FSCO.PPA&TECH NOTES

Question 1

risk classification elements (rating variables) that are prohibited in Ontario [Hint: C-CONES]

Answer 1

[1] Claims where fault ≤ 25%
[2] Credit history
[3] Occupation (some exceptions)
[4] Net worth
[5] Employment
[6] Salary

Question 2

what are the requirements for regulatory approval of territorial changes

Answer 2

[1] direction of [proposed change] must be the same as direction of [indicated change] (both up or both down)
[2] magnitude of [proposed change] must be less than magnitude of [indicated change]
[3] magnitude of [proposed change] must be in the interval (-10%, 10%)

Question 3

For ON, list the types/subtypes of approval processes - types (2) + subtypes (2)

Answer 3

• prior approval (major requirements, simplified guidelines). Ex: PPA (on OAP1 ON major filing), FA, commercial, miscelaneous automobiles
• file & use (major requirements, minor requirements)

Question 4

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

Answer 4

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

Question 5

describe FSCO prior approval & give examples of vehicle classes to which it applie

Answer 5

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 6

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

Answer 6

Expedited approval is a type of prior approval with approval in 30 days
Example where expedited approval can be used:
* PPA on OAP1
* FA is excluded (not eligible for expedited approval)

Question 7

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

Answer 7

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 (not eligible for expedited approval)

Question 8

what is OPCF-44R

Answer 8

• coverage for ‘underinsured MOTORIST’ (as opposed to ‘uninsured AUTO’)
• it is the difference between (your TPL limit) & (at-fault driver’s TPL limit)

Question 9

identify regulatory requirements when changing territory factors in a major filing (DIFFERENT than a simplified filing)

Answer 9

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 (propsed change) < 10% }

Question 10

officer certifications in major filings (timing & officer qualifications)

Answer 10

qualifications: CEO, COO, CFO, Chief Agent in Canada when required: always

Question 11

what filing items must an OFFICER certify (4)

Answer 11

• 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 12

what filing items must an ACTUARY certify (6)

Answer 12

• Effective Dates: for new & renewal business
• Vehicle classification system
• that Actuary has been authorized by insurer
• that Data is RelSuf (reliable & sufficient)
• that AAP (Accepted Actuarial Practice) was used
• that Risk classification system is reasonable

Question 13

ACTUARIAL certifications in major filings - (timing & required actuarial designation)

Answer 13

qualifications: actuary must be FCIA
when required: when rates change or there is a new LOB (Line of Business)

Question 14

is actuary’s certification needed for fleets?

Answer 14

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

Question 15

what information is generally required in a rate filing (3)

Answer 15

[1] (data, narrative): all steps for rate changes
[2] (assumptions, methods): regulator should be able to trace steps from raw data TO final rates
[3] NOT REQUIRED: a specific methodology mandated by FSCO

Question 16

[b] describe the treatment of loss data in filings regarding REINSURANCE

Answer 16

EXCLUDE: reinsurance should not impact price charged to insured. The indication uses direct premiums

Question 17

[b] describe the treatment of loss data in filings regarding CESSION to RSP

Answer 17

INCLUDE: as if never ceded

Question 18

[b] describe the treatment of loss data in filings regarding FARM LOSSES

Answer 18

EXCLUDE: FA (Facility Association) sets their own prices using FARM loss data. Losses incurred by FARM risks are excluded from the loss data

Question 19

[e] identify factors affecting the LENGTH of the loss trend period

Answer 19

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

Question 20

[e] describe the general properties of coverages where premium trends are required

Answer 20

• 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
  
  • CLEAR = Canadian Loss Experience Automobile Rating

Question 21

why might FSCO not approve an auto filing (2)

Answer 21

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

Question 22

what classes of auto insurance does FSCO’s Tech Notes bulletin apply to?

Answer 22

[1] non-fleet automobile insurance on
[2] non-fleet auto written on OAP 1 (Ontario Automobile Policy 1)
non-fleet auto written on OPF 2 (Ontario Driver’s Policy)

Question 23

5 types of Rate and Risk Classification Filing Guidelines depending upon the types of changes proposed.

Answer 23

[1] 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.
[2] PPA Filing Guidelines - Simplified
→ used for changes that satisfy the simplified filing guidelines (not on syllabus)
[3] PPA Filing Guidelines – CLEAR Simplified
→ used when implementing the current year CLEAR vehicle rate group (VRG) table (not on syllabus)
[4] Other Than PPA Guidelines - Major
→ when an insurer is initially entering the insurance market for a category other than PPA (not on syllabus)
[5] Other than PPA - Minor