Chapter 6

Question 1

Who regulates insurance in Alberta?

Answer 1

The office of Alberta superintendent of insurance of the Alberta Treasury board and finance regulates insurance in Alberta along with the ministry of transportation and local police services who enforce the act by prosecuting offences in court and by imposing fines on owners found to be in contravention of the law.

Question 2

Define application

Answer 2

A request by an insured for insurance. Applications may be done verbally, in writing, or online. The insured provides information relating to the subject of insurance. The insurer than assesses this information and decides whether to accept the risk for insurance and on the terms of such acceptance.

Question 3

Who is automobile insurance written by in Alberta?

Answer 3

In Alberta all automobile insurance is written by private insurance companies. It is produced by their own staff or by independent agents or brokers who act on behalf of a number of insurers

Question 4

What is the purpose of an automobile insurance application ?

Answer 4

The application contains the information needed to underwrite, rate, and issue the policy.

Question 5

Who must approve the application used by insurance companies ?

Answer 5

The actual form used must be approved by the provincial or territorial insurance regulator and is standard within a given jurisdiction

Question 6

What is different about government insurance systems from private systems regarding premium and applications ?

Answer 6

In provinces with government insurance systems, a premium is paid when the vehicle licence is purchased or when the operators licence is acquired. An application is completed at that time, providing the necessary information. A policy is not issued as certian basic insurance coverage is compulsory and the vehicle licence or operators licence is evidence of that coverage

Question 7

Define utmost good faith

Answer 7

A legal principle calling for the highest standards of integrity on the part of the insured and the insurer

Question 8

Define misrepresentation

Answer 8

Incorrect or missing information about material fact that is offered or not by an applicant or insured with or without the intent to mislead

Question 9

Why does the broker and agent have the responsibility to ensure the doctrine of utmost good faith?

Answer 9

The knowledge of the broker or agent is considered the knowledge of the insurer, failing to advise the insurer of a material fact or failing to advise the insured of the policy terms could have serious and far reaching consequences for all parties in the event of a loss

Question 10

True or false ? The insurance act does not require insurers to obtain a signed application before an automobile policy is issued ?

Answer 10

True! If a signed application is not recieved however the insurer must send a dorm of application to the insured so that it can be signed and returned. This may be part of the policy that is material

Question 11

When there is a misrepresentation The insurance act contains sections that specify an insurer cannot use as a defence of a claim any information found in a purported copy of an application. When there is no signed written application the insurer must find other means to: list 2 other ways.

Answer 11

Establish that there is in fact a misrepresentation and
Prove that the applicant actually made the misrepresentation at the time he or she applied for the insurance ( that is when the oral application was made )

Question 12

What two provisions apply when a policy is issued and it differs in any way from the written application

Answer 12

The insurer must point out to the insured in writing in what ways the policy differs from the application

If the insured does not object to the changes by advising the insurer in writing within 7 days the policy is deemed to cover as it is written

Question 13

33 items of information required in an automobile insurance application

Answer 13

Item 1: applicants full name and postal address
Item 2: policy period
Item 3: particulars of the described automobile
Item 4: coverages
Item 5: list of all drivers of the described automobile in the household or business
Item 6: impairments
Item 7a: convictions
Item 7b: previous accidents or insurance claims
Item 8: past licence experience
Item 9: pay insurance experience
Item 10: use of vehicle
Item 11: commercial use of vehicle
Item 12: registered owner
Item 13: penalty of false statement
Item 14: additional information for drivers down in item 5
Item 15: name and address of employer
Item 16: all residents of household or employees in the business not already listed in items 5 and 14
Item 17 : vehicle used for carpools or share the ride arrangements
Item 18: fuel if not powered by gas or diesel
Item 19: unrepaired damage
Item 20: special equipment and or custom paint finish
Item 21: vehicle anti theft device
Item 22: previous addresses
Item 23: total number of private passenger vehicles in household
Item 24 remarks
Item 25: report of broker
Item 26: broker/agent declaration
Item 27: description of any trailer not already listed
Item 29: commercial vehicle use
Item 30: any merchandise or material carried
Item 31: volatile, toxic, corrosive, radioactive, or explosive materials carried
Item 32: any machinery or equipment mounted or attached to the vehicle
Item 33: remarks

Question 14

Define drivers abstract

Answer 14

A three year record of a driver includes info such as drivers name, licence number, class, expiry date, conditions restrictions and or status information

Question 15

Define Rate

Answer 15

Amount charged to an insured that reflects the expectation of loss for a covered risk, insurance company expenses and profit.

Question 16

Define lien holder

Answer 16

One who holds a registered claim against a given property as security or collateral against a loan or workmanship performed in relation to that property.

Question 17

Insurable interest

Answer 17

An interest that the insured must haves in the subject matter of insurance purchased so that if the event insured against occurs, the insured will suffer a pecuniary loss

Question 18

What coverages are mandatory for insurance ?

Answer 18

Third party liability - covers insured persons if someone else is killed or injured or someone else’s property is damaged in an automobile accident. The coverage will pay all sums for which the insured is legally liable up to the limit of the policy.

Accident benefits - pays benefits that insured persons are entitled to receive if injured or killed in an automobile accident. Covers medical payments, death, grieving counseling, funeral benefits, and total disability benefits. Provides coverages if the name didn’t heard or other insured person as defined or injured or killed by an uninsured motorist or hit and run driver.

Question 19

What coverages are optional for insurance?

Answer 19

Own vehicle damage - provides a selection of optional coverages for the insured automobile. payments cover direct and accidental loss of, or damage to, I described automobile and it’s permanently attached equipment. and insured may choose one or more specified perils, comprehensive, collision or upset, or all perils.

Family protection coverage - This optional coverage is provided through a policy endorsement, but due to high potential for loss on policy sold without it, this endorsement is typically included automatically with automobile policy sold by Alberta insurers. It is beneficial if an insured or members of the insurance family are seriously injured in an automobile related accident. Brokers and agents must Ensure that clients are made aware of its existence and are offered the coverage. If an applicant specifically declines it, there is a space in the application to indicate the refusal of this coverage. This provides a record of this fact incase it is contested in a future claim

Question 20

Who is eligible for the retiree discount ?

Answer 20

Retired
Age 65 or older or collecting under CPP or QPP
Principle of rated driver of vehicle

Question 21

Define ride sharing

Answer 21

an arrangement set up by means of a website or mobile app in which a passenger travels in a private vehicle driven by its owner for free or for a fee

Question 22

Facility association

Answer 22

an entity established by the Canadian automobile insurance industry to ensure the automobile insurance is available to all owners and licensed drivers of motor vehicles where such owners or drivers are unable to obtain automobile insurance through the voluntary insurance market

Question 23

Residual markets

Answer 23

special programs to ensure Insurance availability for risks that from an underwriting standpoint are less desirable and more hazardous

Question 24

Define underwrite

Answer 24

To ensure. More commonly, to scrutinize a risk and then decide on its eligibility for insurance

Question 25

Define rate manual

Answer 25

Emmanuel containing rates and underwriting rules for use by a company staff, agents, and or brokers

Question 26

Define retention

Answer 26

(1) the amount of liability when seating company ( primary insurer) retains for its own account. It may be a percentage or a dollar amount of each risk. (2) also refers to the part of the risk retained by clients without insuring it ( either because insurance is deemed too expensive or the loss is not insurable)

Question 27

What is in an underwriting manual for all Branch underwriters

Answer 27

an acceptance or rejection list, a senior underwriting only acceptance list, a limit table, a classification guide, another instructional material

Question 28

Define risk

Answer 28

the chance of a loss. Specifically, the possible loss or destruction of property or the possible incurring of liability. Sometimes referred to as the subject of insurance contract

Question 29

Define exposure

Answer 29

The hazard threatening a risk because of external or internal physical conditions

Question 30

What is underwriting rules

Answer 30

the rules used by insurance companies to assess the insurability of a particular risk these rules are set individually by insurance companies and may differ for each class of business

Question 31

Where does individual underwriting take place and what are typical functions?

Answer 31

individual underwriting takes place at Branch level. Underwriting has increasingly become a function of ensuring new applications and requested changes conform the insurers policies for acceptance, refusal to a higher authority. The following functions are typical:
Risk selection
Rating
Using endorsements correctly

Question 32

Another definition for exposure

Answer 32

The total amount the insurer could become liable for under a policy

Question 33

4 reasons to reject a risk

Answer 33

1. The insurer may not insure that class of business
2. The risk may be so much more hazardous than the average that the potential for loss is almost certian
3. The risk may be substandard. The potential for improving our upgrading it exists, but the applicant is not prepared to carry out suggested improvements
4. The risk could be very well managed with great engineering reviews but the claims frequency and severity for the last one or two years may have placed in an unfavorable underwriting rating position

Question 34

Manual rating

Answer 34

a pricing method in which an insurer uses rates that are based on its own experience rather than on the specific group for which it is calculating a premium

Question 35

Define loading

Answer 35

an additional charging in an insurance rate to reflect a hazard not contemplated in the basic rate for the class

Question 36

What are the 2 different kinds of endorsements

Answer 36

1. Extensions - these are used for additional coverage the producer has recommended and the client has purchased
2. Agreements or restrictions - these are required by the insurer based on acceptance and rating manuals

Question 37

How is underwriting in government insurance provinces Saskatchewan, BC and Manitoba different ?

Answer 37

One usual function of underwriting in a government-insured province is that declining risks for them is illegal.

underwritten criteria used by private insurance and other jurisdictions such as age, gender, marital status, and region of the province or territory may be prohibited in these provinces on the basis that they are deemed discriminatory

the main underwriting function is determining the correct rate group as private insurers compete with the government insurer for optional coverage everyone tends to use the same rating criteria