KPMG.RegOv Flashcards
best practices of actuarial involvement in the regulatory oversight of p&c insurance rates
describe the continuum of rate regulation approaches
AMC
- Active regulation (government mandated, prior approval)
- Moderate regulation (file & use, use & file, flex rating)
- Competitive (file only, open competition)
describe the rate regulation approach: government mandated
government sets RRR (rates, rate changes and risk classification)
describe the rate regulation approach: prior approval
regulator approves RRR (rates, rate changes and risk classification) before use
describe the rate regulation approach: file and use
- insurer files RRR
- regulators have a set period to approve or disapprove, otherwise rates can be used
- filing documentations simpler than prior approval
describe the rate regulation approach: use and file
- insurer uses RR and files with regulators
- regulators can retroactively change rates within a certain period
describe the rate regulation approach: flex rating
insurer uses RRR provided rate changes are within a certain range
describe the rate regulation approach: file only
insurer files RRR but no review or approval is required
describe the rate regulation approach: open competition
no filing required
identify 2 main regulatory concerns for auto insurance
- availability
- affordability
do rate regulation mechanisms vary by province?
yes
which provinces/territories use 1 approach for all required vehicles?
- NS: prior approval
- PEI: file and use
- YK/NV/NWT: open competition
identify external considerations affecting rate regulation
EPM
- Economic conditions
- Politics
- Market cycle
identify an example of the rate regulation approach: government mandated
AB grid, BC
identify an example of the rate regulation approach: prior approval
ON major filings
identify an example of the rate regulation approach: file and use
PEI
identify an example of the rate regulation approach: use and file
QC
identify an example of the rate regulation approach: flex rating
not used in Canada
identify an example of the rate regulation approach: open competition
Nunavut and Yukon
BC private insurer files collision and comprehensive changes and waits for approval before using rates. Is this consistent with provincial regulations?
No, coll & comp are optional coverages and optional coverages are governed by open competition
NS must file rates with NC Utility & Review board within specified period after using rates. Is this consistent with provincial regulations?
No, NS uses prior approval
QC private insurer uses property damage rates before submitting filing. Is this consistent with provincial regulations?
Yes, QC is use and file
Government of AB acts as a monopoly in providing insurance for TNC. Is this consistent with provincial regulations?
No, TNC is provided by private insurers
3 benefits to policy holders of switching from prior approval to use and file
1) less rate volatility: faster rate updates and lower price swings
2) lower rates: lower filing costs because filings are less complicates
3) insurers like use and file
- if more insurers are operating, more competition and innovation, better for consumers
- regulators can focus on solvency which protects policyholders versus worrying about rate approval
identify advantages to flex rating
- less volatility in rates
- lower expenses versus prior approval
