foreign insurers must maintain sufficient assets IN CANADA (for recovery from insolvency)
2. If foreign insurer goes insolvency then a Canadian insurer can assume control over assets (helps stop expatriation of capital)

Question 15

Who oversees the Canadian
a) Solvency regulation
b) Rate regulation
(Federal or Provincial)

Answer 15

a) both - cooperative federalism has been achieved in practice
b) provincial

Question 16

Identify the 3 different levels of insurance regulation

Answer 16

• legislation
• regulations by lieutenant governor in council
• guidelines by superintendents

Question 17

Identify the 2 necessary conditions for reimbursement under ‘valued’ insurance policy.

Answer 17

1. Event must be covered
2. Requires PROOF of loss, but not amount of loss

Question 18

Define the standard of absolute liability

Answer 18

IF settlement possible BUT rejected by insurer THEN insurer is liable for all costs (even in excess of policy limit)

Question 19

What are the 3 different possible standards for liability

Answer 19

1. Absolute liability
2. Liability for not acting reasonably
3. Liability for bad faith (builds on lack of reasonableness)

Question 20

identify DIFFERENCES between private & social insurance

Answer 20

SELECTIVITY: (private insurers are MORE selective, social insurance is LESS selective)
SOLVENCY: (private companies monitored by superintendent, social insurance underwritten by govt)
EMPLOYEES: (private insurers have private employess, social insurance has civil servants)
FRAUD PROTECTION: (yes for private insurers, not as much for social insurance)

Question 21

identify SIMILARITIES between private & social insurance

Answer 21

• both PROTECT insurance fund
• both PREVENT over-compensation
• both need to define ‘covered event’
• both need to determine ‘covered losses’
• both need claims & reserving functions

Question 22

Glynn vs Scottish : Facts

Answer 22

Glynn injured in auto accident
- was reimbursed by other driver’s insurer (including medical)
- Glynn sued to DOUBLE-RECOVER medical from own insurer

Question 23

Glynn vs Scottish : Issue

Answer 23

Does Glynn’s insurer have right to subrogation?

Question 24

Glynn vs Scottish : rulings - T/A

Answer 24

RULING 1: for insured: Glynn gets double-recovery
RULING 2: for insurer
- subrogation concept applies becasue auto policy is contract of indemnity
- so Glynn’s insurer does NOT have to pay

Question 25

Fletcher v MPIC: Facts

Answer 25

Fletcher was in serious accident, person responsible was underinsured. Fletcher has requested max coverage but MPIC employee didn't provide UMC. Customer relied on MPIC..

Question 26

Fletcher v MPIC: Issues

Answer 26

SSUE 1: → is a government insurer responsible for informing customers of available coverages? ISSUE 2: → what is the extent of the government's liability should it fail to do so?

Question 27

Fletcher v MPIC: Ruling 1,2,3

Answer 27

Ruling T/A/SC: Insured / Insurer / Insured Final Interpretation: → both private agents and government institutions owe a duty of care → but private agents owe a higher duty-of-care because of their promised expertise

Question 28

Dillon v Guardian Ins Co: Facts

Answer 28

- Guardian rejected a settlement that was LESS THAN the policy limit - subsequent jury award GREATER THAN policy limit - insured sued insurer for excess amount of award above policy limit

Question 29

Dillon v Guardian Ins Co: ruling

Answer 29

Ruling: In favour of insured. (Standard of absolute liability)