FSCO

Question 1

prohibited risk classification elements

Answer 1

(C-CONES):
- claims where fault <= 25%
- credit history
- occupation
- net worth
- employment history
- salary

Question 2

list the types/subtypes of approval processes

Answer 2

• prior approval (major requirements, simplified guidelines)
• file & use (major requirements, minor requirements)

Question 3

describe UDAP requirement regarding rate levels among affiliates

Answer 3

basically, it is unfair or deceptive if the insurer fails to provide the lowest rate among all affiliates

Question 4

describe FSCO prior approval & give examples of vehicle classes to which it applies

Answer 4

for prior approval, FSCO must approve the following before rates can be used:
- rates
- rate changes
- risk classification
examples where prior approval can be used:
- PPA on OAP1 (private passenger auto written using the standard Ontario auto policy 1)
- FA (factility association)

Question 5

describe FSCO expedited approval & give examples of vehicle classes to which it applies

Answer 5

Expedited approval is a type of prior approval with approval in 30 days
Examples where expedited approval can be used:
- PPA on OAP1
- FA is excluded

Question 6

describe FSCO file&use & give examples of vehicle classes to which it applies

Answer 6

for file&use, the insurer must file:
- rates
- rate changes
- risk classification
then regulators have 30 days to approve otherwise rates can be used without approval
examples:
- other than PPA
- commercial auto
- endorsements
- FA is excluded

Question 7

what is OPCF-44R

Answer 7

• coverage for underinsured motorist as opposed to underinsured auto
• it is the difference between your TPL limit & at-fault driver’s TPL limit

Question 8

regulatory requirements when changing territory factors in a major filing

Answer 8

Rebase current, indicated, proposed territorial relativities
Calculate indicated change, proposed change
Check:
- indicated, proposed changes have the same sign
- magnitude proposed change < magnitude indicated change
- magnitude proposed change < 10%

Question 9

officer certifications in major filings timing & officer qualifications

Answer 9

• qualifications: CEO, COO, CFO, Chief Agent in Canada
• when required: always

Question 10

what filing items must an officer certify

Answer 10

• effective dates: for new&renewal business
• guidelines: must certify compliance
• info/data: certify accuracy & completeness
• rates: reasonable, not unfairly discriminatory, don’t impair solvency

Question 11

actuarial certification in major filings - timing & required actuarial designation

Answer 11

• qualifications: actuary must be FCIA
• when required: when rate change or there is a new LOB

Question 12

what filing items must an actuary certify

Answer 12

• effective dates: for new&renewal business
• vehicle classification system
• that actuary hase been authorized by insuer
• that data is RelSuff
• that AAP was used
• that risk classification system is reasonable

Question 13

is actuary’s certification needed for fleets

Answer 13

no, but it is needed for endorsements, commercial vehicles insured by FA

Question 14

what information is generally required in a rate filing

Answer 14

• data, narrative: all steps for rate changes
• assumptions, methods: regulator should be able to trace steps from raw data to final rates
• not required: a specific methodology mandated by FSCO

Question 15

describe the treatment of loss data in filings regarding reinsurance

Answer 15

exclude: reinsurance shouln’t impact price charged to insured

Question 16

describe the treatment of loss data in filings regarding cession to RSP

Answer 16

included as if never ceded

Question 17

describe the treatment of loss data in filings regarding FARM losses

Answer 17

exclude: FA sets their own prices using FARM loss data

Question 18

identify factors affecting the length of the loss trend period

Answer 18

• policy term
• effective date (proposed effective date of rate change)
• calculation date (valuation date of loss data)

Question 19

describe the general properties of coverages where premium trends are required

Answer 19

• coverages with inflation-sensitive exposure bases
• where mix is changing
• for clear filings: but note that premium trend is already accounted for in development of rate groups

CLEAR = Canadian Loss Experience Automobile Rating

Question 20

why might FSCO not approve an auto filing

Answer 20

• insurer used a prohibited rating variable
• insurer’s risk classification system is not reasonable or not sufficiently predictive of loss

Question 21

what classes of auto insurance does FSCO’s tech notes bulletin apply to

Answer 21

non-fleet automobile insurance on
- Ontario Automobile Policy (OAP1)
- Ontario Driver’s Policy (OPF2)

Question 22

5 categories of filing guidelines in FSCO’s tech notes bulletin

Answer 22

• PPA filing guidelines - major:
  -> used when an insurer is initially entering the private passenger automobile insurance market or
  -> when changing existing automobile insurance rates but the changes proposed do not meet the criteria for the simplified filing guidelines
• PPA filing guidelines - simplified
• PPA filing guidelines - CLEAR simplified
• other than PPA guidelines - major
• other than PPA - minor

Question 23

identify legislative requirements for non-fleet auto rate filings in ON

Answer 23

• just and reasonable
• solvency of insurer cannot be impaired
• not be excessive in relation to the financial circumstances of the insurer

Question 24

identify legislative requirements for non-fleet auto risk classification in ON

Answer 24

• just and reasonable
• predictive of risk
• distinguish fairly between risks

Question 25

identify 5 items of required information in an Ontario major rate filing

Answer 25

Choose 5 from: Loss-related information: 1. loss data 2. loss development 3. loss trend 4. treatment of large losses 5. catastrophe provision 6. automobile insurance reform adjustment factors Premium-related information: 7. on-level premium 8. rate group drift Other standard components of rate changes: 9. finance fees/charges 10. tax rates 11. expenses 12. underwriting profit provision 13. investment returns and cash flow rate 14. credibility Important types of changes within a filing: 15. indicated rate changes and proposed rate changes 16. territory, class, driving record and other differential changes 17. territorial definition changes 18. vehicle rate group changes Miscellaneous information: 19. predictive models 20. usage-based insurance pricing programs 21. introduction of new discounts/surcharges or differentials 22. dislocation and capping premium increases 23. auto insurance manual pages

Question 26

2 requirements for loss data in an Ontario rate filing

Answer 26

- must be specific to Ontario - must be at the major sub-coverage level

Question 27

how long a period must be used in estimating the large loss provision and why?

Answer 27

no specific numbers of years but should be long enough to minimize statistical variations

Question 28

what conditions must be met if an Ontario insurer is proposing to make territorial definition changes

Answer 28

- Ontario <- 55 territories, City of Toronto <= 10 territories - all territories must be contiguous - new territories require 3 years of insurer data and 2500 annualized average vehicles over the period - new adjoining territories do not vary by more than +/-10% - territory definitions are the same for all coverages - large claims should be capped in establishing territorial rates

Question 29

what items must be included in an intial UBIP filing

Answer 29

- what driving behaviours are being measured (ie., acceleration or deceleration rates, speed, distance travelled) - how this data is measured (i.e, frequency, occurrence, relevant thresholds) - how this data is normalized and categorized for rating purposes (i.e, total occurences, averaged) - loss data to support proposed UBI discount (i.e, claim severity, claim frequency and loss costs)

Question 30

identify UBIP program costs in a rate filing

Answer 30

- start-up costs for the UBIP filing - ongoing expenses such as: -> data transfer and analysis -> marketing -> third party provider contracts

Question 31

once a new discount is approved, how long must an ON insurer continue to offer the discount and why?

Answer 31

3yr - to ensure stability in the market before the insurer can withdraw it from its risk classification system

Question 32

when is rate capping not permitted

Answer 32

- base rate changes only - broker portfolio transfers or acquisitions - premium decreases

Question 33

identify 4 topics in FSCO regulation 664

Answer 33

- section 3: monthly premium payments - section 5: refusal to issue contract - section 10-14: dispute resolution - section 16: prohibited risk classification elements

Question 34

define accident benefits

Answer 34

benefits received if insured is injured/killed in auto accident (i.e, income replacement, medical, rehab,…)

Question 35

define catastrophic injury

Answer 35

serious, life-threatening, loss of limbs, eyesight,…

Question 36

define tort deductible

Answer 36

the amount that is deducted from a settlement or court award for pain and suffering

Question 37

define minor injury

Answer 37

sprains, strains, contusions, lacerations, whiplash

Question 38

strategy for controlling accident benefit costs

Answer 38

introduce minor injury guidelines with compensation cap of $3500

Question 39

identify a Canadian legal case related to minor injury guidelines

Answer 39

Morrow vs. Zhange (2004): - challenged Alberta's $4000 cap on compensation for minor injuries - cap was upheld

Question 40

why would an auto accident victim want their injuries classified as catastrophic

Answer 40

catastrophic injuries have a higher level of benefits

Question 41

what is the purpose of a tort deductible

Answer 41

to reduce litigation of minor claims - because if the award is less than the deductible, the net amount received by the victim would be zero anyway