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July 1, 2011   by Canadian Underwriter


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Regulation

OSFI calls for global insurance capital standards

Global insurance capital standards would prevent the possibility of companies taking advantage of differences between capital charges across regulatory jurisdictions, according to Canada’s solvency regulator.

Julie Dickson, superintendent of the Office of the Superintendent of Financial Institutions (OSFI), made the observation in a speech to the International Insurance Society 47th Annual Seminar in Toronto on June 21.

“At this moment, we have no international agreement on some key aspects of insurance regulation, nor do we have a road map to get there,” Dickson said. “In fact, there is no international agreement on basic issues, such as specific capital standards on diversifiable risks.”

Meanwhile, OSFI is hearing stories about “regulatory arbitrage” occurring in the insurance industry. This is when a company has a capital charge for a risk, and is able to reinsure it with another company that has a lower capital requirement for the same risk.

“Sometimes you can see this practice allowed within the same conglomerate, most notably through the captive insurance structure,” Dickson said. “This is not something we condone.”

CCIR seeks public input on potential issues related to credit scoring

The Canadian Council of Insurance Regulators (CCIR) is seeking further discussion about seven potential risks to consumers identified in a CCIR paper on the use of credit scores by insurers.

The CCIR said it issued its June 2011 issues paper on credit scoring because it wants to hear from stakeholders about whether its list of identified risks is complete; whether the identified risks do in fact represent a potential harm to consumers; and whether current law addresses some of the risks already.

The seven potential risks identified in the CCIR paper are: inadequate consent; unreliable credit data; availability and affordability of insurance; insufficient disclosure; undue impact on certain groups; privacy breaches; and a lack of consumer understanding.

Ontario regulation allows insurers to challenge claims suspected to be fraudulent

An amendment to Ontario’s Insurance Act will essentially allow insurers to challenge claims suspected to be fraudulent by refusing to pay for treatment plans until the treatment providers produce reasonable information.

Ontario Regulation 194/11 took effect on July 1, 2011. The regulation gives insurers the authority to request certain information from treatment providers, who will have 10 business days to produce it after receiving the request.

Requested information may include:

  • the originals of any treatment confirmation form, treatment and assessment plan, assessment of attendant care needs and other documents giving rise to the claim for payment;
  • a statutory declaration as to the circumstances that give rise to the invoice, including particulars of the goods and services provided; and
  • the name and full address of the provider, and of every provider that provided any of the goods or services referred to in the invoice.

Should a provider fail to comply, the amount payable by an insurer under an invoice is not overdue and no interest accrues on it.

Canadian Market

Alberta consumers increasingly disgruntled with insurance rates, despite decreases

Alberta consumers are increasingly disgruntled about their auto insurance, even though premiums are not increasing significantly year-over-year, a consumer survey by the Alberta Insurance Rate Board (AIRB) has found.

The AIRB contracted an independent marketing research company to conduct a telephone survey with 800 insurance consumers across the province and a Web survey with 214 insurance consumers regarding their perception of auto insurance.

Of the consumers surveyed by telephone, 54% agreed with the statement that “insurance premiums are fair and reasonable.” This marks a drop from the 70% who agreed with the statement when the survey was conducted in 2010.

Between 2004 and 2010, the government and the AIRB ordered premium reductions on mandatory auto insurance coverage totaling 23%. This includes a 5% premium reduction ordered by the AIRB in 2010.

IBC believes New Brunswick insurance market could sustain modest cap increase

The Insurance Bureau of Canada (IBC) believes the New Brunswick insurance market could sustain a “modest, one-time” increase to the province’s $2,500 minor injury cap.

It does not suggest a specific dollar amount, but it does suggest indexing the cap annually to inflation. Also, IBC recommends changing New Brunswick’s definition of a minor injury to mirror that of Alberta’s definition.

The trade association representing Canada’s home, auto and business insurers made its recommendations in connection with New Brunswick’s current review of the province’s minor auto injury cap and minor injury definition.

IBC made its recommendations to the New Brunswick Auto Insurance Working Group, which recently held seven Town Hall meetings around the province.

The minor injury cap in New Brunswick applies to damages for pain and suffering. It does not apply to the amount an insured can receive in compensation for medical and rehabilitative services, lost income or other costs incurred as a result of the minor injury.

Risk Management

Company finance personnel taking on more risk management responsibilities

Changes in the business and regulatory landscape are driving more companies to expand the role of finance departments to take on financial risk management responsibilities, according to a study by Protiviti.

Protiviti polled nearly 200 finance executives from around the world, both in person and through online surveys.

Participants were asked to assess their skills and professional development priorities. More than 100 questions covered three major categories. In the process capabilities area (financial analysis, financial risk management and financial transactions), respondents felt they most needed to improve in financial risk management.

Claims

Severe weather damage in U.S. in 2011 triples the 20-year average between 1990 and 2010

Damage caused by severe weather in the United States during April and May this year nearly tripled the annual average for severe weather losses for the period between 1990 and 2010, an Aon Benfield report says.

Insured losses during the two-month period in 2011 are estimated at $15 billion. Total economic losses during the same time frame are estimated at $21.65 billion.

The report, United States April and May 2011 Severe Weather Outbreak, examines the active stretch of severe weather that occurred across areas east of the Rocky Mountains. At least eight separate timeframes saw widespread severe weather activity, including five separate outbreaks with losses in excess of $1 billion. The period between Apr. 22-28 included 334 separate tornado touchdowns. 


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