KPMG.RegOv

There are three broad systems of rate regulation - AMC (Active, Moderate, Competitive). Each are subdivided into approaches that span the continuum from government mandated rates to open competition.   Forum

Pop Quiz

Suppose there is an auto insurer in New Brunswick called Accidents R Us. Here is some data for the risk-sharing pool in New Brunswick:

Item	Accidents R Us	NB Total
EE(not ceded)	2,800	15,000
EE(ceded)	110	1,000

Calculate the PR (Participation Ratio) for Accidents R Us. (This is from the reading Dutil.FA)

BattlePlan

Based on past exams, the main things you need to know (in rough order of importance) are:

• identify & describe the different types of rate regulation (prior approval, file & use, use & file,...)
• provincial examples of each type

Top Questions ← Questions you absolutely need to know!

reference	part (a)	part (b)	part (c)	part (d)
E (2017.Spring #3)	which is faster: - file & use - prior approval	which is faster: - open competition - prior approval	which is faster: - file & use - use & file
E (2016.Fall #4)	rate regulation: - types	simplified guidelines: - see FSCO.PPA
E (2015.Spring #3)	rate regulation: - types & examples
E (2012.Fall #4)	rate regulation: - types	rate regulation: - switching types

In Plain English!

Today is your lucky day! This article is short because the BattleCards tell you everything you need to know. There are just 2 main things:

1. Types and sub-types of rate regulation: ACM

   ACTIVE (2):

      - government mandated

      - prior approval

   MODERATE (3): File & Use, Use & File, Flex Rating

   COMPETITIVE (2): File Only, Open Competition

2. Examples of each type

That's it! See BattleCards for the details. There are a fair number because there are many RECENT exam problems from this paper, but they're based on a just a few simple ideas.

Note that on p26 of this reading, they list some rules for simplified filing guidelines in Ontario. These guidelines are OUT OF DATE, and directly contradict information from FSCO.PPA. This KPMG paper was written in 2012, and the simplified guidelines have changed. (See FSCO.PPA for the updated guidelines.) It's things like this that make we want to tear my hair out!

Note also that on page 21 and page 30 of this 2012 reading, Alberta rate regulation is listed as being a combination of government-mandated and file & use. This is outdated as new regulations were introduced in 2014. There is a forum thread on that topic here: Alberta rate regulation (Thanks to user srivard23 for noticing this!)

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BattleCodes

• Memorize:
  • types of rate regulation: ACM
  • examples of each type of rate regulation

• Conceptual:
  • You should understand that the different types of rate regulation lie on a continuum, from very restrictive to very open
  • Products like PPA, that most people use, are typically heavily regulated. Why do you think that is? (One answer is because of the potential for abuse. Insurance companies are for-profit enterprises, and it's very easy for a company to lose sight of the public good in its drive for greater profits. Regulation is the way that all of us "little people" are protected from this!)

• Calculational:
  • none

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  Forum

POP QUIZ ANSWERS

• Recall:

PR = Co.EE(not ceded) / Prov.EE(not ceded)

• Therefore PR = 2,800 / 15,000 = 18.67% (You don't need the second row of data in the table.)
• Note that technically, the PR depends on (T.V.PPA.NF.TPL) direct EE (Total Voluntary PPA Non-Fleet Third Party Liability direct earned exposures).