Classes of business for member's participation
Hi Graham,
I have trouble memorizing the classes of business determining a member's participation in the FA because I don't really understand them.
In Spring 2017 #7 c), the examiner's report listed the following classes of business:
1) PPA non-fleet, non-pool business
2) Based on business not in the PPA non-fleet non-pool category or in any risk sharing pool
3) Business ceded to the pool in AB, NB, NS (or vehicles in a risk sharing pool except Ontario)
4) Business ceded to the pool in Ontario or vehicles transferred to a risk sharing pool other than a risk sharing pool in AB,
NB, NS or ON cat fund
Can you explain why each business classes will determine the member's participation and provide examples for point 1) and 2) ?
Many thanks
Comments
Ok, at the risk of sounding dumb, I found this very confusing as well. I even went back to the FA website and looked up their Plan of Operation, but it wasn't very helpful. The text in Dutil was just copied verbatim from that section of the Plan of Operation.
This list for Participation Ratios and Sharing is at the top of page 4 in the Dutil reading. The concept behind everything in FA is that losses are shared by everyone. But it isn't one big pool. There are 5 separate categories of pools that all operate independently.
I also just noticed that the BattleCard with this question was not included in the mini BattleQuizzes. It's now BattleCard 11 of mini BattleQuiz 1 for the Dutil paper. I tried to eliminate all the unnecessary words and boil each point down to the essentials.
Hi Graham,
Are the participation ratios calculated by province?
say, for point 4, a federal insurer will have 3 separate participation ratios for AB, NB and NS? or 1 single participation ratio?
Thank you.
There would be 3 different participation ratios. The RSPs for each province operate independently.
Thank you Graham. Do the FARM pools and UAF for each province also operate independently?
Thanks again !
Yes, FARM and UAF are all separate too. (You're welcome!)
Thank you Graham !
Hi Graham,
Can you please elaborate more regarding the FARM PPA (Non-Fleet, Non-Pool)?
From what I understand it should be Normal Private Passenger with really Bad Risks (e.g. lot of accidents), and it should not be commercial like Taxi since it is defined as Non-Fleet. I guess Fleet mean lot of units of car here? But what about Non-Pool means?
I suppose that it is not referring to Non RSP, otherwise it will cover the same as in the FARM Second Class.
Many Thanks,
Wilson
Yes, that's how I think of category 1 - individual drivers with bad driving records. I took the "non-pool" adjective to mean vehicles that are not in a Risk-Sharing Pool (RSP.)
And "non-fleet", as you said, means individual vehicles that are not part of a larger group of vehicles (like a fleet of taxis.)
I see, Many thanks Graham. Clear enough
Hi Graham,
I am bit confused
is the participation ratio of RSP determined by the business ceded to the pool or business not ceded to the pool ?
From above, I believed the participation ratio was determined by the business ceded to the pool.
However, in Fall 2015 #7 participation ratio was calculated by the business not ceded to the pool.
Thank you
Regarding RSP participation ratios, here is the relevant paragraph from the source text:
Hi @graham,
From my understanding, each of the 3 mechanisms uses participation ratio.
In Fall 2014Q13, what exactly is the difference between the participation ratio for FARM and RSP?
I understand that there are 5 categories etc. but cannot figure out how to find the participation ratio for FARM and UAF.
In minibattlequiz 2, question 6, answer says "FARM: Established seperately by AY, Juridiction"
On what are these based on?
The only thing that you get from the material is that FARM participation ratio varies by class of business and jurisdiction. It doesn't go into further detail, which means you don't have to worry about it for the exam
@graham
I want to clarify point 3 in the wiki.
On the wiki: it says:
RSPs:
(3) RSP in Ontario (except cat claim funds for ON accident benefits from insolvent insurer)
But shouldn't this be RSP in all provinces other than AB, NB, NS, ON Cat
I read the source text and I think the 5 categories should be the following:
1) FARM - PPA (non - fleet non - pool)
So this is basically individual with really bad experience that cannot get auto insurance.
2) FARM - All automobile business other than that included in (1) or transferred to RSP.
So this is basically business auto, like you mention above like a fleet of Taxi
3) This is basically RSP except for AB,NB,NS, ON (cat claim funds for ON accident benefits from insolvent insurer).
Just to clarify this would include Ontario RSP, but just not the CAT claim funds related to insolvent insurer). The territories would be included as well.
4) RSP for AB,NB,NS
5) All uninsured or underinsured motorist claims and the ON Cat that was excluded in 3.
For 5) Is this the same as UAF? If so, would it only be the 4 Atlantic provinces?
Is my interpretation correct?
No, your interpretation is not quite correct. RSPs do no operate in the territories.
I thought territories are included because I saw this on their website
Graham is specifically alluding to the Risk Sharing Pools. Those do not exist for the territories. The facility runs more than just RSPs
I see so basically 3 is basically just on for RSP excluding ON (cat claim funds for ON accident benefits from insolvent insurer)
Right?
Also, the syllabus reading was written in 2008 so if there have been changes in FA operation since then, the syllabus reading would be out of date compared to information on the website.
I'm not sure I understand your question. Could you rephrase?
Its okay I am good now, thanks!