Chapter 14 - Automobile Insurance C14

Terms	Definitions
What are the major classes of automobile risks?	-private passenger, -commercial vehicles (trucks and delivery autos), -public automobiles (buses and taxicabs), -recreational automobiles (motorcycles, atvs, snowmobiles) -garage risks (road hazard and dealership risks) - non-owned automobiles
Name the FOUR (4) aspects of each risk that must be considered in rating. How does each one affect the rate?	location used, class of auto and its uses, drivers, automobile itself
What are the components of a rate?	i) pure premium - amount required to pay only the anticipated losses ii) expense loading - added to pure premium for overhead.
Where does the data used in automobile ratemaking come from, and how is it collected?	all private auto insurers in Canada must record and file auto experience date to comply with the requirements of the auto stats plans. the work is undertaken by the IBC.
Compare data based on a policy year to data based on an accident year.	policy year uses data from claims that occur in the duration of a policy. a weakness is that it does not use the most up to date information to discern current loss cost trends. accident year captures data from claims in the given year regardless of policy years. gives the most recent indicator of what future losses will be.
What are the component loss costs?	i) paid losses - known amounts ii) outstanding losses - provision for reported, not yet paid, claims iii) incurred but not reported losses (IBNR) - liability for future payments on losses that have occurred but yet reported to insurer.
What are IBNR losses?	using accident year data, actuaries calculate the IBNR using historically demonstrated factors and add it to incurred losses (paid and outstanding).
What is trending?	it is the process in which actuaries forecast the trend of increase or decrease in loss costs for the period for which premiums are calculated.
How can different types of automobiles affect a policy's different coverages?	a vehicle is assigned to a rate group based on its expected claims costs. this is based on a number of factors. the higher the rate group, the higher the premium charged.
How does investment income affect automobile rates?	the use of investment income to modify premiums is under close scrutiny of regulators who determine what is considered permitted rate levels.
How is the earned loss ratio determined?	it is the ratio of the loss costs to the earned premiums.
What different types of control exist on automobile insurance rates?	- prior approval - companies file their proposed rates and wait for approval. - file and use - companies file proposed rates and use them but face enquiries by the board - file and use following a "deemer" period - file proposed files and law allows period of time during which board can challenge - prior setting of rates by the board with variations from "benchmark".
What is the Green Book?	the green book shows the Actual Loss Ratio exhibit (a ratio of the loss costs to the earned premiums) and Pure Premium Exhibits.
What is VICC, and what is its function?	it is the vehicle information centre of Canada. its function is to record the cost of claims relative to factors such as wheelbase, boyd style, weight to horsepower ratio, price and the theft record of models.