Alberta: File and Use or Prior Approval
For coverages other than TPL and AB that are governement-mandated (GRID), I believe it should be classified as Prior Approval and not File and Use, right? At my work, I worked on filings for Auto in Alberta and we needed approval before using rates.
Comments
I assume you're referring to page 21 and/or page 30 of the study kit reading:
It definitely says that Alberta uses a combination of government-mandated rates, and file & use. But if you've worked on filings then you would know whether or not that's correct. If the source paper is incorrect, I would have no way of knowing since I've never done an Alberta rate filing.
Have I interpreted your question correctly?
If so, if you give the answer from the source paper, even if it's incorrect, you would get credit. If you provide a different answer (the answer you know is correct) there is a chance you would lose points. You could then appeal if you didn't pass, but it's difficult to have a successful appeal because the graders then have to regrade everyone's exam and they really don't want to do this.
It's very frustrating if there is something in the syllabus you know is incorrect or outdated. Maybe the best bet is to give the incorrect answer from the paper, but state that it's incorrect and also provide the correct answer (provided this doesn't take time away from finishing other questions.)
If I did not interpret your question correctly, please let me know.
Thank you for your response.
Yes, that's what I was referring to. It was mostly to be sure I understood "File and Use" correctly as it seemed to contradict what I already knew about Alberta regulations.
If you are curious, here is a link to filing guidelines in Alberta: https://airb.alberta.ca/industry-information/filing-guidelines/AIRB-Guidelines-for-Private-Passenger-Full-Filing.pdf
Looks like this was enacted in 2014 and the KPMG paper is from 2012.
Interesting, thanks. I'll make a brief note in the wiki about this.
Hi Graham,
What is the difference between Prior Approval and File & Use? The line seems to be thin there. Is it just that for Prior Approval, rate changes might be refused, while File & Use is more casual?
Thanks,
The following post was edited and corrected as indicated on 2019-09-19.
In theory, you're right that the line is thin. For Prior Approval, you can't use the rates until getting approval, but for File & Use you can use the rates while waiting for possible disapproval as soon as the pre-determined review period is over if the regulator does not notify the insurer of disapproval..
I'm not really sure how often File & Use rates are disapproved, but the advantage of "File & Use" is that rates are more responsive to changing conditions since you use can use them immediately the filings require much less documentation that Prior Approval. I suspect that "File & Use" may be used for relatively minor changes, changes that are almost certain to be approved. It would be inefficient, and possibly bad for the public, to force an insurer to wait for approval for a very minor change that could potentially benefit everyone involved.
"for File & Use you can use the rates while waiting for possible disapproval."
I think you are describing Use & File - there is no waiting period before use but regulators can retroactively change rates.
If I understand correctly, for File & Use, insurer can't use rates until after the set period of approval is over and regulators raise no objection (i.e. rates are deemed to be approved).
Yes, I wrote "File & Use" but I was thinking "Use & File". I will edit that. Thanks.
My main point: memorize the respective provinces regulatory regime based on materials provided. Learning the following is far too time consuming and providing a text-book answer is a lot easier then trying to explain a "good answer". In the end, as long as your answer clearly supports your (correct/incorrect) position based on materials provided you will get full credit.
Summary
From examples and definition - the important characteristics of file & use:
1. technical requirements for regulatory approval (no subjective rejection criteria)
2. definite time frame for approval (no indefinite approval process)
3. less documentation (unclear how much less)
That is to say - if you're rates are compliant with the Insurance Act you will have approval 60 days from the completed filing date.
File and Use is still a type of "prior approval" system, but provides a bit of a "guarantee" in terms of the approval.
The definition provided by material isn't technical enough to draw a specific factor to determine which province each should belong to. Inferring you "know" the system used in the province because it "requires approval" - isn't quite that simple. The examples provided do not clearly link their determination to criteria in a definition.
Both File and Use and Prior Approval require regulatory approval (possibly not a Specific Written Approval).
And comments like this make things less clear:
As a specific regulatory approval is a very clear distinction and it would be nearly impossible to build a system that was a mix of a specific regulatory approval and approval from regulator is not required. So clearly the definition is more nuanced.
In the examples:
and
In the definition of each it seems to state the following
and
I suspect the definitions were loosely written and we should rely on the examples (the CAS is). From reviewing this carefully the File and Use is effectively a prior approval system with a guaranteed approval process (prior approval without file and use is open to denials for any reason).
This problem is best highlighted in New Brunswick where it clearly states that both answers are correct (although suggesting neither is correct at the same time):
New Brunswick doesn't have a rejection mechanism, but their process effectively rejects rates the NBIB does not approve of.
I suspect NBIB is misinterpreting what "File and Use" is and they are actually a file and use province (just extremely complex regulations to make it nearly impossible to file a perfect rate change, but if perfect would be approved)
All the examples for "prior approval" all have references to "rejection" in their respective provincial acts.
In Alberta, the regulator WILL APPROVE rate change within 60 days, but will require compliance with regulations for said approval. There is no subjective criteria, except that legislated periodically by the provincial government... (see below).
This was an issue post-2017 when
Effectively converting a "file and use" province into a "prior approval" province - however, as long as it was <= 5%, there was effectively still a file and use process in place (and no approval if over regulated limit)
Nova Scotia has requirement to
Newfoundland (prior approval language)
Again, in Ontario there is a requirement to:
A province with a "file and use" system can easily switch to a "in practice" prior approval system, but that would, in effect, violate the principles of the Insurance Act of said province (eg. NBIB) - as the Act requires approval (and doesn't offer avenue for rejection). However, said approval can be held hostage subject to non Insurance Act related effects, which is how we end up with a "File and Use" province becoming a "Prior Approval" province.
AIRB's own documentation state:
Hence, despite looking like a prior approval province, Alberta has regulations that support a file and use system. And with the 5% cap gone, is allowing larger filed rate increases to get into insurance companies books.
And finally this is further confused when prior approval is said to allow for: