1
Q
IMPORTANT
Identify recommendations of AB auto insurance commitee for AB auto reform (2) + Advantages (4)
A
- Pure no-fault compensation model
- Less money to lawyers (reduce legal fees and seeking of high settlements)
- Delivered quickly (no need to prove who is at fault)
- Prem reduced (less risk)
- Better compensation (health outcomes) - Continuum of care model to promote medical evaluation, assessment and treatment
- Pre-approved protocols
- Reduced duplication
- Early access to care
2
Q
IMPORTANT
Loblaws vs RSA
- Context
- Decision
A
Many opioïd companies take action against Loblaws across Canada for negligence and wrongful act over long period.
Loblaws claims to RSA et Aviva (excess insurers) to recover legal defence costs from one of them now and after they can manage the cost-sharing between them. Insurer refuses.
Trial:
All-Sums Approach (For Loblaws)
- Loblaws can select a single insurer to pay 100% of defence costs for the entire period.
Appeal:
Time-On-Risk Approach (For Insurers)
- Cost must be shared proportionally based on each insurer time on risk.
Supreme Court :
Refuse appeal making decision definitive
3
Q
If AB enacts the reform, assess the likelihood of a sucessful legal challenge. (4)
A
- QC and MB already have a no-fault system and it is good
- Within scope of provincial authority
- Challenge under Charter of Rights and Freedom has no value since drivers are treated equally
- Morrow vs Zhang: Cap of 3500$ on punitive damage upheld
4
Q
** IMPORTANT **
PIPEDA Report of Findings
- Context
- Decision
A
ON Couple was complaining that credit score was used for rating of their property policy that cause their premium to increase.
Decision:
Privacy commissioner confirmed that use of credit score is acceptable.
However, commissionner notes that standard insurance form is deficient and misleading. Consent must be meaningful (may vs always). Insurer should be explicit regarding its intent.
If company finds that consent form is deficient, follow PIPEDA report : Update form, inform and ask for consent.
5
Q
Why might territories differ between coverages for same insurer ? (4)
A
- Competitivity
- Risk driver differs
- Regulatory constraint
- Credibility requirements vary
6
Q
Describe how AB’s new auto insurance is recommended to work.
A
Create Traffic Injury Regulator (Board, Tribunal) that oversee 4 arms of care and compensation:
- Claim Administration
- Medical experts
- Claim assessment panels
- Reconstituted version of Automobile Insurance Rate Board
It must be independent from government and industry.
7
Q
Describe outcome of 1978 Trilogy.
A
Cap of 100k$ on non-pecuniary damages.
8
Q
Definition non-pecuniary damages.
A
Damages not easily quantified financially (Ex: Pain and suffering)
9
Q
Arguments for a cap on non-pecuniary damages
A
C : Compensation from economic damages is already handled
A : Amount of money never provide true restitution
P : Payment of claims can become extravagant without cap
S : Social Burden
10
Q
Fenn vs City of Peterborough
- Context
- Decisions
- What is plaintiff were to contest final decision ?
A
Injured from a gas explosion with injuries above cap of non-pecuniary damage.
TRIAL :
Awarded plaintiff full amount since cap was not existing.
APPEAL : (AFTER TRILOGY)
True amount for damages is 125k$ because
- Erosion of money (adjusted by inflation)
- Plaintiff more injured than trilogy
If contestation:
Probably that they will put award to 100k$ because cap should not consider level of injury
11
Q
Belanger vs Sudbury (Context and Decision)
A
Injury in an auto accident in a storm because of icy road. Belanger sued city of Sudbury because condition of road was not properly managed.
Trial:
City responsible
Appeal:
City still responsible because city should have foreseen the conditions and not just follow the procedures. They should have adapted to conditions.
- City took a statutory defense that they should not have foreseen it.
12
Q
Injured in auto accident and reimbursed by another driver insurer. Sued to own insurer to double recover medical.
Trial : Plaintiff win
Appeal : Insurer win
Ins contract is a contract of indemnity. To recover, insured must prove:
- Event occured
- Sustained loss from event
Subrogation concept apply since insured is not satisfying condition 2. No need to pay.
Name of the case ?
A
Glynn vs Scottish Union and National Ins
13
Q
Lee vs Dawson
- Context
- Decisions
A
Student with catastrophic injuries due to an accident.
Jury :
Awarded 2M$ for non-pecuniary damages (because jury was moved by severity of injury)
Trial :
Reduced to indexed cap (bound to Trilogy)
Appeal:
Reexamine cap based on Charter (discrimination, unjust, small injured advantage). Keep decision stating that only supreme court have the right to overturn it.
Supreme Court:
Dismiss application to appeal (still support cap for personal injury)
14
Q
Exception cases for which cap on non-pecuniary damages does not apply in Canada (3)
A
- SY vs FGC: Sexual Assault
Sexual assault is an intentional, criminal act. Courts have argued that capping these damages would diminish the “vindicatory” purpose of the law.
- Hill vs Church of Scientology: Defamation
The cap was designed to ensure the availability of affordable insurance for accidents.
In defamation, the “injury” is to a person’s reputation.
- Young vs Bella: Negligence causing economic loss
No “social policy” reason to limit what a jury thinks is fair
15
Q
Explain value gap that exists in the ON auto insurance system
A
System focus on cash instead of medical care to help injureds back to pre-accident life
Reminder : Value Gap refers to a significant discrepancy between what something is and what it could be
16
Q
BC insurance model
- Description
- Affordability issue (3)
- Alternative Model (3)
A
Description :
Litigation-based model. Any no-fault drivers can sued at-fault drivers regardless of the severity of the injury. Public insurance for basic coverage. Open competition for optional coverage.
Affordability issues:
- High frequency
- No minor injury capping
- High premiums (dont cover losses)
Alternative model:
- Private insurance
- Charge actuarially sound premiums
- Focus on care
17
Q
** IMPORTANT **
Current ON auto compensation system
Tort vs no-fault for which coverage ?
A
Hybrid Tort-NoFault model:
- No-Fault : Accident Benefits
- Tort : Bodily Injury (can sue and at-fault insurer pays)
18
Q
What conditions must be met if an ON insurer is proposing to make territorial definition changes (6) ?
A
- < 55 territories (<10 Toronto)
- Contiguous
- Neighboring territories must vary less than 10%
- 3 years of historical data for new territory
- Definition is the same for all coverages
- Large claims are capped
19
Q
Causes of unfair delivery of benefits in ON auto insurance (4)
A
- Insurer focus on managing cost instead of care
- Lawyers are paid with contingent fees so they seek high settlement rate
- Victims maximise entitlement instead of own care
- Brokers are paid on volume, not on care
20
Q
Actions to solve delivery in ON auto insurance (5)
A
- Better compensation system for catastrophic injury
- Make contingent fees transparent so less need of lawyers
- More regulatory freedom for insurers
- Arms-lenght regulator with powers to enact policies
- Focus on care not cash
21
Q
Approaches for regulation for auto insurance by FSCO and vehicles covered (2)
A
- Prior Approval (PPA, FA)
- File & Use (Other than PPA, Commercial)
22
Q
Requirements for approval FSCO for premium plan (2)
A
- Interest rate < 1.3%
- Initial payment (down payment) <= 2 monthly installments
23
Q
Alie vs Bertrand and Freres Construction Co
- Context
- Decisions
A
150 houses in Ottawa had defective concrete and needed to replace their basement.
Bertrand and Freres (that provide the defective concrete) have an umbrella policy to cover loss excess limit. Excess insurer denied coverage.
Decision:
Excess policies have duty to defend provided. They follow the form of the underlying policy and do not exclude duty to defend. There is a duty to indemnity.
24
Q
** IMPORTANT **
Context: ON Couple was complaining that credit score was used for rating of their property policy that cause their premium to increase.
Name of this case ?
A
PIPEDA Report of Findings
25
Trial : Awarded 2M$ for brain and facial damage but reduced to indexed cap
Appeal to reexamine cap based on Charter (discrimination, unjust, small injured advantage)
Supreme Court: Dismiss application to appeal (still support cap for personal injury)
Name of the case ?
Lee vs Dawson
26
Citizens vs Parsons
- Context
- Decisions
Companies attempted to deny payouts for fire damage with exclusion in policies. A man names Parsons argued that company didn't comply with ON's Fire Insurance Act.
Federally regulated insurer disputes ON's Fire Insurance Act stating that provincial authority have not the right to deprive insurer of status and capacity.
- Company : Insurance is a national trade
- Parsons : Insurance are private agreement affecting property rights within a province
**Decision:**
Act is intra wires because
- Insurance is a contract (falls in provincial jurisdiction)
- Trade and commerce refers to international or inter-provincial trade (not regulation within a province)
- Federal have power on incorporation of companies, but not how they conduct within a province
27
*** IMPORTANT ***
Context : Many opioïd companies take action against ???. ??? claims to insurers to recover legal defence costs from one of them now. Insurer refuses.
Name of this case ?
Loblaws vs RSA
28
Federally regulated insurer disputes ON's Fire Insurance Act stating that provincial authority have not the right to deprive insurer of status and capacity.
Decision:
Act is intra wires. Trade is inter-provincial, not intra-provincial.
Name of the case ?
Citizens vs Parsons
29
Context: Injured with injuries above cap.
Decisions:
True amount for damages is 125k$ because
- Erosion of money
- Plaintiff more injured than trilogy
If contestation:
Probably that they will put award to 100k$ because cap should not consider level of injury
Name of the case ?
Fenn vs City of Peterborough
30
Context: Injury in an auto accident in a storm because of icy road.
Mister sued city because condition of road was not properly managed.
Decisions:
Trial: City responsible
Appeal: City still responsible because city should have foreseen the conditions and not just follow the procedures. They should have adapted to conditions.
- City took a statutory defense that they should not have foreseen it.
Name of the case ?
Belanger vs Sudbury
31
What are some proposed reforms to tort's laws ? (4)
- Joint & Liability : Change for a proportional system
- Collateral Source : Eliminate
- Compensation Basis : Change from gross to net
- Vicarious Liability : Eliminate
32
Ethical Framework where territorial rates disadvantage a protected group (3)
**Utilitarian Framework (Greatest Good)**
- Keep current structure : Accurate pricing for majority > minority
- Modify: Long-term societal harm > Short Term benefit
**Deontological Framework**
- Keep : Prohibited variables - follow rules
- Modify : Indirect discrimination violates duty to treat fairly
**Ethics Framework**
Modify : Good companies don't perpetuate inequality
33
Fletcher vs MPIC
- Context
- Criterias for Duty of Care
- Decisions
Customers relied on MPIC. There was no mention of under-insured coverage on application.
**Criterias for duty of care:**
- Relied on MPIC info
- MPIC know customers rely on info
- Reliance is reasonable
**Decisions :**
Trial: Insured win
Appeal: Overturned
Supreme Court: Reinstate initial ruling
- Private and government owe duty of care. Private higher because of expertise.
34
Sansalone vs Wawanesa
- Context
- Majority ruling
- Minority ruling
BC bus driver sexually abused teenager and claims to insurer for defence and coverage.
Majority:
- Intentional act and injury is result of the action. Since intentional action, excluded by coverage. No duty to defend
Minority:
- Intentional act but not mean to cause injury. Duty to defend is different from duty to indemnity for damages.
35
Nichols vs American Home
- Context
- Decisions
Accused of fraud but innocent and claims for defence costs. Insurer says that fraud is excluded from policy.
**Trial:**
Duty to defend
**Appeal:**
Duty to indemnify vs Duty to defend different : Must pay defense since it was found innocent
**Decision by Supreme Court:**
Allegation was for fraud and fraud is excluded. No duty to defend
- Duty to defend : Trigerred by the allegations in the pleadings (not the result of allegations)
- Duty to Indemnify : Triggered by actual facts proven at trial
Duty to defend is broader -> Duty to indemnify
36
Glynn vs Scottish Union and National Ins
- Context
- Decision
Glynn injured in auto accident and reimbursed by another driver insurer. Sued to own insurer to double recover medical.
**Trial :**
Insurance contract is a contract of indemnity.
To recover, insured must prove that:
- Event occured
- Sustained loss from event
Insurer had right to subrogation since insured is not satisfying condition 2 (because he has already been made whole). No need to pay.
37
Precision Plating vs Axa Pacific Insurance
- Context
- Decision
Fire premises causing chemicals to overflow and contaminate neighboring property. Axa Pacific is the insurer of Precision Plating (Commercial General Liability)
**Trial :**
Insured win
**Appeal :**
3rd party is claiming for pollutants, not fire which is excluded from policy. No duty to indemnity.
What is critical is not the cause of loss but the cause of indemnity.
38
Goals of AB auto insurance reform (6)
M : Model for private insurance sector
E : Easier access to income replacement
G : Good claim handling process
A : Appropriate medical benefits
A : Affordable
V : Viable
39
What are the 2 phases of territorial ratemaking ?
- Sub-phases to set boundaries (4)
- Challenge for each sub-phases ?
1. Set territory boundaries
- Build non-territory model (**variable selection**)
- Calculate residual (**building block cred**)
- Model residuals (**balancing judgment with data**)
- Finalize boundaries (**incorporating business input**)
2. Set territory relativity (Loss cost, competitive, business strategy)
40
Legal Principales Tort Reforms problems (4)
J : Joint & Liability -> Recover all damages from all defendants regardless of share
C : Collateral Source -> No need to be entered at trials
C : Compensation Basis -> Base for income replacement is gross
V : Vicarious Liability -> One person responsible for actions of another
41
Why might a pricing model be biased but not unfair (or vice-versa) ? (4)
- Biased but Fair
- Unbiased but Unfair
- Biased and Unfair
- Unbiased and Fair
- Biased but Fair : Charges different rates to groups defined by age
- Unbiased but Unfair: Treats all customers identically
- Biased and Unfair : Uses postal codes that correlate with race
- Unbiased and Fair : Normal based on risk
42
Areas under federal insurance regulation (5)
- C : Conditions to enter market
- I : Investment Restrictions
- R : Financial Reporting
- C : Calculation of assets and reserves
- P : Protection of policyholder
43
Areas exclusively under federal regulation (6)
- Trade and Commerce
- Criminal Law
- Taxes
- Banking (incorporation + regulation)
- Bankruptcy
- Peace
44
Source of bias when developping new predictive model (4)
- Data generation (historical inequities)
- Data preparation (missing pattern)
- Model development (variable selection)
- Implementation (treshold)
45
Serious injury in auto accident and granted 104 weeks of care benefits. ??? reclassified her as catastrophically impaired 5 years after stop of benefits. ??? denied benefits because 2-year statutory time limit for making a claim is expired.
Trial: Discoverability Principle does not apply. ??? did not apply for extended benefits in the 2-year period.
Appeal: Discoverability Principle did apply. Would be absurd to expect ??? to apply while she was not even classified.
Discoverability Principle: A limitation period can be extend in certain cases, where a plaintiff did not have knowledge of and cannot have discovered the event.
Name of the case ?
Tomec vs Economical Ins
46
Victim severely insured by underinsured driver. Sign limits agreement with tortfeaser and claims against own insurer for excess beyond limits agreement.
Decisions:
Insurer pays because limit agreement did not:
- Prevent insured from being fully compensated for entitlement
- Insurer's right of subrogation after insured is fully compensated
Name of the case ?
Somersall vs Scottish and York
47
Context: 150 houses in Ottawa had defective concrete and needed to replace their basement. Construction company have an umbrella policy to cover loss excess limit. Excess insurer denied coverage.
Decisions:
Excess policies have duty to defend provided. They follow the form of the underlying policy and do not exclude duty to defend. There is a duty to indemnify.
Name of the case ?
Alie vs Bertrand and Freres Construction Co
48
Systematic evaluation process for modeling (5)
1. Measure bias
2. Analyse actuarial justification
3. Evaluate data quality and age
4. Fairness considerations
5. Documentation
49
Direct vs Indirect discrimination in insurance rating
Direct : Straighforward (use of prohibited variable)
Indirect : Through proxy, correlation, historical bias in data (require ongoing monitoring)
50
Differences Bias and Fairness (Definitions)
Bias : Measurable property of predictive models (static, constant)
Fairness : How model outcomes are applied in context (dynamic, evolue with societal)
51
Briefly describe areas of Canadian Insurance Legislation that promotes solvency (6)
C : Conditions for new intrants
I : Investment Restrictions
R : Rating Bureau to promulgate rates
C : Compliance to regulation
A : Adequacy of rates
F : Financial Statements regularly
52
Leg amputated from auto accident and sough classification as catastrophically impaired.
Conclusion:
Mental and physical impairment can be combined to determine CAT claims:
- SABS doesn't forbid it
- Combination consistent with guidelines
- Unfair for those who falls into multiple categories
This solution will increase cat claims but still rare.
Name of the case ?
Kusnierz vs Economical Mutual Ins
53
Describe aspects considered by Minister of Finance in determining whether letters patents should be issued for incorporation of insurance company (4)
- **Capital :**
Does company have enough money to start and remain solvent ?
- **Business Plan :**
Is the strategy viable ?
- **Past Bankruptcies :**
Is the history clean and trustworthy ?
- **Contribution to financial system :**
Will this new company benefit Canadian economy ?
If do not respect, the letter patent is denied.
54
Areas under provincial insurance regulation (3 each)
**Contracts:**
- Policy Contents and Term
- Premium plan
- Reinstatement
**Transaction:**
- Claim Handling
- Unfair Practices
- Agents licensings
55
Ways in which domestic insurance company can operate in more than one province (2)
- Federally regulated insurer
- Ask permission to other province where he wish to operate
56
BC bus driver sexually abused teenager and claims to insurer for defence and coverage.
Majority:
- Intentional act and injury is result of the action. Since intentional action, excluded by coverage. No duty to defend
Minority:
- Intentional act but not mean to cause injury. Duty to defend is different from duty to indemnity for damages.
Name of the case ?
Sansalone vs Wawanesa
57
Intra-vires vs Ultra-vires
Intra-vires: In power of the authority
Ultra-vires: Beyond power of the authority
58
Customers relied on MPIC. There was no mention of under-insured coverage on application.
Criterias for duty of care:
- Relied on MPIC info
- MPIC know customers rely on info
- Reliance is reasonable
Trial: Insured win
Appeal: Overturned
Supreme Court: Reinstate initial ruling
- Private and government owe duty of care. Private higher because of expertise.
Name of the case ?
Fletcher vs MPIC
59
Main areas on which Canadian Insurance Regulation is focused (5)
- Solvency
- Ownership
- Tax revenues
- Honesty
- Marketing
60
House destroyed in fire. Insurer cut rent alleging arson but has no evidence.
Trial: 1M$ punitive damage
Appeal: Reduced by 100k$
Supreme: Reverse decision because act was highly reprehensible as an effort to force an unfair settlement
Considerations for quantum:
- Vulnerability of victim
- Degree of harm
- Blameworthiness of insurer
- Deterrence to insurer
Name of the case ?
Whiten vs Pilot Ins Co
61
Accused of fraud but innocent and claims for defence costs. Insurer says that fraud is excluded from policy.
Decision:
Fraud is excluded. No duty to indemnity so no duty to defend
Name of the case ?
Nichols vs American Home
62
Reasons insurance industry was singled out for public oversight of solvency (3)
- Many bankruptcies in 1860s
- Short-term pricing competition is not in public interest (bring insolvency to pay future claims)
- Big savings components
63
How do urban and rural postal codes differ in their suitability as territory building blocks ? (4)
**Size :**
Small for urban, large for rural
**Homogeneity :**
Homogeneous for urban, Varying for rural
**Suitability :**
Most perils (urban), challenging for location-specific perils (rural)
**Granularity :**
Appropriate (urban), Too large for precise risk differenciation (rural)
64
Validation steps when using external data for territory (5)
1. Understand data
2. Compare to internal data
3. Sensitivity testing (how it is sensitive to model assumptions)
4. Practical validation
5. Documentation
65
What factors would trigger a review of existing territory boundaries ? (6)
- Shift in portfolio
- Change in external environment (urban expansion)
- Competition
- Regulatory constraint
- Risk profile evolution
- Technical triggers (model update)
66
Fire premises causing chemicals to overflow and contaminate neighboring property.
Decisions:
3rd party is claiming for pollutants, not fire which is excluded from policy. No duty to indemnity.
What is critical is not the cause of loss but the cause of indemnity.
Name of the case ?
Precision Plating vs Axa Pacific Ins
67
Purposes of punitive damages (3)
Deterrence
Denunciation
Retribution
68
Insured 1 was injured in auto accident by Insured 2.
Trial: No physical damage but mental damage of 100k$ (proof by family testimony)
Appeal: No physical and mental damage (no proof by an expert)
Supreme: Mental damage
Recovery for mental illness depends on:
- Duty of care
- Breach of duty of care
- Legal causal relationship
- Factual causal relationship
- Mental injury is serious and prolonged and rises above anxieties and fear
All criterias were met. The law of negligence must afford equal protections to victims mental and physical injuries.
Name of the case ?
Saadati vs Moorhead
69
How would you balance credibility and granularity when combining FSAs into territories ? (5)
1. Define minimum credibility treshold
2. Initial relativities
3. Grouping logic
4. Iterative refinement testing different grouping scenarios
5. Practical Constraints
70
**IMPORTANT**
Aspects needed to consider before adopting the use of credit scores (5)
1. Comply with provincial law
2. Ensure info used is current and accurate
3. Gathering prior consent (written or verbal) -> Valid for the duration of contract
4. Keep info confidential and private
5. Not use credit as a sole variable (refuse coverage)
71
**IMPORTANT**
What can do a customer when he believes that a recent identity theft has affected their credit score ?
Written statement to insurer describing extraordinary event and why it affected his credit score with proof. Insurer review it and adjust the credit score after.
72
Requirements when designing a consent request for the use of credit info (4)
- How info will be used
- What info is collected
- Consent of customer
- Period of consent
73
Sub-types of rate regulation (7) + provinces
Government : AB GRID, BC basic cov
Prior approval : ON and NS
File and Use : ON, PEI
Use and File : QC
Flex Rating : Not used in CAN
Filing Only :
Open Competition : All north territories + BC optional cov
74
Disadvantage of having separate federal and provincial solvency regulation (2)
- Different class of insurer
- PACICC guaranty fund can charge higher premium for insurance in province with weak regulation
75
Insurer incorporated in one province was doing business in another one. Federal believes it falls under Trade. Provincial believes insurance is not Trade.
Council took side of province and ruled ultra-vires for federal.
Name of the case ?
Attorney Canada vs Attorney AB
Insurance Reference Case
76
Identify options for addressing the deficiency in provincial solvency regulation vs IAIS (3)
- Restrict regulation to market conduct and supervise by OSFI
- Enhance own regulation
- Transfer regulation to another province with better standards
77
Calculation insured's recovery from PACICC
- Calculation
- Limit
Recovery = Unearned Prem recov + Losses recov
= min(UEP, 2500)*70% + min(Losses - Deduc, Limit by cov)
- **Unearned Premium Recovery**
When an insurer fails, the policy is effectively cancelled immediately or shortly after the insolvency date. Maximum of 2500$.
PACICC pays 70% of that capped amount.
- **Losses to recover**
If a policyholder had an accident before the company went bust, or during the short window before the policy is cancelled, the bankrupt insurer can no longer pay that claim. Maximum based on coverage :
Auto : 425 000$
Property : 530 000$
Other : 400 000$
78
Complication from ankle injury in auto accident. Sought catastrophic impairment designation and Insurer rejected.
Deleguate decision:
Only one impairment criterias must be satisfied:
- Daily Function
- Ability to Work
- Concentration
- Social Function
We can combine physical and mental injuries because they are too hard to separate (comprehensive approach).
Appeal:
Reinstate deleguate decision
Name of the case ?
Aviva vs Pastore
79
Type of insurance : Group vs Ind Insurer
Group :
- Class of people
- Between insurer and sponser
- Open-ended : Members can join or leave the group without the contract needing to be renegotiated
- Different legislation
80
Is Life insurance considered a contract of indemnity ?
No since loss of life cant be indemnify
81
Types of insurance : Valued vs Typical Policy
Valued: Proof of amount of loss not needed because compensation is pre-determined by contract
Typical: Need proof of loss but no proof of amount
82
Insured was shot by a gang in California with a rented car. Claims no-fault Accident Benefits against his auto policy.
Decisions:
Wording of policies states that benefits must be given for injuries THAT ARISE OUT OF the ownership, use or operation of vehicle. COVERED.
Applicability in Ontario:
Wording different. CAUSED BY. Not covered
Name of the case ?
Amos vs Ins Corp of BC
83
AB capped minor injuries at 3500$ in an attempt to reduce coverage and therefore reduce premiums. Cap was challenged as the grounds of discrimination against individuals with minor injuries.
Trial: Removed cap, discrimination
Appeal: Keep cap, not discriminatory and can no longer be appeal
Name of the case ?
Morrow vs Zhang
84
Types of insurance : Social vs Private Insurance (Similarities and Differences) (3)
Similarities:
- Defined covered events
- Determine covered losses
- Prevent over-compensation
Differences:
- Private monitored by SuperIntendent
- Private more selective
- Private employees
85
What is the definition of catastrophic injury and tort deductible in ON auto insurance ?
Catastrophic injury : Serious, life-threatening
Tort deductible: Amount deducted to court award settlement (reduce litigation of minor claims)
86
Identify coverage that is a major contributor to affordability issue in auto insurance for ON and solution.
Accident Benefits
Solution : Cap of 3500$ on minor injury
87
What are the legislative requirements for rate and risk classification ? (3 each)
**Rate :**
Just and reasonable
Cover expenses
Not to large profit margin
**Risk Classification :**
Just and reasonable
Predictive
Fair logical link with no discrimination
88
What are the types of filing guidelines ? (5)
- When does major filing is used ? (3)
Major - Used when entering a market, changing rates, FA
Simplified
CLEAR
Major - Other than PPA
Minor - Other than PPA
89
What is the evolution path of guidance of ORM ?
Informative (non mandatory) to Approach (mandatory, benefits if good)
90
What is the Model Approval Function ? (4)
Used by third Line of Defense in approval of ORM. Must review :
1. Result, documentation
2. Model Development
3. Model Influences
4.Compliance Verifications
91
**IMPORTANT**
What are the Three Lines of Defence roles ?
How they ensure fairness in risk management?
**1st Line (Business):**
Set up the models.
Ensure fairness is being applied in ratings
**2nd Line (Compliance):**
Independant review of committee to challenge and oversee first line.
Questions and dive in model to assess the impact of fairness across social context and challenge the decisions made.
**3rd Line (Audit):**
Internal audit.
Look into the internal controls and assess if they were correctly implemented and manages, including fairness model.
92
What are the fundamental practice every ORM Framework need ? (4)
- M : Maintenance
- A : Appetite
- R : Roles and Responsabilities
- G : Governance of data
93
What are the steps in ORM cycle ?
1. Risk Identification
2. Risk Assessment (inherent and residual risk)
3. Risk Prioritization (accept, refuse, share)
4. Risk Reporting and Monitoring
- Response : Fix immediately if error and share
- Action : Establish action plan, escalate to senior management and report to board if material and document
94
How do inherent and residual risk differ ?
Inherent : Risk before applying existing controls (raw exposure risk)
Residual : Risk after applying existing controls (see effectiveness of controls)
95
What is the proportionality principle for ORM adoption and why it matters ? (5)
Adoption must vary based on
- Nature
- Complexity
- Size
- Profile
**Reasons:**
- Not one-size fits all
- Large insurer need robust framework
- Small insurer are not overburned
- Burden matches actual risk
- Resources allocated efficiently
96
Zamboni accident incur burn to insured. Sued manufacturer for negligence in making the gas and water tanks similar leading to his mistake.
Trial : But for test. Manufacturer won
Appeal: Material Contribution Test. Plaintiff won
Supreme: But for test. Manufacturer won.
But for test: Would result have occured but for act of defendent ?
Material contribution test: Requires that negligent action materially contributed to the risk of harm
Name of the case ?
Resurface Corp vs Hanke
97
??? rejected a settlement that was less than policy limit (4M$). Jury award 7M$. Sued insurer for excess amount above policy limits.
Ruled that in cases where settlement within policy limit was possible and insurer choose to go to trial, must pay entire amount.
ABSOLUTE LIABILITY: Should not gamble with insured's money
Name of the case ?
Dillon vs Guardian Ins Co
98
What is FSRA and what are his goals ? (5)
Financial Service Regulatory Authority
Goals :
- Public confidence
- Monitor development and trends
- Promote high standards of conduct
- Protect rights and interest of customers
- Strong, sustainable, competitive sectors
99
In what situations do we need to include a certificate of actuary in filing ? (3)
- Rate change
- Diff change
- New groups of auto
100
What are the requirements for regulatory approval territorial changes in Ontario ? (3) + CALCUL
Direction changes = Direction ind changes
Magnitude changes < Magnitude ind changes
-10% < Magnitude changes < 10%
101
*** IMPORTANT ***
What elements are prohibited in classification auto system in ON ? (11)
- Income level / worthiness (gross or net)
- Occupation, Employment, Profession
- Residence History
- Credit Score / Card
- Bankruptcy / Debteness
- Multiline discount varying by product
- Minor accident occured on or after June 1, 2016
- Past claims out of accident occuring on or after September 1, 2010 (insured was 25% or less at fault)
- Medical plan
- Income continuation plan, sick leave plan
- Lapse in insurance coverage (except if termination, suspension, conviction)
You will be asked to identify error in major filing rate of Ontario.
102
How Reinsurance, RSP Cession, FARM Losses are treated in loss data for major filing ?
Reinsurance : Excluded since direct premiums
RSP Cession : Included
FARM Losses : Excluded
103
Annual PACICC Assessment for an insurer (Calculation and Limit)
Assessment = (Advanced - Recovery) x Direct Written Premium (Insurer) / Total Direct Written Premium (All members)
Limit = 1,5% x Direct Written Premium (Insurer)
This calculation must be done separately by jurisdiction. (DIFFERENT ASSESSMENT BY JURISDICTION)
104
Which coverage are not covered in PACICC ? (4)
- Aircraft, mortgage, marine, credit, crop
- Employer's Liability
- BI coverage in QC and BC
- Auto ins in MB and SK
105
Funding for PACICC (3)
- Assessment of participating insurer
- Borrow money from compensation fund (pre-insolvency fund) -> Use this pool before PACICC collect assessment of insurers
- 3rd party recovery
106
Definition of PACICC
P&C Ins Compensation Corp :
Protect eligible policyholders from undue financial loss in case of insurer's insolvency. All licensed P&C insurers in CAN must participate
107
Company characteristics for causing insolvency (4)
*Causes of insolvency for insurer
- Size (limited access to capital)
- Growth (inadequate pricing)
- Governance and controls (weak operational failure)
- New entrants (competition)
108
Attorney Canada vs Attorney AB (Context, Decision)
Federal government passed the Insurance Act which prohibited any person from carrying insurance in Canada without a federal license. Federal believes insurance falls under Trade and Commerce. The province argued that it falls under Property and Civil Rights.
**Decision :**
- Federal licensing requirements ultra vires of federal. Insurers incorporated in a single province have the capacity (not the right) to write in
other provinces. They will need the other province’s approval.
- Foreign insurer might have to be federally licensed even if operating in just one province
- Federally incorporated insurers have right and capacity to operate in all provinces
109
Aviva vs Pastore
- Context
- Decisions
Complication from ankle injury in auto accident. Sought catastrophic impairment designation (which provide access to much compensation) and Aviva rejected.
**Deleguate decision:**
Only one impairment criterias must be satisfied:
- Daily Function
- Ability to Work
- Concentration
- Social Function
We can combine physical and mental injuries because they are too hard to separate (comprehensive approach).
**Appeal:**
Upheld deleguate decision
110
What are the 5 objectives of Insurance Bureau of Canada ?
- Engage in research
- Discuss about general insurance
- Enhance public understanding
- Data collection
- Study legislation
111
Legislation vs Guidelines
- Guidelines : more flexible.
- Legislation : Must go through Senate, House of Commons, Royal approval
112
Legislation to protect Canadian insurer against foreign insurers (2)
- Must maintain assets in Canada
- If insolvency, canadian insurers can take over the asset
113
Advantages of foreign insurers in Canada (3)
- Capital
- Competition
- Innovation
114
Mandates of Canadian Council of Insurance Regulators (4)
- Drafting legislation
- Education
- Adequacy of provincial regulation
- Promote uniform practices in industry
115
*** IMPORTANT ***
Morrow vs Zhang
- Context
- Decisions
AB capped minor injuries at 4000$ in an attempt to address rising costs and increase in under-insured motorists.
Cap was challenged as the grounds of discrimination against individuals with minor injuries.
**Trial:**
Removed cap, discrimination based on injury (distinguish people based on disability violated section 15 of Charter)
**Appeal:**
Keep cap, not discriminatory based on Charter and can no longer be appeal
True that it distinguish but not discriminatory
This case is the reference when validating the cap for minor injuries that is adjusted annually for inflation.
116
Amos vs Ins Corp of BC
- Context
- Decisions
Insured was shot by a gang in California with a rented car. Claims no-fault Accident Benefits against his BC auto policy. Insurer denied it stating injury was caused by gun not vehicle.
**Supreme Court of Canada:**
Introduce Amos test :
- Did accident result from the ordinary activities of vehicle ?
- Is there some causal relationship between injuries and use of vehicle ?
Wording of policies states that benefits must be given for injuries *THAT ARISE OUT OF* the ownership, use or operation of vehicle. COVERED.
**Applicability in Ontario:**
Wording different. CAUSED BY. Not covered
117
Resurface Corp vs Hanke
- Context
- Decisions
Zamboni accident incur burn to insured. Sued manufacturer for negligence in making the gas and water tanks similar leading to his mistake.
**Trial :**
But for test. Manufacturer won
Would result have occured but for act of defendent ?
**Appeal:**
Material Contribution Test. Plaintiff won
Requires that negligent action materially contributed to the risk of harm
**Supreme:**
Reinstate Trial decision
118
Kusnierz vs Economical Mutual Insurance
- Context
- Decisions
Leg amputated from auto accident and sough classification as catastrophically impaired (physical + mental damages).
Insurer argued that Statutory Accident Benefits Schedule required physical and mental impairment to be assessed separately.
**Conclusion:**
Mental and physical impairment can be combined to determine CAT claims. This reasoning was based on 3 pillars :
- SABS doesn't forbid it
- Combination consistent with guidelines
- Unfair for those who falls into multiple categories
This solution will increase cat claims but still rare.
119
Whiten vs Pilot Ins Co
- Context
- Decisions
House destroyed in fire. Insurer cut rent alleging arson but has no evidence.
**Trial:**
1M$ punitive damage
**Appeal:**
Reduced to 100k$ (no physical harm occured 1M to high)
**Supreme:**
Reverse decision because act was highly reprehensible as an effort to force an unfair settlement
**Considerations for quantum:**
The Supreme Court established specific criteria for determining the size of punitive damages in insurance cases:
- Vulnerability of victim
- Degree of harm
- Blameworthiness of insurer
- Deterrence to insurer
120
Dillon vs Guardian Ins Co
- Context
- Decision
Guardian ins rejected a settlement that was less than policy limit (4M$). Jury award 7M$. Sued insurer for excess amount above policy limits.
**Court:**
Insurer has absolute liability :
- Ruled that in cases where settlement within policy limit was possible and insurer choose to go to trial, must pay entire amount.
- Should not gamble with insured's money
121
Somersall vs Scottish and York
- Context
- Decision
Somersall severely insured by underinsured driver. Somersall sign limits agreement with tortfeaser and claims against own insurer for excess beyond limits agreement (since they had SEF 44 Endorsement). Insurer refused stating that the agreement removed the insurer's right of subrogation.
**Supreme Court:**
Insurer pays because limit agreement did not:
- Prevent insured from being fully compensated for entitlement
- Insurer's right of subrogation after insured is fully compensated
122
Tomec vs Economical Ins
- Context
- Decisions
Serious injury in auto accident and granted 104 weeks of care benefits. Economical reclassified her as catastrophically impaired 5 years after stop of benefits. Economical denied benefits because 2-year statutory time limit for making a claim is expired.
**Trial:**
Discoverability Principle does not apply. Tomec did not apply for extended benefits in the 2-year period.
**Appeal:**
Discoverability Principle did apply. Would be absurd to expect Tomec to apply while she was not even classified.
**Discoverability Principle:**
A limitation period can be extend in certain cases, where a plaintiff did not have knowledge of and cannot have discovered the event.
123
Saadati vs Moorhead
- Context
- Decisions
Saadati was injured in auto accident by Moorhead. Saadati claimed the accident caused psychological damage.
**Trial:**
No physical damage but non-pecuniary damage of 100k$ (proof by family testimony)
**Appeal:**
No physical and mental damage (must have proof by an expert)
**Supreme:**
Reinstate trial decision.
**Recovery for mental illness depends on:**
- Duty of care : Defendant owed plaintiff a duty to be careful
- Breach of duty of care
- Legal causal relationship : Injury wasn't too remote
- Factual causal relationship : Accident caused mental state
- Mental injury is serious and prolonged and rises above anxieties and fear
All criterias were met. The law of negligence must afford equal protections to victims mental and physical injuries.
124
Describe the deep pocket syndrome in tort tension and propose one reform that would help.
Victims go after company with deepest pockets to pay total loss even if they have a small degree of liability.
Solution : Replace with proportional liability
125
Explain whether damages for loss of income could be greater than the plaintiff would have otherwise received while working in tort reform
If reform, no because plaintiff would receive compensation on a net basis instead of gross. Currently, the basis is gross income so plaintiff receive more than their net loss.
126
Why costs of involuntary exit are lower in CAN vs US for PACICC ?
Dividends from liquidation are returned to solvent member companies
127
Flex Rating
- Definition
- Advantages (2)
Flex rating allows insurance companies to change rates within a pre-defined range without needing prior approval from the regulator
**Advantages:**
- Less volatility in premium
- More efficient for rate change as it does not required regulator's prior approval when rate are in a specific range
128
Initiatives for affordability issue in BC auto compensation system (2)
- Cap for non-pecuniary damages
- Increase road safety with intersections cameras
129
Elements of ORM framework maintenance (3)
- Training (on-going education)
- Documentation
- Periodic Reviews
130
What is the continuum of rate regulation approaches in Canada ? (3)
- Active regulation
- Moderate regulation
- Competitive
131
UBIP (Usage-based Insurance Pricing) :
- Items included in filing (4)
- Programs costs (2)
- Once a new discount is approved, how long must the insurer continue to offer the discount and why?
- When is rate capping not permitted? (3)
**Items :**
- Driving behaviours (Acceleration, speed, distance)
- How data is measured
- How data is normalized and categorized for rating purpose
- Loss data to support UBI discount
**Costs:**
- Start-up
- Ongoing expenses (data transfer, marketing, third party provider contracts)
**Time :**
- 3 years to ensure stability in market
**Rate capping not permitted :**
- Base Rate changes only
- Broker portfolio transfers or acquisition
- Premium decreases (negative capping)
132
*** IMPORTANT ***
What are the 2 categories of Fairness and describe ?
**Procedural :**
How are insureds treated throughout the pricing process.
(How to handle missing data? Which variable to include?)
**Distributive :**
Distribution of pricing outcomes across various insureds. (not linked to pricing but result)
133
*** IMPORTANT ***
What are important conditions on rate in major filing Ontario ? (4)
- Annual Basis
- Identify Surcharges / Discounts
- Include commissions and other expense provision
- Prior to dividends
134
Primary cause of increasing auto insurance premiums in Alberta.
Increase in BI awards (no cap)
Exam 6C (2nd try)
flashcards
Decks in class (3)
# Cards
