FSCO.PAA

Question 1

ON PPA prohibited risk classification elements (6)

Answer 1

1. Claims where fault is ≤ 25%
2. Credit History
3. Occupation (some exceptions)
4. Net Worth
5. Employment History
6. Salary

Question 2

Does a retiree discount on all coverages comply with ontario regulations?

Answer 2

Yes (this discount is actually REQUIRED by Ontario regulations)

Question 3

Is a multi-line discount varying by property product compliant with ON regulations?

Answer 3

No (this is a trick question). We can have multi-line discounts for property products but the discounts cannot vary by product

Question 4

Is a good credit discount compliant with ON regulations?

Answer 4

No for PPA in Ontario

Question 5

Can an insurer cancel your policy if you become unemployed?

Answer 5

No: employment is a prohibited risk classification element

Question 6

Can an insurer non-renew because of a drunk-driving conviction?

Answer 6

Yes, you would be more than 25% at fault in this case and therefore this element is not prohibited. It’s ok to use convictions for underwriting

Question 7

Can an insurer lower your rates because your salary has increased?

Answer 7

No: salary is a prohibited risk classification element

Question 8

Can an insurer change your rates because you moved?

Answer 8

Yes, territory is a very commonly used variable in risk classification systems and is therefore not prohibited

Question 9

Can your insurer raise your rates if you become an Uber driver?

Answer 9

Yes: use of your car is a valid rating variable (in this case, more miles are being driven which therefore increases the risk which is why its okay to increase rates)

Question 10

Can an insurer lower your rates because you own a certain credit card?

Answer 10

No: credit usage/history as well as # of credit cards is a prohibited risk classification variable

Question 11

List the types/subtypes of approval processes - types (2) + subtypes (2)

Answer 11

Prior approval: major requirements, simplified guidelines (used for PPA)

File & use: major requirements, minor requirements (used for non-PPA)

Question 12

Describe the UDAP (Unfair or Deceptive Acts or Practices) requirement regarding rate levels among affiliates

Answer 12

Essentially, it is unfair or deceptive if the insurer fails to provide the lowest rate among all affiliates

Question 13

Describe FSCO prior approval & give examples of vehicle classes to which it applies

Answer 13

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 (Facility Association)

Question 14

Describe FSCO expedited approval & give examples of vehicle classes to which it applies

Answer 14

Expedieted approval is a type of prior approval with approval in 30 days

Examples where expedieted approval can be used:
- PPA on OAP1
- FA is excluded (not eligible for expedited approval)

Question 15

Describe FSCO file & use & give examples of vehicle classes to which it applies

Answer 15

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 are:
- Other than PPA
- Commercial Auto
- Endorsements
- FA is excluded (don’t apply for expedited approval)

Question 16

What is OPCF-44R

Answer 16

• Coverage for “underinsured MOTORIST” (as opposed to “uninsured auto”)
• It is the difference between (your TPL limit) & (at fault driver’s TPL Limit)

Question 17

Identify regulatory requirements when changing territory factors in a major filing (DIFFERENT THAN a simplified filing)

Answer 17

REBASE (current, indicated, proposed) territorial relativities
CALCULATE (indicated change, proposed change)
CHECK:
- Indicated & proposed changes have the same sign
- Magnitude of proposed changes < magnitude of indicated change
- Magnitude of proposed change is between -10% to 10%

Question 18

Officer certifications in major filings (timing & officer qualifications)

Answer 18

Qualifications: CEO, COO, CFO, Chief Agent in Canada
When required: always

Question 19

What filing items must an OFFICER certify (4)

Answer 19

• Effective dates: for new & renewal business
• Guidelines: must certify compliance
• Info/data: certify accuracy & completeness
• Rates: reasonable, not unfairly discriminatory, don’t impair solvency

Question 20

Actuarial certifications in major filings (timing & required actuarial designation)

Answer 20

Qualifications: actuary must be FCIA
When required: when rates change (usually increase) or there is a new LOB (line of business)

Question 21

What filing items must an ACTUARY certify (6)

Answer 21

• Effective dates: for new & renewal business
• Vehicle classification system
• That Actuary has been authorized by Insurer
• That the data is reliable and sufficient
• That Accepted Actuarial Practice was used
• That risk classification system is reasonable

Question 22

Is actuary’s certification needed for fleets?

Answer 22

no, but it IS needed for (endorsements, commercial vehicles insured by FA or Facility Association)

Question 23

What information is generally required in a rate filing? (3)

Answer 23

• 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

Question 24

Describe the treatment of loss data in filings regarding REINSURANCE

Answer 24

EXCLUDE: reinsurance should not impact price charged to insured, indications use direct premiums

Question 25

Describe the treatment of loss data in filings regarding CESSION to RSP

Answer 25

INCLUDE: as if never ceded

Question 26

Describe the treatment of loss data in filings regarding FARM LOSSES

Answer 26

EXCLUDE: FA (Facility Association) sets their own prices using FARM loss data

Question 27

Identify factors affecting the LENGTH of the loss trend period

Answer 27

• Term (policy term)
• Effective date (proposed effective date of rate change)
• Calculation date (valuation date of loss data)
• Other answers possible are just general knowledge

Question 28

Describe the general properties of coverages where premium trends are required

Answer 28

• Coverages with inflation-sensitive exposure bases
• Where mix is changing (ex: physical damage make/model)
• For CLEAR filings: but note that premium trend is already accounted for in development of rate groups

Question 29

Why might FSCO not approve an auto filing?

Answer 29

• Insurer used a prohibited rating variable
• Insurer’s risk classification system is not reasonable (or not sufficiently predictive of loss)