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Flashcards in KPMG - Regulatory Oversight Deck (23)
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1
Q

Describe the continuum of rate regulation approaches. (3)

A

ACTIVE (government mandated, prior approval)
MODERATE (file & use, use & file, flex rating)
COMPETITIVE (file only, open competition)

2
Q

Describe the GOVERNMENT MANDATED rate regulation approach.

A

The government sets rates, rate changes and risk classification.

3
Q

Describe the PRIOR APPROVAL rate regulation approach.

A

The government approves rates, rate changes and risk classifications before their use.

4
Q

Describe the FILE & USE rate regulation approach.

A

The insurer files the rates, rate changes and risk classifications. The regulators have a set period of time to approve the above, otherwise rates can be used.

5
Q

Describe the USE & FILE rate regulation approach.

A

The insurer uses the rates, rate changes and risk classifications and files them with the regulators. The regulators can retroactively change rates within a certain period of time.

6
Q

Describe the FLEX RATING rate regulation approach.

A

The insurer uses rates, rate changes, and risk classifications provided that the rate changes are WITHIN a certain range.

7
Q

Describe the FILE ONLY rate regulation approach.

A

The insurer files rates, rate changes and risk classifications but NO review or approval is required from the regulators.

8
Q

Describe the OPEN COMPETITION rate regulation approach.

A

This approach does not require and filing of rates, rate changes, or risk classifications.

9
Q

Identify the main regulatory concerns for auto insurance.

A

Availability and affordability.

10
Q

Do rate regulation mechanisms vary by province?

A

Yes.

11
Q

Which provinces/territories use 1 approach for all required vehicles? (3)

A

NS (prior approval)
PEI (file & use)
YK, NV, NWT (open competition)

12
Q

Identify external considerations affecting Rate Regulation. (3)

A
  • market cycle
  • economic conditions
  • politics
13
Q

Identify an example of the GOVERNMENT MANDATED rate regulation approach.

A

Alberta Grid

14
Q

Identify an example of the PRIOR APPROVAL rate regulation approach.

A

Ontario major filings

15
Q

Identify an example of the FILE & USE rate regulation approach.

A

PEI

16
Q

Identify an example of the USE & FILE rate regulation approach.

A

Quebec

17
Q

Identify an example of the FLEX RATING rate regulation approach.

A

Not used in Canada

18
Q

Identify an example of the OPEN COMPETITION rate regulation approach.

A

Nunavut, Yukon

19
Q

Two benefits to policyholders of switching from Prior Approval to Use & File. (1 of 2)

A
  • less rate volatility (faster rate updates, lower price swings)
  • lower rates due to lower filing costs
20
Q

Two benefits to policyholders of switching from Prior Approval to Use and File. (2 of 2)

A
  • if more insurers are operating -> more competition & innovation -> good for consumers
  • regulators can then focus on solvency which protects policyholders rather than worrying about the rate approval
21
Q

Which regulatory approach is faster? File & Use or Prior Approval

A

File & Use is probably faster due to the set period of time for approval, BUT can’t be used for all LoBs in all provinces.

22
Q

Which regulatory approach is faster? Open Competition vs Prior Approval

A

Open Competition is faster to market, BUT valid only in NU, YK

23
Q

Which regulatory approach is faster? File & Use vs Use & File

A

Use & File since there is no waiting period before use, BUT only valid in Quebec