Chapter 11 Industry Programs for Insurance Availability Narrative Model Questions

Facility Association


- The operations of the Association are conducted according to the Plan of Operation(the Plan)

     - approved by the members

     - and by regulatory authorities.

- Every insurer licensed to write automobile liability insurance in any jurisdiction the Facility Association serves is required by law to become a member

      - and remain a member of the Association.

- Insurers share in the operations of the Association based on their market share of automobile business in the jurisdictions where the Association operates.

- The underwriting

     - and claims functions are provided by a limited number of designated members, called servicing carriers,

     - who are compensated by operating

     - and service fees.

    

- The Facility also manages risk sharing pools in

     - Alberta,

     - New Brunswick,

     - Nova Scotia,

     - and Ontario, 

     - which are established under the Plan of Operation.

- These pools allow automobile insurance underwriters to transfer certain private passenger automobile exposures that may meet the companies' underwriting guidelines,

     - but still present higher-than-average risk.

- They are sometimes referred to as "grey" private passenger risks.

- Because these risks meet underwriting guidelines, insurers can't decline them,

      - and they must still be written in the voluntary market at the insurers' normal rates.

- Risk sharing pools give the writing companies the option of keeping such business for their own account 

      - or transferring it to the pool.

- Only risks that do not meet underwriting guidelines can be considered residual market risks 

     - and have policies issued through the Facility Association.

a) PRR

- Yes the applicant would qualify for the Plan de repartition des risques(PRR)

- In Quebec, the Groupement des assureurs automobiles administers a risk sharing plan called the Plan de repartition des risques(PRR)

- The PRR supports insurers providing access to automobile insurance for all Quebec automobile owners.

- All automobile insurers licensed in Quebec participate in the PRR, except those who do not write any automobile 3rd party liability insurance.

- The PRR is a mechanism that allows an insurer to transfer any risk that does not meet its underwriting criteria into a shared pool

- The underwriting profit or loss of the pooled risks,

     - as well as administration costs,

     - are shared between participants in the ratio of their percentage of the total automobile written volume in Quebec.


b) 1) Rate Calculation

- No standard rates are prescribed by the PRR

      - and a risk is transferred for the standard premium set by the insurer.

- If the risk has a record which shows Highway Code infractions, the PRR requires that the standard premium in the insurer's rate manual be surcharged by a specified percentage.


2) Informing the Broker

• - You would not advise the broker in this scenerio.
• - Insureds are very seldom aware that the PRR has been instrumental in the process of obtaining and supporting the coverage that they have obtained;

      - the PRR is, therefore, almost unknown to the public.

- As a matter of fact, the procedure followed for the transfer of a risk to the PRR is such that many brokers do not even know which of their risks have been transferred by the insurer.

3)Term of Policy

- Eligibility would be determined by the insurer.

- The insurer may transfer a risk to the PRR where coverage is granted

      - or withdraw it from the PRR at any time within a policy period.

- The insurer only needs to submit the appropriate information electronically

      - or on a paper form according to the stipulated procedures,

      - with the premium calculated on a pro rata percentage basis for the term transferred.