DUTIL.FA Flashcards
3 types of risk-sharing mechanisms administered by FA
RSPs
FARM (residual market)
UAF (Uninsured Automobile Fund)
Goal of FA
to ensure auto insurance availability for all owners & licensed drivers unable to obtain coverage through the voluntary market
created by insurance industry
unincorporated non-profit
5 classes of business that determines a member’s participation in the FA results
(1) PPA non-fleet, non-pool business
(2) All auto excl. (1) and RSPs
(3) RSP in Ontario
(4) RSPs in AB, NB, NS
(5) Uninsured & Unidentified motorists claims and the ON catastrophic claim fund excluded from (3)
Key purpose of RSPs
Allows insurers to cede risks of their on books for which they consider premiums to be inadequate (enhance market stability)
Key purpose of FARM
Provide auto insurance to drivers who can’t find it on the voluntary market
Key purpose of UAF
Provide compensation in cases of no insurance or inadequate insurance
Areas of operational differences between FARM & RSP (6)
Number of costumer placed
Rates
Admission (or risks insured)
Customer Knowledge
Participation ratio
U/W and claims administration
FARM & RSPs operational difference regarding rates
FARM: rates set by FA
RSP: uses rates of ceding company
FARM & RSPs operational difference regarding customer knowledge
FARM: yes
RSP: no
FARM & RSPs operational difference regarding admission
FARM: only if agent/broker can’t place risk with voluntary market
RSP: use U/W rules of ceding company
FARM & RSPs operational difference regarding # customers placed
FARM: can be unlimited
RSP: depends on province, example transfer limit in ON is 5% of the member’s voluntary PPA non-fleet written exposures
FARM & RSPs operational difference regarding participation ratio
FARM: varies by class of business (5), jurisdiction and AY
RSP: based on voluntary private passenger, non-fleet, TPL direct EE not ceded to the pool
FARM & RSPs operational difference regarding claims administration & U/W
FARM: uses servicing carrier (or 3rd party)
RSP: ceding company handles it
Functions of FA’s board of directors (4)
- Approve rate changes and filings
- Authorize expenses
- Establish standards for servicing carriers & RSP users
- Appoint committees & subcommittees to assist them with specific issues
Minimum requirements that a risk must meet to be eligible for transfer to one of the pools (5)
- PPA
- insured can’t be eligible for FARM
- at least minimum TPL statutory limit required in the applicable province
- insurer must follow proper classification & rating, and provide documentation
- insurer must use approved rates