Dutil - FA

• origin: to ensure availability of compulsory auto insurance across Canada.
• role: provide a residual market for auto insurance and try to have as small a market share as possible.
• goal: provide auto insurance to drivers who can’t find it in voluntary market (last resort)

1. approve rate changes
2. authorize expenses
3. establish and maintain standards for servicing carriers and RSP members

• Mandatory FA membership for insurers licensed to write auto liab in jurisd FA operates
• Votes based on member's TPL direct WP for latest complete year in all jurisds FA operates

Residual auto insurance market for those unable to obtain insurance in voluntary market for PPV/COV

Participation ratio used to allocate P/L for each class

1. PPV non-fleet non-pool auto
2. all auto other than (1) or transferred to a RSP
3. transferred to a RSP other than pool in AB, NB, NS, ON CAT claim fund
4. transferred to a RSP in AB, NB, NS
5. all UM claims related to a pool or ON CAT claim fund

allow insurers to cede risks they consider premiums to be inadequate (allow them to write more high risks)

• risk insured:
  • FARM: PPV and COV; unable to find insurance in voluntary market
  • RSP: PPV not qualified for FARM; high risks insured by insurer
• Awareness:
  • RSP: p.h. unaware; FARM: p.h. aware
  • Rating / UW
  • RSP: insurer approved rates and rules; FARM: FA rates / rules
• Type of risk:
  • FARM: any PPV/COV vehicle declined by insurers; RSP: PPV only not qualified for FARM
• Service provider:
  • FARM: contracted a few service carriers to issue/admin policies and adjust claims on behalf of FA
  • RSP: insurers who issue policy
• coverage requirement:
  • RSP: must have min stat limits; FARM: not required
• Limit of # risks:
  • can be a limit for transfering to RSP; No limit to FARM
• treatment of losses in ON PPV Filing:
  • RSP: include; FARM: excluded as it’s not business of the insurer

results pooled among members in the prov:

• participation ratio based on voluntary PPV, non-fleet, TPL direct exposures (car years) not ceded to RSP
• incl those who do not transfer
• ON: ratio also depends on # of risks ceded to RSP

• ceded: premium charged net of service charges to insured (commission), subject to limits by prov
• member then receives expense allowance (% of ceded WP) to settle acq, op and LAE but not premium tax and prof fees

1. PPV
2. not eligible for FARM
3. min TPL limit
4. insurer's risk classification
5. insurer's approved rate

• proportion of each risk that can be ceded
• transfer of coverages (max limits or min ded)

1. Covers 85% of every risk transfered (other provinces 100% subject to limits)
   • rationale - incentive for insurers to maintain adequate UW/pricing and manage claims
2. Total up to 5% of voluntary PPV non-fleet WEXP
   • rationale
     • prevent company from using RSP as marketing tool to attract NB (higher expenses than RN)
     • incentive for insurers to maintain adequate UW/pricing as transfer is limited

1. Grid pool:
   • Covers risks that are subject to stat max prem
   • no lim to # of risks ceded. rationale: company has no control over price
2. Non-Grid pool:
   • total up to 4% of voluntary PPV non-fleet WEXP not ceded to Grid pool. rationale: help cope with 'take all comers' in Alberta

1. covers exposures with > 1 driver who receives discount for 'recently licensed driver with good driving records'
2. up to 8% of voluntary PPV non-fleet WEXP

1. covers exposures with > 1 driver with < 6 years of driving experience and no accidents / convictions
2. no lim on # of risks ceded

compensate when unable to recover from cases of no insurance or under-insurance