CAS Exam 6C Fall 2013, Question 8
Study guide: Exam 6C
A personal lines pricing actuary who is working for a large insurance company in the province of Ontario, is asked by management to review three opportunities presented below.
Opportunity A: A broker has a contract with the company and believes there is an opportunity to target young drivers in the more affluent areas of Toronto. The broker wants to offer these drivers a quick and superior quoting service and policy issuance process based on the average income in their postal code.
Opportunity B: The CEO of the insurance company wants to target customers who have personal property policies with the company. To do so, the CEO suggests offering a multi-line discount of 10% on the auto policy. The historical experience of these customers is reviewed and they are found to indeed have better auto loss experience.
Opportunity C: A combination of competitive analysis and loss experience shows that the company is underpriced in the city of Hamilton but overpriced in the London area. The company would like to increase rates in Hamilton by 10%, and reduce rates in London by 5%. The overall impact of these changes is 0%.
For each opportunity, answer the following:
Part a (1 point)
Explain whether the opportunity is permissible according to Ontario regulations.
Part b (1.5 points)
If the opportunity is permissible, identify three types of actuarial information relevant to this specific change that must be provided to the Financial Services Commission of Ontario (FSCO) to obtain approval.
Answer this question and see the worked solution
Concepts tested
- Risk Classification Restrictions
- Rate Regulation
- Credit-Based Insurance Scoring
- Territorial Rating
- Financial Services Regulatory Authority of Ontario