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, QC -BI cov

Question 4

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

Answer 4

Regulator approves (Rates, Rate Changes, 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 (Rates, Rate Changes, Risk Classification)
• regulators have a set period to approve/disapprove otherwise rates can be used (30-90 days)
• filing docs are simpler than for Prior Approval

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, Risk Classification) and files with regulators
• regulators can retroactively change rates within a certain period

Ex: QC

Question 8

Briefly explain the flex rating regulation approach.

Answer 8

• insurer uses (Rates, Rate Changes, 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 (Rates, Rate Changes, Risk Classification)
• but NO review or approval 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