KPMG.RegOv

Question 1

describe the continuum of rate regulation approaches

Answer 1

AMC
- Active regulation (government mandated, prior approval)
- Moderate regulation (file & use, use & file, flex rating)
- Competitive (file only, open competition)

Question 2

describe the rate regulation approach: government mandated

Answer 2

government sets RRR (rates, rate changes and risk classification)

Question 3

describe the rate regulation approach: prior approval

Answer 3

regulator approves RRR (rates, rate changes and risk classification) before use

Question 4

describe the rate regulation approach: file and use

Answer 4

• insurer files RRR
• regulators have a set period to approve or disapprove, otherwise rates can be used
• filing documentations simpler than prior approval

Question 5

describe the rate regulation approach: use and file

Answer 5

• insurer uses RR and files with regulators
• regulators can retroactively change rates within a certain period

Question 6

describe the rate regulation approach: flex rating

Answer 6

insurer uses RRR provided rate changes are within a certain range

Question 7

describe the rate regulation approach: file only

Answer 7

insurer files RRR but no review or approval is required

Question 8

describe the rate regulation approach: open competition

Answer 8

no filing required

Question 9

identify 2 main regulatory concerns for auto insurance

Answer 9

• availability
• affordability

Question 10

do rate regulation mechanisms vary by province?

Answer 10

yes

Question 11

which provinces/territories use 1 approach for all required vehicles?

Answer 11

• NS: prior approval
• PEI: file and use
• YK/NV/NWT: open competition

Question 12

identify external considerations affecting rate regulation

Answer 12

EPM
- Economic conditions
- Politics
- Market cycle

Question 13

identify an example of the rate regulation approach: government mandated

Answer 13

AB grid, BC

Question 14

identify an example of the rate regulation approach: prior approval

Answer 14

ON major filings

Question 15

identify an example of the rate regulation approach: file and use

Answer 15

PEI

Question 16

identify an example of the rate regulation approach: use and file

Answer 16

QC

Question 17

identify an example of the rate regulation approach: flex rating

Answer 17

not used in Canada

Question 18

identify an example of the rate regulation approach: open competition

Answer 18

Nunavut and Yukon

Question 19

BC private insurer files collision and comprehensive changes and waits for approval before using rates. Is this consistent with provincial regulations?

Answer 19

No, coll & comp are optional coverages and optional coverages are governed by open competition

Question 20

NS must file rates with NC Utility & Review board within specified period after using rates. Is this consistent with provincial regulations?

Answer 20

No, NS uses prior approval

Question 21

QC private insurer uses property damage rates before submitting filing. Is this consistent with provincial regulations?

Answer 21

Yes, QC is use and file

Question 22

Government of AB acts as a monopoly in providing insurance for TNC. Is this consistent with provincial regulations?

Answer 22

No, TNC is provided by private insurers

Question 23

3 benefits to policy holders of switching from prior approval to use and file

Answer 23

1) less rate volatility: faster rate updates and lower price swings
2) lower rates: lower filing costs because filings are less complicates
3) insurers like use and file
- if more insurers are operating, more competition and innovation, better for consumers
- regulators can focus on solvency which protects policyholders versus worrying about rate approval

Question 24

identify advantages to flex rating

Answer 24

• less volatility in rates
• lower expenses versus prior approval

Question 25

file and use VS. prior approval
which one is faster?

Answer 25

file and use
but can’t be used for all LoBs in all provinces

Question 26

open competition vs. prior approval
which one is faster?

Answer 26

open competition
only valid in NU and YK

Question 27

use and file vs. file and use
which one is faster?

Answer 27

use and file
valid only in QC