FSCO - PPA

Question 1

Prohibited risk classification elements. (6)

Answer 1

• claims where fault <25%
• credit history
• occupation (some exceptions)
• net worth
• employment history
• salary

Question 2

Can an insurer lower your rates because your salary increased?

Answer 2

NO: salary is a prohibited risk classification element

Question 3

Can an insurer change your rates because you moved?

Answer 3

YES: territory is a valid rating variable

Question 4

Can an insurer raise your rates if you become an Uber/Lyft driver?

Answer 4

YES: use of the vehicle is a valid rating variable

Question 5

Can an insurer lower your rates because you own a certain credit card?

Answer 5

NO: credit history as well as the number or type credit cards owned is a prohibited risk classification element

Question 6

List the types/subtypes of approval processes? (2)

Answer 6

• prior approval (major requirements, simplified guidelines)

- file and use (major requirements, minor requirements)

Question 7

Describe the UDAP (Unfair or Deceptive Acts or Practices) requirement regarding rate levels among affiliates.

Answer 7

Basically, it is unfair or deceptive if the insurer fails to provide the lowest rate among all affiliates.

Question 8

Describe FSCO prior approval and give examples of vehicle classes to which it applies.

Answer 8

FSCO approves the rates, rate changes and risk classifications before their use.
Eg: PPA on OAP1, FA (Facility Association)

Question 9

Describe FSCO expedited approval and give examples of vehicle classes to which it applies.

Answer 9

It is a type of prior approval with approval in 30 days.

Eg: PPA on OAP1, excl. FA (Facility Association)

Question 10

Describe FSCO file and use and give examples of vehicle classes to which it applies.

Answer 10

Insurer files rates, rate changes and risk classifications THEN the regulators have 30 days to approve, otherwise rates can be used.
Eg: other than PPA, commercial, endorsements, excl. FA (Facility Association)

Question 11

What is OPCF-44R?

Answer 11

• coverage for ‘underinsured MOTORIST’ (as opposed to uninsured AUTO’)
• it is the difference between your TPL limit and the at-fault driver’s TPL limit

Question 12

Officer certifications in major filings - WHICH company officers qualify and WHEN are certifications required?

Answer 12

Qualifications: CEO, COO, CFO, Chief Agent in Canada

When required: always

Question 13

Which filing items must an OFFICER certify? (4)

Answer 13

• Effective dates: for new and renewal business
• Guidelines: must certify compliance
• Info/data: certify accuracy and completeness
• Rates: reasonable, not unfairly discriminatory, don’t impair solvency

Question 14

Actuarial certifications in major filings - WHICH actuarial designation are required and WHEN are certifications required?

Answer 14

Qualifications: actuary must be FCIA

when required: when rates change or there is a new LOB

Question 15

What filing items must an ACTUARY certify? (6)

Answer 15

• Effective dates: for new and renewal business
• Vehicle classification system
• that the Actuary has been authorized by insurer
• that the Data is SUFFICIENT and RELIABLE
• that the AAP (Actuarial Accepted Practice) was used
• that the Risk classification system is reasonable

Question 16

Is an actuary’s certification needed for fleets?

Answer 16

No, but it is needed for endorsements, commercial, vehicles insured by FA (Facility Association)

Question 17

What information is generally required in a rate filing? (3)

Answer 17

• data, narrative: all steps for rate changes
• assumptions, methods: regulator should be able to trace steps from raw data TO final rates
  NOT REQUIRED: a specific methodology

Question 18

Describe the treatment of loss data in filings regarding REINSURANCE.

Answer 18

EXCLUDE: reinsurance should not impact price charged to insured.

Question 19

Describe the treatment of loss data in filings regarding CESSION to RSP (Risk Sharing Pool).

Answer 19

INCLUDE: as if never ceded

Question 20

Describe the treatment of loss data in filings regarding FARM LOSSES.

Answer 20

EXCLUDE: FA (Facility Association) sets their own prices using FARM loss data

Question 21

Describe the general properties of coverages where premium trends are required. (3)

Answer 21

• coverages with inflation-sensitive exposure bases
• where mix is changing (Eg: physical damage make and model)
• for CLEAR filings: but note that premium trend is already accounted for in development of rate groups
  where CLEAR = Canadian Loss Experience Automobile Rating

Question 22

What are the regulatory requirements when changing territory factors in a major filing? (note: this is DIFFERENT than for a simplified filing) (3)

Answer 22

REBASE current, indicated, proposed territorial relativities
RECALCULATE indicated change, proposed change
CHECK that:
- indicated and proposed changes have the same sign (+ or -)
- magnitude of proposed change < magnitude of the indicated change
- magnitude of proposed changes are < 10%

Question 23

Why might FSCO not approve an auto filing? (2)

Answer 23

• insurer used a prohibited rating variable

- insurer’s risk classification system is not reasonable (or not sufficiently predictive of loss)