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CAS Exam 6C > BAER - Intro to Canadian Insurace Cases > Flashcards

BAER - Intro to Canadian Insurace Cases Flashcards

1
Q

List the types of insurance carriers. (4)

A
  • individual U/W
  • joint-stock company
  • mutual insurance company
  • reciprocal/inter-insurance company
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2
Q

Define individual U/Ws.

A

Like a stock exchange, BUT only open to members (U/W members & non U/W members).

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3
Q

Define joint-stock company.

A

A for profit company that is owned by shareholders BUT managed by a board of directors. The profits are distributed to the stockholders & investors

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4
Q

Define mutual insurance company.

A

A company that is owned by its policyholders. The profits are paid to policy holders as dividends.

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5
Q

Define reciprocal/inter-insurance exchange.

A

An unincorporated ASSOCIATION of subscribers who EXCHANGE contracts of indemnity. These don’t issue policies, and members are individually liable.

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6
Q

Why are insurers partly exempted from anti-trust law?

A

Because short-term price competition is not in the interest of the consumer: it leads to under pricing which can result in insolvency.

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7
Q

What do rating bureaus do?

A

Promulgate rates, terms of contracts, etc - it is an APPROVED way for insurers to COOPERATE in setting rates that are adequate.

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8
Q

What is the legal status of Rating Bureaus?

A

They are authorize and regulated by the Provincial Insurance acts.

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9
Q

How to rating bureaus collect and analyze data?

A

Provincial Superintendents appoint a STATISTICAL GATHERING AGENCY, which is usually Statistical Division of the IBC.

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10
Q

What does Insurance Forms Manual Services publish?

A

It publishes standardized version of basis policies and options, so that there is no competition on basis of policies in Canada.

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11
Q

What are IBC’s 5 objectives (formed in 1964).

A
  • STUDY legislation
  • COLLECT/analyze data
  • ENGAGE in research
  • DISCUSS general insurance
  • PROMOTE public understanding
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12
Q

What has been the focus of Canadian Insurance regulation since Confederation? (5)

A
  • MARKETING: marketing integrity & improvement of the insurance contract
  • OWNERSHIP: encourage Canadian ownership
  • TAXES: collection of taxes
  • HONESTY: honesty & competence of intermediaries (eg: agents, brokers, etc.)
    SOLVENCY: ensure the solvency of insurers in order to protect policyholders
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13
Q

Examples of federal legislation designed to guarantee solvency in insurers. (1-3)

A
  • CREATION: oversee the creation of domestic insurers & licensing of foreign insurers
  • INVESTMENTS: restrictions on types of investments that are permitted (in order to reduce risk)
  • RATING: authorization of rating bureaus for info-sharing
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14
Q

Examples of federal legislation designed to guarantee solvency in insurers. (4-6)

A
  • COMPLIANCE: give the government departments the authority to enforce compliance with legislation
  • ADEQUACY: create boards to oversee and ensure the adequacy of rates
  • FILINGS: require the regular filing of Financial Statements
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15
Q

What is an indirect way Canadianization is encouraged in the insurance industry?

A
  • requirements on foreign insurers to maintain sufficient assets IN CANADA
  • if a foreign insurer becomes insolvent, THEN a Canadian insurer can assume control over the assets (helps stop the expatriation of capital)
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16
Q

What is the superintendent’s powers over marketing practices?

A

The superintendent can investigate and order persons to stop offensive practices.

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17
Q

What are the different levels of insurance regulation? (3)

A
  • legislation
  • regulations by the lieutenant governor in council
  • guidelines by superintendents
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18
Q

Why are uniform guidelines easier to establish than uniform legislation?

A

Because Guidelines do not need to go through the legislative process (ie: reports and readings in the House of Commons & Senate, Royal Assent).

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19
Q

Cite a case that the Privy Council use against federal efforts at insurance legislation.

A

Citizen’s Insurance Company v Parsons

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20
Q

Who oversees Canadian SOLVENCY regulation (federal or provincial)?

A

BOTH - cooperative federalism has been achieved in practice

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21
Q

Who oversees Canadian RATE regulation (federal or provincial)?

A

Provincial

22
Q

Why is the provincial insurance legislation so uniform across provinces?

A
  • primarily due to CCIR (Canadian Council of Insurance Regulators)
  • one would think that since legislation is done provincially, that there would be great difference from province to province, but this is not the case
23
Q

Identify DIFFERENCES between private & social insurance. (4)

A
  • SELECTIVITY: private insurers are MORE selective, social insurers are LESS selective
  • SOLVENCY: private companies are monitored by the superintendent, social insurance is underwritten by the government
  • EMPLOYEES: private insurers have private employees, social insurers have civil servants
  • FRAUD PROTECTION: yes for private insurance, not as much for social insurance
24
Q

Identify SIMILARITIES between private & social insurance. (5)

A
  • both PROTECT insurance fund
  • both PREVENT over-compensations
  • both need to define ‘covered event’
  • both need t o determine ‘covered loss’
  • both need claims and reserving functions
25
Q

What is the Principle of Indemnity?

A

The principle that if an insured suffers a covered loss, that they are returned to the financial position as they were prior to the loss, and be neither penalized or rewarded.

26
Q

What is the Contract of Indemnity?

A

It is the contract where an amount recoverable is measured by the insured’s pecuniary loss.

27
Q

Is paying a fixed amount on event occurrence considered indemnity?

A

NO, because the insured does not have to have a loss
- eg: pay a fixed sum if the temperature at the winter carnival stays above 0, because the carnival would be cancelled due to warm weather

28
Q

Is a life insurance policy an indemnity policy? Explain why or why not.

A

NO, because a loss of life cannot be indemnified

- life insurance is a contract that pays a certain sum upon death (irrespective of pecuniary loss)

29
Q

Identify conditions for recovering under an indemnity policy (including subrogation).

A
  • event must be covered

- requires proof of AMOUNT of loss

30
Q

Identify the difference between a ‘valued’ policy and a ‘typical’ insurance policy.

A

Proof of amount of loss not required because compensation is per-determined by the contract.

31
Q

Identify the necessary conditions for reimbursement under a ‘valued’ insurance policy.

A
  • event must be covered

- requires PROOF of loss, but not amount of loss

32
Q

Glynn v Scottish Union & National Insurance Company - Facts

A
  • Glynn was injured in an auto accident
  • was reimbursed by the other driver’s insurer (including medical)
  • Glynn was sued to DOUBLE-RECOVER medical from own insurer
33
Q

Glynn v Scottish Union & National Insurance Company - Main Issue

A

Does Glynn’s insurer have the right to subrogation?

- can Glynn’s insurer claim benefits from a guilty party’s payment to PREVENT double-recovery by Glynn?

34
Q

Glynn v Scottish Union & National Insurance Company - Ruling 1

A

Ruling in favour of the insured: Glynn gets double recovery.

35
Q

Glynn v Scottish Union & National Insurance Company - Ruling 2

A

Ruling is overturn in favour of the insurer:

  • the subrogation concept applies because the auto policy is a contract of indemnity
  • so Glynn’s insurer does NOT have to pay
36
Q

Identify differences between group and individual insurance. (4)

A

GROUP:

  • insures classes of people vs individuals
  • contract is between the insurer and the sponsor vs the insurer and insured
  • contract is open-ended (eg: new employees are automatically convered) vs going through the U/W process
  • treated differently be provincial legislation vs individual insurance
37
Q

Contrast group insurance with subscription policies.

A

GROUP: one insurer covers many insureds

SUBSCRIPTION POLICY: multiple insurers U/W different aspects of complex risk (eg: large commercial risk)

38
Q

What is an important intent of the doctrine of subrogation?

A

To prevent overcompensation of the insured.

39
Q

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

A
  • ELECTION: pick ONE of tort recovery or collateral source
  • CUMULATION: pick BOTH tort recovery and collateral source - may violate principle of indemnity
  • REIMBURSEMENT: amount not covered by tort recovery IS COVERED by collateral source
  • RELIEF: tortfeasor’s liability REDUCED by collateral source
40
Q

Fletcher v MPIC (1990) - Facts

A
  • customer relied on MPIC

- there was NO MENTION of UIM (uninsured motorist) coverage on application or insurance certificate

41
Q

Fletcher v MPIC (1990) - Main Issues

A

1) is the government insurer responsible for informing customers of available coverages?
2) what is the extent of liability should it fail to do so?

42
Q

Fletcher v MPIC (1990) - Rulings 1, 2, 3

A

1) trial judge finds in favour of the plaintiff (insured)
2) ruling is overturned on appeal, in favour of insurer
3) Supreme Court reinstates the original ruling, in favour of the insured

43
Q

Dillion v Guardian Insurance Company - Facts

A
  • Guardian rejected a settlement that was LESS THAN the policy limit
  • subsequent jury award was GREATER THAN the policy limit
  • the insured sued for the excess amount of the award above the policy limit
44
Q

Dillion v Guardian Insurance Company - Define the standard of absolute liability

A

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

45
Q

Dillion v Guardian Insurance Company - What are the different possible standards for liability? (3)

A
  • absolute liability
  • liability for not acting reasonably
  • liability for bad faith (builds on lack of reasonableness)
46
Q

Dillion v Guardian Insurance Company - Arguments of absolute liability

A
  • AVOIDS: determining whether the 1st offer was reasonable
  • LOWERS: probability of insurer gambling with insured’s money
    The insurer and the insured have different monetary interests
47
Q

Dillion v Guardian Insurance Company - Ruling 1

A
  • insurer liable under ALL standards (practically, only needs to be liable by 1 standard)
  • finds in favour of the insured
48
Q

Dillion v Guardian Insurance Company - Ruling (BC cases)

A

BC only: reject absolute liability

REASON: relationship between insurer and insured NOT fiduciary (monetary interests differ)

49
Q

What are common examples of financial derivatives? (4)

A
  • Options
  • Swaps
  • Futures
  • Forwards
50
Q

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

A
  • COMPETITION: produces lower prices, makes policies more affordable, and increases the availability of coverage for Canadians
  • INNOVATION: good for customers
  • FOREIGN CAPITAL: flows into Canada
51
Q

Identify DISADVANTAGES of foreign participation in the Canadian insurance industry. (3)

A
  • a foreign insurer would have less focus on Canadian interests
  • foreign insurers have higher insolvency rates (cross-reference with Dibra’s paper on why insurers fail)
  • foreign insurers may expatriate profits

CAS Exam 6C (70 decks)

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