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Exam 6 > Baer.Intro > Flashcards

Baer.Intro Flashcards

1
Q

types of insurance carriers

A
  • individual underwriting
  • joint stock company
  • mutual insurance company
  • reciprocal / inter insurance exchange
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2
Q

define individual underwriting

A

like a stock exchange but only open to members

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3
Q

define joint stock company

A
  • for profit and owned by stockholders but managed by BoD
  • profits go to stakeholders and investors
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4
Q

define mutual insurance compnay

A
  • owned by phs
  • profits paid to phs as dividends
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5
Q

define reciprocal/inter - insurance exchange

A

unincorporated association of subscribers who exchange contracts of indemnity (don’t issue policies, members are individually liable)

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6
Q

why are insurers partly exempt from anti trust laws

A

anti trust laws: regulations that encourage competition by limiting the market power of any particular firm
because short term price competition leads to underpricing and insolvency which hurts customers

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7
Q

what do rating bureaus do?

A
  • promulgate rates and terms of contracts
  • it is an approved way for insurers to cooperate in setting adequate rates
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8
Q

legal status of rating bureaus

A

they are authorized and regulated by provincial insurance acts

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9
Q

how do rating bureaus collect and analyze data?

A

provincial superintendents appoint a statistics gathering agency

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10
Q

what does Insurance Forms Manual Services publish?

A

standard versions of basic policies, options so there is no competition on basis of policies in Canada

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11
Q

IBC’s 5 objectives

A

SEP-DC (DC in September)
- Study legislation
- Engage in research
- Promote public understanding
- Discuss general insurance
- Collect and analyze data

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12
Q

what has been the focus of Canadian Insurance regulation since Confederation?

A

MOTHS
- Marketing: marketing integrity and improvement of insurance contract
- Ownership: encourage Canadian ownership
- Taxes: collection of taxes
- Honesty: honestly and competence of intermediaries
- Solvency: keep insurer’s solvent to protect policyholders

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13
Q

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

A

CC-FAIR
- Creation of domestic and licensing foreign of insurers
- Compliance: give govt authority to enforce compliance with legislation
- Files FS: require regular filing of FS
- Adequacy: create boards to oversee and ensure adequacy of rates
- Investments: restrictions on types of investments that are permitted to reduce risk
- Rating bureaus: authorization of rating bureaus for info sharing

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14
Q

what conditions eventually led to public control over solvency?

A
  • insurer bankruptcies in the 1860/70s
  • the recognition short term price competition is bad
  • insurance involves a significant savings component (prepaid premiums) and phs must be protected
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15
Q

how does federal legislation protect Canadian insureds of foreign insurance companies?

A
  • foreign insurers must maintain sufficient assets in Canada for recovery from insolvency
  • if foreign insurer goes insolvent then a Canadian insurer can assume control over assets
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16
Q

what are the superintendent’s power over marketing practices?

A

investigate and order persons to stop offensive practices

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17
Q

what are the different levels of insurance regulation?

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

cite a case Pricy Council used against Fed efforts at insurance regulation

A

Citizens InsCo v Parsons

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19
Q

who oversees Canadian solvency regulation? (federal or provincial)

A

both
cooperative federalism 合作联邦制 has been achieved in practice

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20
Q

who oversees Canadian rate regulation?

A

provincial

21
Q

why is provincial insurance legislation so uniform across provinces?

A
  • primarily due to CCIR (Canadian Council of Insurance Regulators)
  • although legislation is done provincially, there are not great differences from province to province
22
Q

identify differences between private and social insurance

A

SSEF
- Selectivity: private insurers are more selective
- Solvency: private monitored by superintendent, social underwritten by government
- Employees: private have private employees, social has civil servants
- Fraud protection: yes for private, not so much for social

23
Q

identify similarities between private and social insurance

A
  • protect insurance fund
  • prevent over compensation
  • need to define covered event
  • need to determine covered losses
  • need claims and reserving functions
24
Q

what is the principle of indemnity?

A

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

25
Q

what is a contract of indemnity?

A

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

26
Q

is paying a fixed amount on event occurrence considered indemnity?

A

no because insured doesnot have to have a loss
- eg: pay a fixed sum if temperature at winter carnival stays above 0 because carnival would be cancelled due to warm weather

27
Q

is a life insurance an indemnity policy? explain

A

no, because loss of life cannot be indemnified
- life contract is a contract that pays a certain sum upon death irrespective of pecuniary loss

28
Q

identify conditions for recovering under an indemnity policy

A
  • event must be covered
  • requires proof of amount of loss
29
Q

identify the differences between a valued policy and a typical insurance policy

A

proof of amount of loss is not required because compensation is pre determined by the contract

30
Q

identify necessary conditions of reimbursement under ‘valued’ insurance policy

A
  • event must be covered
  • requires proof of loss, but not amount of loss
31
Q

Facts and issues of Glynn v. Scottish Union&National Ins Co

A

Facts:
- Glynn injured in auto accident
- was reimbursed by other insurer
- Glynn sued to double recover medical from own insurer
Issue:
- does Glynn’s insurer have right to subrogation

32
Q

Rulings of Glynn v. Scottish Union&National Ins Co

A

1) for insured: Glynn gets double recovery
2) for insurer:
- subrogation concept applies because auto policy is a contract of indemnity
- so Glynn’s insurer does not have to pay

33
Q

identify 4 differences between group and individual insurance

A
  • insures class of people vs individuals
  • contract is between insurer and sponsor vs insurer and insured
  • contract is open ended (ex: new employees are covered automatically) vs has to go through uw process
  • treated differently by provincial legislation vs individual insurance
34
Q

contrast group insurance with subscription policies

A
  • Group: one insurer covers many insureds
  • Subscription: multiple insurers underwrite different aspects of complex risk (ex: large commercial risk)
35
Q

important intend of doctrine of subrogation

A

prevent over compensation of insured

36
Q

tort recovery vs collateral sources: identify the 4 loss options

A

ECRR
- Election: pick either tort recovery or collateral source
- Cumulation: recover from both tort system and collateral 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

37
Q

Facts and issues of Fletcher vs MPIC

A

Facts:
- customer relied on MPIC
- there was no mention of UIM (Underinsured Motorist) coverage on application or insurance certificate
Issues:
- is a government insurer responsible for informing customers of available coverages?
- what is the extent of the government’s liability should it fail to do so

38
Q

Fletcher vs MPIC, criteria - for duty of care

A

MPIC owes a duty of care to its customers if
- customers rely on the information
- their reliance is reasonable
- MPIC knew or should have known the customer would rely on this information

39
Q

Rulings123 of Fletcher vs MPIC

A

1) insured wins
2) MPIC wins
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

40
Q

Facts of Dillion vs Guardian Ins Co

A
  • 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
41
Q

define the standard of absolute liability

A

if settlement possible but rejected by insurer, then insurer is liable for all costs even in excess of liability
- the insurer is liable for the exceedance of the limit if it refuses to settle the case below the limit

42
Q

what are the different possible standards for liability?

A
  • absolute liability
  • liability for not acting reasonable
  • liability for bad faith
43
Q

arguments for absolute liability

A
  • avoids: determining whether first offer was reasonable
  • lower probability of insurer gambling with insured’s money
  • insured and insurer have different monetary interests
44
Q

Ruling1 and BC case of Dilon vs Guardian Ins Co

A

Ruling1:
- insurer liable under all standards
- find in favor of insured
BC case:
- reject absolute liability because relationship between insurer and insured not fiduciary (monetary interest differ)

45
Q

what is the outcome of the case for Dilllon vs Guardian Ins Co

A
  • insurer liable for amount exceeding policy limit
  • they could have settled but didnt
  • therefore insurer is absolutely liable
46
Q

common examples of financial derivaties

A

options/forwards/futures/swaps

47
Q

identify advantages of foreign participation in the Canadian insurance industry

A
  • competition: produces lower prices and higher availability for Canadians
  • innovation: good for consumers
  • foreign capital: flows into Canada
48
Q
A

Exam 6 (58 decks)

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