Chapter 3 Regulatory Framework

Question 1

What does PIPEDA stand for?

Answer 1

Personal Information Protection and Electronic Documents ACT

Question 2

What is solvency?

a. A business entity’s ability to meet its long-term financial commitments
b. An endorsement on an insurance policy
c. The insurer’s availability to provide coverage for a range of risks
d. A bonus premium paid to brokers

Answer 2

a. A business entity’s ability to meet its long-term financial commitments

Solvency is a business entity’s ability to meet its long-term financial commitments.

Question 3

What is the purpose of the Personal Information Protection and Electronic Documents Act?

a. To balance individuals’ privacy rights with the need of organizations.
b. To bring about change in the insurance industry
c. To assist in the growth of the insurance organization
d. To overrule the principles of indemnity

Answer 3

a. To balance individuals’ privacy rights with the need of organizations to collect, use, or disclose personal information for reasonable and appropriate purposes
The Personal Information Protection and Electronic Documents Act (PIPEDA) governs the collection and use of personal information. It states that personal information to be collected must be relevant and that all information that has been collected, is being collected, or will be collected must be held in the strictest of confidence.

Question 4

What is the role of the Office of the Superintendent of Financial Institutions?

a. It controls the wording of policies issued by federally licensed insurance companies.
b. It regulates the financial stability of federally licensed insurance companies.
c. It grants licenses to agents who represent federally licensed insurance companies.
d. It only monitors the operations of life insurance companies in Canada.

Answer 4

b. It regulates the financial stability of federally licensed insurance companies.

The Office of the Superintendent of Financial Institutions (OSFI) in Ottawa is responsible for the constant supervision and enforcement of safeguards so that inadequately financed insurance companies are not established and existing ones remain financially healthy.

Question 5

What three areas does the Insurance Companies Act regulate?

a. Establishment of an insurance company, prerequisites to operation, and supervision during operation
b. Establishment of an insurance company, prerequisites to operation, and licensing of executive officers
c. Establishment of an insurance company, capacity during operation, and licensing of executive officers
d. Capacity during operation, licensing of executive officers, and reporting of loss results to a general insurance statistical agency

Answer 5

a. Establishment of an insurance company, prerequisites to operation, and supervision during operation

The Insurance Companies Act regulates the establishment of an insurance company, the prerequisites to operation, and supervision during operation.

Question 6

Which of the following is an automobile statutory condition?

a. Degree of Injury Suffered
b. Overpayment of Insurance Premium
c. Material Change in Risk
d. Contract Wording Bias

Answer 6

c. Material Change in Risk
Material Change in Risk is one of the automobile statutory conditions.

Question 7

Which of the following statements about Quebec general conditions is true?

a. They are applicable only to fire insurance risk.
b. They are sections of the Civil Code reproduced in insurance policies.
c. They are identical to statutory conditions.
d. They are statutory in nature.

Answer 7

d. They are statutory in nature. 
General conditions (Quebec) are statutory in nature in that provincial legislation sets out the subject matter that must be covered by these conditions although it does not specify the exact words that must be used.

Question 8

Which statement is correct?

a. Each province has its own superintendent of financial institutions.
b. The Highway Traffic Act deals with insurance agent and broker licensing.
c. The superintendent of insurance overseas agent and broker licensing pursuant to the provincial/territorial insurance acts.
d. The Insurance Companies Act deals with provincial licensing and supervision of insurance companies and solvency standards for insurers.

Answer 8

c. The superintendent of insurance overseas agent and broker licensing pursuant to the provincial/territorial insurance acts.

Question 9

Which statement is true?

a. The statutory conditions must be identified and printed in every liability insurance policy.
b. Statutory conditions are special prescribed and standardized conditions that the federal insurance acts require to be included in all insurance policies.
c. Insurers can omit all the statutory conditions if the contract has an extremely short duration, like in a ticket or travel contract.
d. Statutory conditions may be included or excluded in any type of insurance policy, at the insurer’s discretion.

Answer 9

c. Insurers can omit all the statutory conditions if the contract has an extremely short duration, like in a ticket or travel contract.
Insurers can omit all the statutory conditions if the contract has an extremely short duration (like in a ticket or travel contract) or if the contract is a non-renewable accident insurance policy of under six months.

Question 10

Which type of conduct could seriously impair a defense against a fraudulent claim?

a. Any improper conduct regarding maintaining the confidentiality of information
b. Any conduct in accordance with the Personal Information Protection and Electronic Documents Act (PIPEDA)
c. Any conduct required by the policy statutory conditions
d. Any conduct in accordance with the Personal Information Protection and Electronic Data Act (PIPEDA)

Answer 10

a. Any improper conduct regarding maintaining the confidentiality of information

Any improper conduct regarding maintaining the confidentiality of information could seriously impair a defense against a fraudulent claim.

Question 11

Who oversees agent and broker licensing pursuant to the provincial/territorial insurance acts?

a. Superintendent of banks
b. Provincial or Territorial superintendent of insurance
c. The provincial or Territorial Insurance Act
d. Prime minister of Canada

Answer 11

b. Provincial or territorial superintendent of insurance
Each province has its own Insurance Act. All private-sector insurance companies operating in the province/territory, brokers and agents, and adjusters are licensed by the superintendent of insurance (or provincial/territorial equivalent) pursuant to this Act.

Question 12

What is Solvency?

Answer 12

A business entity’s ability to meet it long term financial commitments.

Question 13

What are the three main areas covered by the Insurance Companies Act supervising Canadian Insurance Companies

Hint ESP

Answer 13

1. Establishment of an insurance company
2. Supervision during operation
3. Prerequisites to operation

Question 14

What are the prerequisites to operation?

Answer 14

1. Must submit proof of necessary capital
2. Must publish notice in the newspaper near where the head office is located

Question 15

List the multiple pieces of legislation that govern the conduct of Insurance companies in Canada

pg.3.8

Answer 15

1. The Insurance Companies Act
2. Provincial and territorial Insurance Act
3. Provincial and territorial Highway and traffic Act
4. Regulation made pursuant to various Act

Question 16

What is the purpose of Statutory Conditions

Answer 16

Statutory Conditions help provide insured with a consistent approach to having their claims settled and bind the insured and insurer, establishing cerein rights and obligations for both parties

Question 17

What is the Statutory conditions called in Quebec

Answer 17

Quebec General Conditions

Question 18

The insurance act generally requires that the statutory conditions be identified and printed in every accident and sickness, automobile and fire insurance policy. List 3 exceptions

Answer 18

1. Insurers can omit some of the 12 conditions when those conditions are not applicable to the specific contract
2. Insurers can vary certain parts of the statutory conditions unless it makes the contract less favorable to the insured
3. Insurers can omit all statutory conditions if the contract has an extremely short duration such as travel insurance or the policy is less than 6 months.

Question 19

What are the 4 keys that must be followed if there is a breach in PIPEDA whether accidental or deliberate?

Answer 19

1. Contain the breach and assess if there are ways to reduce the harm
2. Evaluate the risk associated with the breach
3. Determine who needs to be notified
4. Prevent future breaches by determining how the breach happened and by taking steps to prevent it from happening again

Question 20

Insurance regulated at both the federal and provincial/territorial levels. What is the focus of insurance regulations?

Answer 20

What is the focus of insurance regulations?

Solvency
Market conduct
Insurance availability
Rating structures

Question 21

Summarize the role of the Office of the Superintendent of Financial Institutions for regulating insurance companies.

Answer 21

Office of the Superintendent of Financial Institutions

* OSFI regulates and monitors federally chartered and foreign insurance companies
* It supervises and enforces safeguards so that inadequately financed insurance companies are not established and existing ones remain financially healthy
* It works in accordance with the Insurance Companies Act
* It is concerned only with such supervision and control as will affect the administration of the companies’ funds and ensure that the public is adequately protected against misuse or mismanagement of those funds
* It is there to ensure the financial integrity of all insurers, including measures to safeguard insurance company solvency

Question 22

Describe how provinces and territories regulate insurance in their jurisdiction.

Answer 22

Provincial and territorial regulation

* Provincial and territorial regulators exercise controls, similar to those of the federal regulator, over those insurers who are incorporated and licensed to operate only in a given jurisdiction
* They regulate the operations of insurance intermediaries such as agents and brokers
* They regulate the operations of insurance adjusters, including licensing and disciplinary action
* They regulate insurance contracts such as the wording of automobile insurance policies, statutory conditions, and minimum coverages

Question 23

Explain how self-regulation of insurance brokers works.

Answer 23

Broker self-regulation

* In jurisdictions where brokers self-regulate, a brokers’ organization or association
* Sets qualification standards
* Sets operational requirements
* Police their own membership
* Registration then replaces licensing
* The brokers’ organization is still answerable to the government should any problems arise

Question 24

Casualty Insurance refers to?

a. Life insurance
b. Auto insurance
c. Liability insurance
d. Fire insurance

Answer 24

c. Liability insurance

Casualty Insurance loosely used to described an area of insurance not particular or directly concerned with life insurance or automobile insurance. Most frequently refers to liability, burglary and plate glass insurance but my include fidelity and surety.

Question 25

What are the four steps to remediate a privacy breach?

a. contain, stop, determine, Prevent
b. contain, evaluate, determine, prevent
c. stop, evaluate Determine, prevent
d. contain, evaluate, assess, prevent

Answer 25

b. contain, evaluate, determine, prevent

Question 26

What is true in regards to adjuster and agent licensing in Canada ?

a. All adjusters must be licensed, and all agent must be licensed
b. All adjusters must be licensed and all agents except staff agents in NB and Quebec must be licensed.
c. All independent adjusters must be licensed and all agents must be licensed
d. All staff adjusters must be licensed, all agents must be licensed.

Answer 26

c. All independent adjusters must be licensed and all agents must be licensed

Question 27

What are earned premium is

Answer 27

Earned premiums are the portion of premium earned or charged for the period of time a policy was in effect. The total premium collected(paid) less the unearned premiums.