KPMG - Regulatory Oversight Flashcards
Describe the continuum of rate regulation approaches. (3)
ACTIVE (government mandated, prior approval)
MODERATE (file & use, use & file, flex rating)
COMPETITIVE (file only, open competition)
Describe the GOVERNMENT MANDATED rate regulation approach.
The government sets rates, rate changes and risk classification.
Describe the PRIOR APPROVAL rate regulation approach.
The government approves rates, rate changes and risk classifications before their use.
Describe the FILE & USE rate regulation approach.
The insurer files the rates, rate changes and risk classifications. The regulators have a set period of time to approve the above, otherwise rates can be used.
Describe the USE & FILE rate regulation approach.
The insurer uses the rates, rate changes and risk classifications and files them with the regulators. The regulators can retroactively change rates within a certain period of time.
Describe the FLEX RATING rate regulation approach.
The insurer uses rates, rate changes, and risk classifications provided that the rate changes are WITHIN a certain range.
Describe the FILE ONLY rate regulation approach.
The insurer files rates, rate changes and risk classifications but NO review or approval is required from the regulators.
Describe the OPEN COMPETITION rate regulation approach.
This approach does not require and filing of rates, rate changes, or risk classifications.
Identify the main regulatory concerns for auto insurance.
Availability and affordability.
Do rate regulation mechanisms vary by province?
Yes.
Which provinces/territories use 1 approach for all required vehicles? (3)
NS (prior approval)
PEI (file & use)
YK, NV, NWT (open competition)
Identify external considerations affecting Rate Regulation. (3)
- market cycle
- economic conditions
- politics
Identify an example of the GOVERNMENT MANDATED rate regulation approach.
Alberta Grid
Identify an example of the PRIOR APPROVAL rate regulation approach.
Ontario major filings
Identify an example of the FILE & USE rate regulation approach.
PEI
Identify an example of the USE & FILE rate regulation approach.
Quebec
Identify an example of the FLEX RATING rate regulation approach.
Not used in Canada
Identify an example of the OPEN COMPETITION rate regulation approach.
Nunavut, Yukon
Two benefits to policyholders of switching from Prior Approval to Use & File. (1 of 2)
- less rate volatility (faster rate updates, lower price swings)
- lower rates due to lower filing costs
Two benefits to policyholders of switching from Prior Approval to Use and File. (2 of 2)
- if more insurers are operating -> more competition & innovation -> good for consumers
- regulators can then focus on solvency which protects policyholders rather than worrying about the rate approval
Which regulatory approach is faster? File & Use or Prior Approval
File & Use is probably faster due to the set period of time for approval, BUT can’t be used for all LoBs in all provinces.
Which regulatory approach is faster? Open Competition vs Prior Approval
Open Competition is faster to market, BUT valid only in NU, YK
Which regulatory approach is faster? File & Use vs Use & File
Use & File since there is no waiting period before use, BUT only valid in Quebec
