FSCO Flashcards
prohibited risk classification elements
(C-CONES):
- claims where fault <= 25%
- credit history
- occupation
- net worth
- employment history
- salary
list the types/subtypes of approval processes
- prior approval (major requirements, simplified guidelines)
- file & use (major requirements, minor requirements)
describe UDAP requirement regarding rate levels among affiliates
basically, it is unfair or deceptive if the insurer fails to provide the lowest rate among all affiliates
describe FSCO prior approval & give examples of vehicle classes to which it applies
for prior approval, FSCO must approve the following before rates can be used:
- rates
- rate changes
- risk classification
examples where prior approval can be used:
- PPA on OAP1 (private passenger auto written using the standard Ontario auto policy 1)
- FA (factility association)
describe FSCO expedited approval & give examples of vehicle classes to which it applies
Expedited approval is a type of prior approval with approval in 30 days
Examples where expedited approval can be used:
- PPA on OAP1
- FA is excluded
describe FSCO file&use & give examples of vehicle classes to which it applies
for file&use, the insurer must file:
- rates
- rate changes
- risk classification
then regulators have 30 days to approve otherwise rates can be used without approval
examples:
- other than PPA
- commercial auto
- endorsements
- FA is excluded
what is OPCF-44R
- coverage for underinsured motorist as opposed to underinsured auto
- it is the difference between your TPL limit & at-fault driver’s TPL limit
regulatory requirements when changing territory factors in a major filing
Rebase current, indicated, proposed territorial relativities
Calculate indicated change, proposed change
Check:
- indicated, proposed changes have the same sign
- magnitude proposed change < magnitude indicated change
- magnitude proposed change < 10%
officer certifications in major filings timing & officer qualifications
- qualifications: CEO, COO, CFO, Chief Agent in Canada
- when required: always
what filing items must an officer certify
- effective dates: for new&renewal business
- guidelines: must certify compliance
- info/data: certify accuracy & completeness
- rates: reasonable, not unfairly discriminatory, don’t impair solvency
actuarial certification in major filings - timing & required actuarial designation
- qualifications: actuary must be FCIA
- when required: when rate change or there is a new LOB
what filing items must an actuary certify
- effective dates: for new&renewal business
- vehicle classification system
- that actuary hase been authorized by insuer
- that data is RelSuff
- that AAP was used
- that risk classification system is reasonable
is actuary’s certification needed for fleets
no, but it is needed for endorsements, commercial vehicles insured by FA
what information is generally required in a rate filing
- data, narrative: all steps for rate changes
- assumptions, methods: regulator should be able to trace steps from raw data to final rates
- not required: a specific methodology mandated by FSCO
describe the treatment of loss data in filings regarding reinsurance
exclude: reinsurance shouln’t impact price charged to insured
describe the treatment of loss data in filings regarding cession to RSP
included as if never ceded
describe the treatment of loss data in filings regarding FARM losses
exclude: FA sets their own prices using FARM loss data
identify factors affecting the length of the loss trend period
- policy term
- effective date (proposed effective date of rate change)
- calculation date (valuation date of loss data)
describe the general properties of coverages where premium trends are required
- coverages with inflation-sensitive exposure bases
- where mix is changing
- for clear filings: but note that premium trend is already accounted for in development of rate groups
CLEAR = Canadian Loss Experience Automobile Rating
why might FSCO not approve an auto filing
- insurer used a prohibited rating variable
- insurer’s risk classification system is not reasonable or not sufficiently predictive of loss
what classes of auto insurance does FSCO’s tech notes bulletin apply to
non-fleet automobile insurance on
- Ontario Automobile Policy (OAP1)
- Ontario Driver’s Policy (OPF2)
5 categories of filing guidelines in FSCO’s tech notes bulletin
- PPA filing guidelines - major:
-> used when an insurer is initially entering the private passenger automobile insurance market or
-> when changing existing automobile insurance rates but the changes proposed do not meet the criteria for the simplified filing guidelines - PPA filing guidelines - simplified
- PPA filing guidelines - CLEAR simplified
- other than PPA guidelines - major
- other than PPA - minor
identify legislative requirements for non-fleet auto rate filings in ON
- just and reasonable
- solvency of insurer cannot be impaired
- not be excessive in relation to the financial circumstances of the insurer
identify legislative requirements for non-fleet auto risk classification in ON
- just and reasonable
- predictive of risk
- distinguish fairly between risks
identify 5 items of required information in an Ontario major rate filing
Choose 5 from:
Loss-related information:
1. loss data
2. loss development
3. loss trend
4. treatment of large losses
5. catastrophe provision
6. automobile insurance reform adjustment factors
Premium-related information:
7. on-level premium
8. rate group drift
Other standard components of rate changes:
9. finance fees/charges
10. tax rates
11. expenses
12. underwriting profit provision
13. investment returns and cash flow rate
14. credibility
Important types of changes within a filing:
15. indicated rate changes and proposed rate changes
16. territory, class, driving record and other differential changes
17. territorial definition changes
18. vehicle rate group changes
Miscellaneous information:
19. predictive models
20. usage-based insurance pricing programs
21. introduction of new discounts/surcharges or differentials
22. dislocation and capping premium increases
23. auto insurance manual pages
2 requirements for loss data in an Ontario rate filing
- must be specific to Ontario
- must be at the major sub-coverage level
how long a period must be used in estimating the large loss provision and why?
no specific numbers of years but should be long enough to minimize statistical variations
what conditions must be met if an Ontario insurer is proposing to make territorial definition changes
- Ontario <- 55 territories, City of Toronto <= 10 territories
- all territories must be contiguous
- new territories require 3 years of insurer data and 2500 annualized average vehicles over the period
- new adjoining territories do not vary by more than +/-10%
- territory definitions are the same for all coverages
- large claims should be capped in establishing territorial rates
what items must be included in an intial UBIP filing
- what driving behaviours are being measured (ie., acceleration or deceleration rates, speed, distance travelled)
- how this data is measured (i.e, frequency, occurrence, relevant thresholds)
- how this data is normalized and categorized for rating purposes (i.e, total occurences, averaged)
- loss data to support proposed UBI discount (i.e, claim severity, claim frequency and loss costs)
identify UBIP program costs in a rate filing
- start-up costs for the UBIP filing
- ongoing expenses such as:
-> data transfer and analysis
-> marketing
-> third party provider contracts
once a new discount is approved, how long must an ON insurer continue to offer the discount and why?
3yr - to ensure stability in the market before the insurer can withdraw it from its risk classification system
when is rate capping not permitted
- base rate changes only
- broker portfolio transfers or acquisitions
- premium decreases
identify 4 topics in FSCO regulation 664
- section 3: monthly premium payments
- section 5: refusal to issue contract
- section 10-14: dispute resolution
- section 16: prohibited risk classification elements
define accident benefits
benefits received if insured is injured/killed in auto accident (i.e, income replacement, medical, rehab,…)
define catastrophic injury
serious, life-threatening, loss of limbs, eyesight,…
define tort deductible
the amount that is deducted from a settlement or court award for pain and suffering
define minor injury
sprains, strains, contusions, lacerations, whiplash
strategy for controlling accident benefit costs
introduce minor injury guidelines with compensation cap of $3500
identify a Canadian legal case related to minor injury guidelines
Morrow vs. Zhange (2004):
- challenged Alberta’s $4000 cap on compensation for minor injuries
- cap was upheld
why would an auto accident victim want their injuries classified as catastrophic
catastrophic injuries have a higher level of benefits
what is the purpose of a tort deductible
to reduce litigation of minor claims
- because if the award is less than the deductible, the net amount received by the victim would be zero anyway
