BAER.INTRO

Question 1

types of insurance carriers (4)

Answer 1

• individual U/W
• joint stock co.
• mutual ins. co.
• reciprocal/inter-insurance exchange

Question 2

IBC’s 5 objectives (formed in 1964)

Answer 2

STUDY legislation
COLLECT/analyze data
ENGAGE in research
DISCUSS general insurance
PROMOTE public understanding

Question 3

what has been the focus of Cdn Ins regulation since Confederation

Answer 3

MOTHS

MARKETING: marketing integrity & improvement of insurance contract
OWNERSHIP: encourage Cdn ownership
TAXES: collection of taxes
HONESTY: honesty & competence of intermediaries (Ex: agents)
SOLVENCY: keep insurer’s solvent to protect policyholders

Question 4

identify examples of Canadian regulation/legislation (federal or provincial ) that promote insurer solvency (6)

Answer 4

CIR-CAF

CREATION: oversee creation of (domestic) & licensing (foreign) of insurers

INVESTMENTS: restrictions on types of investments that are permitted (to reduce risk)

RATING: authorization of rating bureaus for info-sharing

COMPLIANCE: give Govt depts authority to enforce compliance with legislation

ADEQUACY: create boards to oversee and ensure adequacy of rates

FILE F/S: require regular filing of Financial Statements

Question 5

what conditions eventually led to public control regarding solvency

Answer 5

• insurer bankruptcies in the 1860s/70s
• the recognition short-term price competition is bad
• insurance involves a significant savings component (prepaid premiums) & policy holders must be protected

Question 6

difference between guideliness & legislation for insurance regulation

Answer 6

• guidelines are more flexible than legislation
• legislation must go through senate, house of commons, and get royal approval

Question 7

defn: what is the ‘principle of indemnity’

Answer 7

after covered loss, return insured to former financial position (before loss), and neither penalize nor reward

Question 8

defn: what is a ‘contract of indemnity’

Answer 8

contract where amount recoverable is measured by insured’s pecuniary loss

Question 9

identify conditions for recovering under an indemnity policy (2)

Answer 9

• event must be covered
• requires proof of AMOUNT of loss

Question 10

Glynn v Scottish Union & National Ins Co

Answer 10

FACTS: - Glynn injured in auto accident
- was reimbursed by other driver’s insurer (including medical)
- Glynn sued to DOUBLE-RECOVER medical from own insurer

ISSUE: - does Glynn’s insurer have right to subrogation
- in other words:
- can Glynn’s insurer claim benefits from guilty party’s payment to PREVENT double-recovery by Glynn

RULING 1: for insured: Glynn gets double-recovery

RULING 2: for insurer
- subrogation concept applies because auto policy is contract of indemnity
- so Glynn’s insurer does NOT have to pay

Question 11

Tort Recovery vs Collateral Sources: identify the 4 loss-sharing options

Answer 11

ELECTION (pick ONE OF tort recovery OR collateral source)

CUMULATION (pick BOTH tort recovery AND collateral source)

REIMBURSEMENT (amount not covered by tort recovery IS COVERED by collateral source)

RELIEF (tortfeasor’s liability REDUCED by collateral source)

Question 12

Fletcher v MPIC

Answer 12

FACTS: - customer relied on MPIC
- there was NO MENTION of UIM (Under-insured Motorist) coverage on application or insurance certificate

ISSUE 1:
→ is a government insurer responsible for informing customers of available coverages?
ISSUE 2:
→ what is the extent of the government’s liability should it fail to do so?

RULING 1: judge finds for plaintiff (insured wins)

RULING 2: overturned on appeal (MPIC wins)

RULING 3: SCC (Supreme Court of Canada) reinstates original ruling (insured wins)
Final Interpretation:
→ both private agents and government institutions owe a duty of care
→ but private agents owe a higher duty-of-care because of their promised expertise

Question 13

Criteria for duty of care MPIC (3)

Answer 13

MPIC owes a duty of care to its customers if:
(1) customers rely on the information
(2) their reliance is reasonable
(3) MPIC knew (or should have known) the customer would rely on this information

Question 14

Dillon v Guardian Ins Co

Answer 14

FACTS: - Guardian rejected a settlement that was LESS THAN the policy limit
- subsequent jury award GREATER THAN policy limit
- insured sued insurer for excess amount of award above policy limit

Arguments for absolute liability
AVOIDS: determining whether 1st offer was reasonable
LOWERS: probability of insurer gambling with insured’s money
(insurer, insured): have different monetary interests

OUTCOME:
- insurer liable for amount exceeding policy limit
- they could have settled but didn’t
- therefore insurer is absolutely liable

Question 15

define the standard of absolute liability

Answer 15

IF settlement possible BUT rejected by insurer THEN insurer is liable for all costs (even in excess of policy limit)

Question 16

what are the different possible standards for liability (3)

Answer 16

• absolute liability
• liability for not acting reasonably
• liability for bad faith (builds on lack of reasonableness)

Question 17

identify ADVANTAGES of foreign participation in the Canadian insurance industry (3)

Answer 17

COMPETITION: produces (lower prices, higher availability) for Canadians

INNOVATION: good for consumers

FOREIGN CAPITAL: flows into Canada