Baer.Intro Flashcards
Identify the 5 objectives of IBC (Insurance Bureau of Canada).
- STUDY legislation
- COLLECT/analyze data
- ENGAGE in research
- DISCUSS general insurance
- PROMOTE public understanding
Identify 6 areas of Canadian legislations (federal/provincial) that promotes financial soundness of insurance companies. (Hint = CIRCA-F)
- CREATION: oversee creation of (domestic) & licensing (foreign) of insurers
- INVESTMENTS: restrictions on types of investments that are permitted (to
reduce risk) - RATING: authorization of rating bureaus for info-sharing
- COMPLIANCE: give Govt depts authority to enforce compliance with
legislation - ADEQUACY: create boards to oversee and ensure adequacy of rates
- FILE F/S: require regular filing of Financial Statements
What has been the 5 focus areas of Canadian Insurance regulation since Confederation (Hint = MOTHS)
-
Marketing integrity & improvement of insurance contract - Encourage Canadian
ownership - Collection of
taxes -
Honesty & competence of intermediaries (Ex: agents) - Keep insurer’s
solvent to protect policyholders
What is the ‘principle of indemnity’
After covered loss, return insured to former financial position (before loss), and neither penalize nor reward
What is a ‘contract of indemnity’
Contract where amount recoverable is measured by insured’s pecuniary loss
Briefly explain the important intent of doctrine of subrogation
Prevent over-compensation of insured
Identify 2 ADVANTAGES and 2 DISADVANTAGES of foreign participation in the Canadian insurance industry
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
Briefly discuss whether a life insurance contract is considered an indemnity policy.
No, because the amount recoverable is not measured by the loss.
The amount payable is fixed and written into the contract.
Identify 2 conditions that an insurer must establish to be entitled to recover under an indemnity insurance contract.
- Event must be covered
- Requires proof of AMOUNT of loss
Briefly describe how a ‘valued policy’ differs from a typical insurance policy.
Proof of amount of loss not required because compensation is pre-determined by contract
What conditions (3) eventually led to public control regarding solvency
- Insurer bankruptcies in the 1860s/70s
- The recognition short-term price competition is bad
- Insurance involves a significant savings component (prepaid premiums) & policy holders must be protected
Briefly explain the difference between guidelines & legislation for insurance regulation
Guidelines are more flexible than legislation
Legislation must go through senate, house of commons, and get royal approval
Briefly describe two mandates of the Canadian Council of Insurance Regulators
- Legislation Axis:
Ensure adequacy of Provincial Regulation - Practices Axis:
Consumer protection
How does federal legislation protect Canadian insureds of foreign insurance companies (2)
- Foreign insurers must maintain sufficient assets IN CANADA (for recovery from insolvency)
- If foreign insurer goes insolvency then a Canadian insurer can assume control over assets (helps stop expatriation of capital)
Who oversees the Canadian
a) Solvency regulation
b) Rate regulation
(Federal or Provincial)
a) both - cooperative federalism has been achieved in practice
b) provincial
Identify the 3 different levels of insurance regulation
- legislation
- regulations by lieutenant governor in council
- guidelines by superintendents
Identify the 2 necessary conditions for reimbursement under ‘valued’ insurance policy.
- Event must be covered
- Requires PROOF of loss, but not amount of loss
Define the standard of absolute liability
IF settlement possible BUT rejected by insurer THEN insurer is liable for all costs (even in excess of policy limit)
What are the 3 different possible standards for liability
- Absolute liability
- Liability for not acting reasonably
- Liability for bad faith (builds on lack of reasonableness)
identify DIFFERENCES between private & social insurance
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)
identify SIMILARITIES between private & social insurance
- 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
Glynn vs Scottish : Facts
Glynn injured in auto accident
- was reimbursed by other driver’s insurer (including medical)
- Glynn sued to DOUBLE-RECOVER medical from own insurer
Glynn vs Scottish : Issue
Does Glynn’s insurer have right to subrogation?
Glynn vs Scottish : rulings - T/A
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
Fletcher v MPIC: Facts
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..
Fletcher v MPIC: Issues
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?
Fletcher v MPIC: Ruling 1,2,3
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
Dillon v Guardian Ins Co: Facts
- 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
Dillon v Guardian Ins Co: ruling
Ruling: In favour of insured. (Standard of absolute liability)
