KPMG.RegOv

Question 1

Identify the 3 types of rate regulation approaches.

Answer 1

1. Active
2. Moderate
3. Competitive

Question 2

Identify the 2 subtypes of active rate regulation approaches.

Answer 2

1. Government mandated

2. Prior Approval

Question 3

Briefly explain the Government mandated rate regulation approach and give examples of provinces using it.

Answer 3

Gov sets rates, rate changes and risk classification.

Ex: Alberta GRID, BC

Question 4

Briefly explain the prior approval rate regulation approach and give examples of provinces using it.

Answer 4

Gov approves rates, rate changes and risk classification before use.
Ex: ON for major filings, NS

Question 5

Identify the 3 subtypes of moderate rate regulation approaches.

Answer 5

1. File & Use
2. Use & File
3. Flex Rating

Question 6

Briefly explain the File&Use rate regulation approach and give an example of province using it.

Answer 6

Insurer files and regulators have a predetermined period to approve before use.
Ex: PEI

Question 7

Briefly explain the Use&File rate regulation approach and give an example of province using it.

Answer 7

Insurer uses rates, rate changes and risk classification and then files with regulators.
Regulators could decide to change rates retroactively within a set period.
Ex: QC

Question 8

Briefly explain the flex rating regulation approach.

Answer 8

Insurer uses rates, rate changes and risk classification provided rate changes are within a certain range.
Not used in Canada

Question 9

Identify the 2 subtypes of competitive rate regulation approaches.

Answer 9

1. File only

2. Open competition

Question 10

Briefly explain the file only rate regulation approach.

Answer 10

Insurer files, but no review is required.

Question 11

Briefly explain the open competition rate regulation approach and give examples of provinces using it.

Answer 11

No filing required.

Ex: NU, YU, NWT

Question 12

Identify the 2 main regulatory concerns for auto insurance

Answer 12

Availability & Affordability

Question 13

Identify 3 external conditions affecting rate regulation.

Answer 13

1. Market cycle
2. Economic conditions
3. Politics

Question 14

Identify 4 advantages of switching from Prior Approval to Use & File approach.

Answer 14

1. Less rate volatility (faster rate updates)
2. Lower rates (lower filing costs since simpler)
3. More competition & innovation
4. Regulators can focus on solvency