KPMG.RegOv

Reading: “Research Report – Best Practices for Actuarial Involvement in the Regulatory Oversight of Property and Casualty Insurance Rates,” December 2012, pp. 21-31 except references to the B.C. and Ontario simplified guidelines.

• Note that Alberta, B.C. and Ontario simplified guidelines are excluded.

Author: KPMG

Forum

BA Quick-Summary: Regulatory Oversight One of four systems to regulate P&C insurance rates: prior approval, file-and-use, use-and-file, and flex rating. These systems differ in how much regulatory review is required before new rates take effect and how much actuarial support must be included. Actuaries should ensure rate filings are transparent, well-documented, and consistent with ASOPs. This includes disclosing data sources, assumptions, methods, trend selections, and any judgment applied in the rate-making process. The article emphasizes alignment with ASOPs—particularly ASOPs 13, 29, and 41—and calls for structured documentation including trend analysis, methodology, and the rate impact of key assumptions.

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) Click for Answer 

Study Tips

This reading is available only through purchasing the study kit from the CAS website. It is not available online. It covers just a few basic concepts that are easy to grasp. You'll learn everything you need to know by working through the old exam problems.

Estimate study time: 2 hours (not including subsequent review)

BattleTable

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!

 Outdated   → questions highlighted in orange are outdated because they are from material no longer on the syllabus

reference	part (a)	part (b)	part (c)	part (d)
E (2019.Spring #2)	provincial auto regs - BC rate change	provincial auto regs - NS rate change	provincial auto regs - QC rate change	provincial auto regs - AB: auto ins for TNCs
E (2018.Fall #3)	rate regulation: - types & examples	flex rating: - advantages
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 & examples	simplified guidelines: - see FSCO.PPA
E (2015.Spring #3)	rate regulation: - types & examples
E (2012.Fall #4)	rate regulation: - types	rate regulation: - switching types

Full BattleQuiz You must be logged in or this will not work. (opens in a separate window)

In Plain English!

This is a pretty easy reading to study and the wiki 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 (Alberta GRID, BC)

      - prior approval (Ontario major filings)

   MODERATE (3):

      - file & use (PEI)

      - use & file (Quebec)

      - flex rating (not used in Canada)

   COMPETITIVE (2):

      - file only

      - open competition (Nunavut, Yukon)

2. Examples of each type, where applicable

Notes:

• The topic of simplified filing guidelines in Ontario has been removed from the syllabus beginning 2021.Spring.

• No longer relevant: Page 26 of the source text lists 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.)

• Page 21 and 30 of the source text lists Alberta rate regulation 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.

There are a fair number of BattleCards in the quiz because but they are mostly recent exam problems. They are all based on a just a few simple ideas.

mini BattleQuiz 1 You must be logged in or this will not work.

mini BattleQuiz 2 You must be logged in or this will not work.

mini BattleQuiz 3 You must be logged in or this will not work.

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

Full BattleQuiz You must be logged in or this will not work. (opens in a separate window)

  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).