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

Based on the Fletcher v MPIC case, identify 3 criteria for establishing a duty of care.

Answer 16

MPIC owes a duty of care to its customers if:
(1) customers rely on the information
(2) their reliance is reasonable
(3) MPIC knew (or should have known) the customer would rely on this information

Question 17

Identify the 3 different levels of insurance regulation

Answer 17

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

Question 18

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

Answer 18

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

Question 19

Define the standard of absolute liability

Answer 19

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

Question 20

What are the 3 different possible standards for liability

Answer 20

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