C14 - Test your Knowledge, Long Answers Flashcards
Outline Accident Benefits in the provinces of the Alberta, Newfoundland, Nova Scotia, and Prince Edward Island. (10 marks)
Accident Benefits
- Accident Benefits are mandatory in all of these provinces except Newfoundland
- Accident Benefits consist of modest amounts that are set out in the policy
- or separate schedules
- Various limits apply
- In Nova Scotia, insurers are obligated to offer optional supplementary Accident Benefits in the same form as the mandatory Accident Benefits
- but with increased limits
- or durations
- Additional premium may apply to these benefits
- Benefits under this part of the policy are paid on a no-fault basis
- Coverage comprises several separate sub-sections:
- Medical, rehabilitation, and funeral expenses
- Death benefits and loss of income payments
- Supplemental benefits respecting accidents occurring in Quebec (This last item is not applicable to Nova Scotia.)
Outline the death benefits provided under Autoplan Accident Benefits. (10 marks)
Death Benefits under Auto Plan
- If an insured dies as a result of injuries sustained in an automobile accident, death benefits are payable to the insured’s spouse
- dependants
- or both (if applicable) - Benefit levels vary according to the position the insured held in the household
- If the insured provided the primary or higher source of income, the death benefit to the survivor(s) will be higher than if he or she provided less or no income
- Higher benefits are paid if the insured was considered the head of the household
- The number of surviving dependants will also affect the amount that will be paid
- There are two types of payments made under this section—an initial lump sum payment,
- and a weekly payment - The weekly payments will be paid for 104 weeks
- Dependant children age 19 or older who reside with the deceased person,
- and because of mental
- or physical infirmity, receive most of their financial support from the deceased person are also eligible to receive weekly payments for a maximum of 104 weeks
(a) Define the following terms:
(i. ) Pure premium (1 marks)
(ii. ) Expense loading (6 marks)
(b) List the components of loss costs. (3 marks)
(a) Components of a rate
(i) Pure premium is the amount required to pay only the anticipated losses
(ii) Expense loading is added to the pure premium and includes the following:
- Acquisition costs – commission and cost of the insurer’s sales structure
- Processing and servicing costs – administration
- Taxes – federal, provincial, and municipal
- Contingencies – catastrophes, extra large losses, and reinsurance costs
- Profit
(b) Components of loss costs
- paid losses
- outstanding losses
- incurred but not reported losses (IBNR)
List the requirements under Prescribed Condition 4, Requirements If Loss or Damage to Persons or Property. (15 marks)
Requirements If Loss or Damage to Persons or Property
- The insured must promptly give the insurer written notice, with all available particulars, of
- any accident involving death,
- injury,
- damage,
- or loss in which the insured
- or a vehicle owned or operated by the insured has been involved;
- any claim made in respect of the accident;
- and any other insurance held by the insured providing coverage for the accident
- on receipt of a claim,
- legal document,
- or correspondence relating to a claim, immediately send the insurer a copy of the claim, document, or correspondence;
- cooperate with the insurer in the investigation,
- settlement,
- or defence of a claim or action;
- except at the insured’s own cost, assume no liability
- and settle no claim; and
- allow the insurer to inspect an insured vehicle
- or its equipment or both at any reasonable time
Explain Inverse liability. (10 marks)
Inverse Liability
- Inverse Liability coverage is part of basic Autoplan.
- It is included under First Party Coverage (Regulations, Part 10),
- which also includes Underinsured Motorist coverage - Inverse Liability covers British Columbia insureds who are involved in collisions in parts of Canada
- or the USA, where local laws prevent them from seeking compensation from the other (at-fault) driver after the crash
- jurisdictions where insureds and/or their insurers are responsible for paying the costs of repairing their own vehicles - Inverse Liability covers vehicle damage only
- It does not cover any medical or rehabilitation costs, as these would be covered by Accident Benefits
- The amount of coverage provided under Inverse Liability corresponds to the degree of fault assigned to the other driver for the loss
- This means that insureds who are partially at fault will be responsible for paying part of their loss
- To be fully covered, they would require collision coverage
List (10) TEN perils covered under Specified Perils. (10 marks)
(a) Specified Perils Coverage
- Fire
- Theft (except by an employee or member of the insured’s household)
- Lightning
- Windstorm
- Earthquake
- Hail
- Explosion
- Riot
- Civil commotion
- Falling or forced landing of an aircraft or a portion of it
- Rising water
- The stranding, sinking, burning, derailment, upset, or collision of a conveyance transporting the vehicle on land or water
You are a broker and you are in the process of selling a basic Autoplan policy to a potential client for his 8-passenger minivan. Your client has some concerns and a few questions. Please provide detailed answers to each of your client’s questions below.
(a) My entire family is planning a road trip through parts of Canada, the U.S.A., and Mexico. What kind of coverage will this policy provide us with? (6 marks)
(b) If I buy a new car, will it be covered under this policy? (5 marks)
(c) I have a camping trailer that we will be pulling during the road trip. Do I need to insure it? (5 marks)
(d) Is coverage provided if we use the vehicle for a business offering sightseeing adventures? We will only be charging tourists $5 for the trip. (4 marks)
(a) Territory
- Insurance provided by this contract applies only within Canada,
- the United States of America
- and upon a vessel travelling between ports of these countries
- When the insured travels elsewhere (Mexico or to Europe), for example, it is necessary to buy a local automobile insurance policy
- Basic Autoplan and extension Third Party Liability
- and Own Damage coverage also cover losses occurring in Canada
- or the USA or on a vessel travelling between them
- The Autoplan policy will provide the insured with coverage through Canada and the US, but not when they are traveling through Mexico (5 marks)
(b) Newly Acquired Automobile
- Coverage will be provided to the insured if he purchases an additional automobile and disposes of the old vehicle.
- The insured cannot own both vehicles at the same time.
Coverage
- The Substitute Vehicles provision under the Insurance (Vehicle) Regulation grants 10 days coverage from the date a substitute vehicle is acquired
- and title to the described vehicle has been transferred,
- meaning the day it is sold or disposed of - The vehicle being replaced must be disposed of for coverage to be in effect
- Also, coverage applies only if the licence plates are current
- and compatible, i.e. car to car; truck to truck. It cannot be motorcycle to car.
- meaning private passenger plates are removed from the old vehicle
- and displayed on the new one
- which is also a private passenger vehicle (5 marks)
(c) Trailer
- The insured will need to insure their trailer
- ICBC does not automatically cover trailers
- There is no section in the Insurance (Vehicle) Regulation that automatically transfers Third Party Liability coverage to a towed trailer
- Each trailer registered in British Columbia must have separate plates
- and insurance
- There is no specific provision regarding out-of-province trailers (5 marks)
(d) Excluded Uses
- The insured will not receive coverage for using his automobile as a sightseeing vehicle
- The Insurance (Vehicle) Regulation and Insurance (Vehicle) Act do not exclude the same vehicle uses as the SPF 1
- Instead, ICBC has specific rate classes for many of the uses that would be excluded under the SPF I,
- including renting or leasing the vehicle,
- carrying explosives,
- and using the vehicle to carry passengers for compensation
- To be properly covered, vehicles used for these purposes must be placed in the correct rate class (4 marks)
(a) List the FIVE (5) major classes of automobile risk. (6 marks)
(b) Describe the use of the CLEAR system for setting automobile insurance rates. (9 marks)
(a) Major classes of automobile risk
- Private passenger (pleasure and business use)
- Commercial vehicles (trucks and delivery autos)
- Public automobiles (buses and taxicabs)
- Recreational vehicles (motorcycles, snowmobiles, ATVs)
- Garage risks (road hazard and dealership risks)
- Non-owned automobiles (6 marks)
(b) CLEAR (Study 9 – pages 5 and 14)
- Canadian Loss Experience Automobile Rating (CLEAR) system
- Insurers use it to set rates for private passenger automobiles.
- Under CLEAR, the premium for the physical damage insurance is based on the likelihood of vehicles being involved in claims
- and what it will typically cost to settle each claim
- Under CLEAR system, rate groups are now calculated using data recorded by the Vehicle Information Centre of Canada (VICC)
- on the cost of claims relative to such factors as wheelbase,
- body style,
- weight-to-horsepower ratio,
- price, and
- the theft record of individual models. (9 marks)
Explain why the following special coverage’s are used:
(a) Collector Motor Vehicle Agreed Value Policy (5 marks)
(b) Excess Special Equipment Endorsement (5 marks)
(c) Income Replacement Policy including Death Benefits (10 marks)
(a) Collector Motor Vehicle Agreed Value Policy
- The Collector Motor Vehicle Agreed Value policy (APV348) covers vehicles that are collected by enthusiasts but do not qualify for a Vintage Motor Vehicle certificate.
- It provides a range of Third Party Liability limits
- and Own Damage coverage,
- along with a range of deductibles for eligible vehicles.
- Premiums and licence plate fees are reduced. (5 marks)
(b) Excess Special Equipment Endorsement (Study 7—page 14)
- The Excess Special Equipment endorsement (APV300) covers vehicle equipment not supplied by
- or available from the manufacturer that has a combined value greater than
- $1,000 for permanently attached and shuttle-mounted sound or communication equipment; or
- $5,000 for other permanently attached equipment, including a custom paint finish.
- Each item of “sound or communication equipment” or “other equipment” and its value must be listed on the endorsement.
- The vehicle must have Own Damage coverage to be covered under this endorsement. (5 marks)
(c) Income Replacement Policy including Death Benefits (Study 7—page 14)
- The Income Replacement policy including Death Benefits (APV197) provides Accident Benefits to British Columbia motorists in addition to those provided by basic Autoplan.
- The additional benefits are paid only after benefits are claimed
- and paid under basic Autoplan.
- The APV197 covers the named insured
- as well as the named insured’s spouse
- and dependents,
- provided they reside in the same household as the named insured.
- Benefits are provided for injuries sustained by an insured who is riding in an owned or non-owned vehicle,
- or who is a cyclist
- or a pedestrian involved in an accident with a vehicle.
- No benefits are paid if the insured is not a British Columbia resident.
- One APV197 covers the named insured and any spouse and dependents living at home,
- irrespective of the number of vehicles owned by those individuals.
- If an insured is covered by more than one APV197, ICBC will only pay income replacement or death benefits to the insured according to the terms and conditions of one APV197 policy.
- There is no stacking of benefits.
- The income replacement benefits payable to an insured person under this policy, either alone
- or jointly with any other plan or policy, will not be more than 75 percent of the gross weekly income of the insured person. (10 marks)
Discuss the Green/Grey Book automobile experience data and its use in automobile insurance in B.C. (20 marks)
Green/Grey book automobile experience data
- All private automobile insures who write business in Canada must record and file automobile experience data
- This is a requirement of the Automobile Statistical Plans prescribed by the Superintendents of Insurance.
- Information is used to provide industry-wide statistics.
- These statistics are used for analysis
- This work is undertaken by the Insurance Bureau of Canada (IBC)
- The cost is shared among the insurers,
- except in provinces where basic automobile insurance is provided by the government
- IBC (Insurance Bureau of Canada) complies with the information
- The cost is at the insurer’s cost
- In Quebec, the Groupement des assureurs performs this function
- The results of the analysis are published annually in the Green Book.
- In Quebec, the results are published in the Grey Book
- Exhibits show a five-year history for the following:
- Private passenger automobiles
- Farmers’ private passenger automobiles
- Commercial automobiles
- Snow vehicles
- Motorcycles
- Inter-urban trucks
- Public classes
- Garages
- Some miscellaneous classes
- Data is exhibited per policy year and accident year.
- Policy Year
- All policies with policy-effective dates within the year are grouped together.
- All claims arising from these policies are taken into account, regardless of when they occur.
- Claims that are reported late are included so that premiums are matched with losses.
- Information gives the actuary a starting point from which to project future loss costs and to develop premiums.
- Accident year
- All losses in a given year, regardless of the policy years to which they are attributable, are grouped together.
- Loss costs demonstrated are the most recent indicators of what the future loss costs may be
- For example, if a policy is sold with an effective date of December 1, 2010 and a claim occurs in January 2011, the claim is reported as a 2011 claim for actuary purposes
- Both policy year and an accident year must be distinguished from calendar year
Outline the TWO (2) bodily injury benefit coverages under basic plate insurance in Saskatchewan. (15 marks)
Saskatchewan bodily injury benefit coverages
No-fault option
- Includes the following coverages, which are subject to various limits and conditions:
- income benefits
- rehabilitation coverage
- medical,
- travel,
- and personal expenses
- living assistance
- permanent impairment payments
- death benefits
- and funeral expenses
- Benefit limits are indexed
- Coverage limits under the no-fault option are greater than under the tort option, however, the insured’s right to sue is severely limited
Tort option
- Includes the following coverages, which are subject to various limits and conditions:
- income benefits
- medical and rehabilitation coverage
- permanent impairment payments
- death benefits
- and funeral expenses
- Coverage limits are lower than under the no-fault option, because an injured person not responsible for the collision can sue those responsible for expenses above the package of benefits
- and for pain and suffering
(a) List SIX (6) pieces of information that you would find on a pink card. (6 marks)
(b) Describe Autoplan Third Party Liability coverage for non-owned vehicles. Which non-owned vehicles would not be covered under Autoplan? (10 marks)
(c) Outline the rights of ICBC Third Party Liability Claims. (4 marks)
(a) Pink Cards
- Name and address of insurer
- Name and address of insured
- Agency or brokerage name or number
- Description of insured vehicle
- Policy number (licence plate number in those provinces with full government plans)
- Effective date and expiry date (6 marks)
(b) Coverage for Non-Owned Vehicles (Study 2 – page 14)
- A person named as an owner in an owner’s certificate
- A member of the owner’s household
- An employee
- or partner of the owner for whose regular use the vehicle described in the owner’s certificate is provided
- The spouse of an employee or partner described in paragraph
- where the spouse resides with the employee or partner
Non-Owned Vehicles not Covered
- Autoplan Third Party Liability coverage is not transferable in situations where
the insured is operating the motor vehicle in connection with the business of a garage service operator
- Where the insured is working as a garage employee and driving the non-owned vehicle in the course of his or her work in the garage coverage is not transferable.
- The motor vehicle is owned or regularly operated by an insured
- Coverage is not transferable if the non-owned vehicle being driven is owned or regularly operated by an insured such as the husband driving a vehicle registered to his wife while they are residing in the same household
- The motor vehicle is used for carrying passengers for compensation
- or hire or for commercial use
- There is no coverage if the non-owned vehicle is being used as a taxi or for commercial purposes such as a delivery vehicle.
- The motor vehicle is not licensed under the Motor Vehicle Act, the Commercial Transport Act, or similar legislation of another jurisdiction,
- and the insured does not have reasonable grounds to believe the motor vehicle is licensed
- There is no coverage if the insured operates a non-owned and unlicensed vehicle and does not have reasonable grounds for believing it was licensed. (10 marks)
(c) Rights of ICBC: Third Party Claims (Study 2 – page 16)
- Corporation shall be entitled to appoint and instruct counsel to defend the action
- Admit liability, in whole or in part, on behalf of the insured
- Participate in any non-judicial process which has as its goal the resolution of a claim
- Compromise or settle the action (4 marks)
Describe the coverage provided under Autoplan for an occupant of a vehicle driven without consent. Please provide an example. (5 marks)
Consent of Owner
- Under Autoplan there is no need for a specific exclusion to deny Third Party Liability coverage to an occupant or driver of a vehicle driven without consent
- This is because an insured person under Third Party Liability (Part 6) is deemed to be an individual who
- with the consent of the owner
- or while a member of the owner’s household, operates the vehicle described in the owner’s certificate
- Under normal circumstances, a vehicle owner is not liable if a passenger in his or her vehicle is injured while it is being driven without his or her consent
- because, by definition, the person driving the vehicle without consent (the thief) is not an insured
- Accident Benefits (Part 7) are available to both the driver
- and the occupant of a vehicle driven without consent
- unless payment of benefits is restricted as detailed in Section 55(3)
- and Section 96 of the Insurance (Vehicle) Regulation
You are an insurance agent, and you have just completed a verbal application (APV250) for Chloe, 22, who is insuring her two door hatchback.
Chloe, stated in the application process that she uses her vehicle on weekends, when in actual fact she uses to commute everyday to work and school. Chloe did this so that she would receive a lower premium.
While driving to work, Chloe is involved in a motor vehicle accident, where she suffered serious permanent injuries preventing her from working.
Did Chloe violate the Insurance Vehicle Act, and if so what is the penalty? Explain. (15 marks)
(a) Forfeiture and Relief from Forfeiture (Study 8 – page 4)
- Chloe intentionally misrepresented her situation to receive a lower premium, and as a result violated the section 75 of the Insurance (Vehicle) Act
- In both cases, APV9 and APV250, the owner must declare that the answers he or she has given are true,
- and must sign the document to this effect in order to validate it
- Any false statement can result in forfeiture of a claim in accordance with the insurance (Vehicle) Act (Section 75).
- It states all claims by or in respect of the applicant or insured are invalid and the right of an applicant,
- an insured,
- or a person claiming through or on behalf of an applicant
- or insured or of a person claiming as a dependant of the applicant or the insured, to insurance money under the plan
- or an optional insurance contract, is forfeited if
- the applicant for coverage under the plan or the optional insurance contract
- knowingly misrepresents or fails to disclose in the application a fact required to be stated in it
- However, the Insurance (Vehicle) Act (Section 19) allows ICBC to provide relief from forfeiture in cases of hardship. It states
- If a forfeiture under section 75 would appear inequitable, the corporation may relieve a person affected by it from the forfeiture of all or any insurance money
- The corporation must relieve an insured from a forfeiture of the benefits under section 75 that it considers equitable if, as a result of an accident, the insured dies
- or suffers a loss of function of mind
- or body that renders the insured permanently incapable of engaging in any occupation for wages or profit.
- The permanent serious injuries that Chloe suffered in her motor vehicle accident may allow her to relief from forfeiture as she is not able to work
