Chapter 6 - C 120

Terms	Definitions
What features of automobile insurance regulation are common to all provinces and territories in Canada?	policy forms are government approved, rates charges are approved by the government, underwriting rules are filed with the government, compulsory insurance laws make it mandatory that every auto owner has access to insurance.
Why is it important for an underwriter to use "the power of why" when assessing automobile insurance risk?	to ensure the proper level of exposure on a risk.
What steps should an underwriter be sure to take in underwriting any automobile insurance risk?	review the automobile insurance application, learn about the applicant, identify the lessor or lessors of any leased vehicles, examine applicant's relationship with broker, ask about the use of the vehicle, identify the type or class of vehicle, mods to vehicle, repairs, disting. registered owner and actual owner, estb. drivers age
Why is it becoming more of a challenge for underwriters to obtain a signed application form?	technology can make signed applications difficult to obtain.
Why is it important for an underwriter to identify all persons who are to be insured under a policy?	to make sure that misrepresentation of intended use does not exist.
Why is it useful for an underwriter to know about the other types of insurance that the applicant has with the insurer?	it could be easier to underwrite the application by having access to their homeowner's policy and the financial information available.
What does the potential ambiguity of indirect financial information indicate about the nature of underwriting? What does this suggest about the essence of an underwriter's work?	it shows that an underwriter never has perfect information. the essence of the work is to draw inferences and find compromises that allow businesses to be written at a premium commensurate with the risk.
Explain why the applicant for insurance on a leased vehicle is usually the lessee.	the lessee has custody and control of the automobile. will know who and how the auto is used.
Why is it important for an underwriter to know the age of a leased vehicle?	the older the leased vehicle, the more likely a leasing company is financially unstable and may pose a moral hazard. leased vehicles are normally late-models.
Why is it important for an underwriter to know about the broker from whom the application comes?	if the applicant is unknown to the broker then they could be "shopping around" and unlikely to be a long term customer or they are trying to hide their past driving records
What are the differences among the personal use, commercial use, and business use of a vehicle?	personal - used for leisure commercial - in the course of commercial activity business - combines elements of personal and commercial use
What are the major classes that automobile risks are usually divided into for rating purposes? Give an example of each.	private passenger - pleasure and business use commercial - trucks and delivery public automobiles - buses and taxis recreational - motorcycles, ATVs garage risks - road hazard and dealership risks non-owner autos
Why is it important for an underwriter to know whether the business use of a vehicle will result in the driver being in unfamiliar driving territory?	the possibility for a loss is greater in an unfamiliar territory than a familiar one.
Why is it important for an underwriter to know whether the applicant's operation and the industry it operates in are stable?	if the industry is dying then how long can the applicant stay in business and be able to pay a premium.
What is a non-owned automobile policy? When may this type of policy be needed?	a non-owned auto policy is based on the legal concept of "respondeat superior" (let the superior answer) liability is shifted to the person in charge. ex. a pizza delivery man using his own car for the employer's business.
What is a temporary substitute vehicle?	a vehicle not owned by the insured or anyone living in the insured's home and is being used due to the breakdown, repair, destruction or sale of their vehicle.
What is the CLEAR system?	phsyical damage insurance is now rated on the CLEAR (Canadian loss experience automobile rating)
What important facts does the MSRP system ignore?	most collision claims result in repair rather than replacement, vehicle price is not the only predictor of repair costs, safety features should not result in higher premiums, price not best predictor of claim frequency, depreciation is different on vehicles
In short, on what does the CLEAR system base the premium for physical damage insurance?	bases premium for physical damage insurance on the likelihood of vehicles being involved in claims and what it costs to settle each claim.
What are aftermarket modifications? How do they affect an automobile's exposure to loss?	work done to the vehicle that makes them significantly different than factory settings. each mod changes worth and exposure of the vehicle.
Why is it important for an underwriter to be aware of any unrepaired damage to a vehicle?	makes vehicle less safe and roadworthy and more likely to be in an accident. may also suggest a moral hazard.
Why should an underwriter obtain a Motor Vehicle Record for a risk?	it will help determine if the driver has had any convictions or accidents in the last 3 years.
What questions should an underwriter ask when assessing the risk posed by a new driver?	did the driver just obtain their license? the class of license? formal training program?
What types of information should an underwriter determine about the maintenance of an applicant's vehicle?	is the vehicle maintained regularly? is it done by a third party or one of the applicant's party.
What is the first decision to be made by an underwriter? What factors might alter this decision?	the first decision is whether to accept or reject the risk on the proposed terms. factors include changes to unsatisfactory policies, a higher deductible or a higher premium.