Chapter 2 - other influences

Question 1

Name 10 different insurance industry influences

Answer 1

Competition
development Prior loss reserves
mergers and acquisitions
market dislocation
reinsurance
claims frequency
unexpected events
profitability and investments
financial strength and rating agency
product innovation
the alternative market
the employment environment 
electronic communication /technology

Question 2

What is the main responsibility of PIPEDA

Answer 2

PIPEDA was designed to protect the privacy of personal information that is collected, used, or disclosed by banks, insurers and other private sector organizations.

in addition for insurance: governing how business is to be conducted with the federal government by electronic means, and clarifying how electronic records may be used as evidence

Question 3

What is basic principle of PIPEDA

Answer 3

personal information should not be collected, used, or disclosed without prior knowledge and consent the individual it concerns.

Question 4

What are the 3 main obligations of PIPEDA

Answer 4

Accountability (organization must designate a person to oversea compliance with PIPEDA, and organization must adopt practices. policies, and procedures to do so… also train staff to do so)
Accuracy (Decisions based on accurate information ex such as insureds age, address, marital status etc) as these items can affect premium)
Consent (the organization must have knowledable consent)

Question 5

What IBNR

Answer 5

claims that have happed, but not yet reported to the insurance company

Question 6

what is ART

Answer 6

alternative risk market

Question 7

What is a captive

Answer 7

– is an example of an ART. Is an insurer owned and controlled by its insureds. Captive is usually a special purpose subsidiary created to insure the risks of its parent company

Question 8

What is SIR

Answer 8

Is the amount of potential loss not covered by the insurance company.

Question 9

What is Reciprocal

Answer 9

is a means of risk financing in which a group or a number of subscribing organizations together appoint a central underwriter. Colleges/Universities are good examples

Question 10

What are DJ actions

Answer 10

declatory judgement actions. The actions required to determine if coverage exists for environmental issues.

Question 11

What is limitation period

Answer 11

period in which the insured is allowed to sue the insurer for settlement that did not meet expectations

Question 12

Tolling agreement

Answer 12

the agreement to suspend the limitation period

Question 13

What is class action

Answer 13

is a lawsuit brought against another party by a group of people with similar claims against that same party

Question 14

What is coordinating council

Answer 14

is a lawyer chosen by the insured (defendant) of the class action lawsuit. The lawyer or lawyers who will conduct the insured’d defence in negotiations and legal proceedings with the plaintiffds and the judge

Question 15

Competition

Answer 15

200 insurers in Canada, 2/3 of competition of foreign owned
Advantage of foreign owned companies is easier to raise capital
Problem with foreign ownership is many companies may become intolerant to any deteriation of the Canadian insurance climate. Europe not comfortable with liability losses

Question 16

Mergers and acquisitions

Answer 16

can force more competition for other brokers and insurers

Question 17

Market dislocation

Answer 17

when a competitor leaves the market for whatever reason ex: Geographic area. The question for other insurers becomes, how can we take advantage of this?

Question 18

Development of prior accident year reserves

Answer 18

IBNR - may be worse than expected

Question 19

Unexpected events

Answer 19

good financial results can be tarnished by random catastrophic results

Question 20

profitability and invesments

Answer 20

insurance companies do not just make money with profits gains, they do so by investing in the markts

Question 21

Financial strength and rating agencies

Answer 21

personal and commercial insurance buyers want to insure with a financially strong insurer that will be ready to pay a claim if the time comes. Standard and Poor. AM best company

Question 22

What influences of technology and industry group on insurers and the industry

Answer 22

Public Safety Canada
Emergency Management – develops policy, response system and standards for such as thing as natural disasters, terrorism, computer viruses
Canadian Standards Association – standard and code which indicates acceptable levels of safety, quality and performance
Council of Canadian Fire marshals and fire commissioners
Canadian safety council – a chartitable organization dedicated to safety. Example would include: the motorcycle training program
Canadian boiler and machinery underwriters association
Insurance institute for highway safety

Question 23

what are the legislative and judicial facors that influence insurers and the industry

Answer 23

PIPEDA
Environmental legislation (DJ actions)
Limitations act aka limitation period.
Class actions
Judicial decisions
Faciliaty association
Property and Casualty Insurance Compensation Corp (PACICC)– and industry  run, not for profit entity that guarantees most property and casuality insurance policies. Designed to come into operation  if an insurer become insolvent and not able to pay the losses to the insureds.