FOI - Chapter 3

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Questions and Answers

What is the primary role of the federal government in relation to insurers?

Setting standard terms for insurance policies

Licensing only those companies that meet financial standards (correct)

Determining premium rates for insurance contracts

Administering the Insurance Act in each province

Which statement best describes the responsibility of the Superintendent of Insurance?

To approve all insurance claims before payment

To monitor financial stability of insurers operating under provincial charters (correct)

To set the financial requirements for federal licenses

To decide the insurance rates applicable in the province

What defines an insurer as solvent?

The insurer has a high volume of paid premiums

The insurer can fulfill its financial obligations (correct)

The insurer has been audited successfully

The insurer has a license to operate

What is the significance of the 1992 Amendment to the Federal Insurance Company Act?

It established that federally licensed insurers are responsible for consumer losses in case of insolvency Signup and view all the answers

What is the maximum amount that can be claimed under the Property and Casualty Insurance Compensation Corporation (PACICC) for a single occurrence?

$250,000 Signup and view all the answers

Which of the following accurately describes the fiduciary nature of insurance?

Insurers and brokers must handle customers' money with an expectation of trust. Signup and view all the answers

In the context of financial solvency, what must insurers file annually with the Superintendent?

Annual reports on their assets, liabilities, and loss statistics Signup and view all the answers

What happens if the Superintendent of Insurance audits an insurer?

The insurer's operations may be suspended until issues are resolved Signup and view all the answers

Which of the following is required for insurers to operate in a province?

A unique license issued by the provincial government Signup and view all the answers

What role does the Property and Casualty Insurance Compensation Corporation (PACICC) play?

It pays valid claims when an insurer goes bankrupt. Signup and view all the answers

What notice period is required for an insurer to terminate a contract by mail?

15 days notice Signup and view all the answers

What happens to the premium if a contract is terminated by the insurer?

Refund of excess premium over pro rata premium is given Signup and view all the answers

If the insured terminates the contract, how is the refund calculated?

Excess of premium over pro rata premium for the expired time Signup and view all the answers

What type of damage is NOT covered when losses are due to the application of heat?

Damage from directly applied heat to property Signup and view all the answers

How should the insurer provide refunds?

By money order, postal, or express company money order, or cheque Signup and view all the answers

What begins the 15-day notice period for termination by the insurer?

The day after the receipt of the registered letter by the post office Signup and view all the answers

Which of the following situations would result in coverage for resultant fire damage?

An electrical surge damaging wiring Signup and view all the answers

What documentation must the insured provide upon loss or damage to property?

A complete inventory of destroyed/damaged property Signup and view all the answers

Which statutory condition voids an insurance contract?

Misrepresentation of property details Signup and view all the answers

What must the insured state regarding the cause of the loss if it is due to fire or explosion?

How the fire or explosion originated to the best of their knowledge Signup and view all the answers

What is the result of damage due to artificially generated electricity according to fire insurance policies?

No coverage for losses Signup and view all the answers

What establishes the rights and responsibilities of parties in a fire insurance contract?

Statutory conditions mandated by law Signup and view all the answers

Which statement is true regarding the short rate premium after termination by the insured?

It cannot be less than any minimum retained premium specified. Signup and view all the answers

What happens if radioactive materials escape due to an insured peril?

Contamination damage is not insured Signup and view all the answers

Which of the following is NOT a standard exclusion for fire peril insurance?

Damage from resultant fires Signup and view all the answers

In what case is the fire insurance contract void regarding misrepresentation?

If property details are falsely described Signup and view all the answers

What is the condition necessary for a right to appraisal to exist?

Proof of loss must be delivered Signup and view all the answers

What is the maximum time frame for an insurer to pay the loss after completion of proof of loss?

60 days Signup and view all the answers

Within how many days must an insurer notify the insured of their intention to repair, rebuild, or replace damaged property?

30 days Signup and view all the answers

What is the time limit for commencing an action against the insurer for recovery of a claim?

1 year after the loss occurs Signup and view all the answers

What must be included in any written notice sent to the insurer?

Must be sent to the chief agency of the insurer Signup and view all the answers

What happens if the insurer starts to repair within 45 days after receipt of proof of loss?

The insurer must complete the repair diligently Signup and view all the answers

Which of the following statements about the appraisal process is true?

It addresses valuation disputes independently of recovery rights Signup and view all the answers

What is the primary objective of the appraisal condition in insurance contracts?

To resolve disagreements on property value Signup and view all the answers

What must be included in the proof of loss submitted by the insured?

Details of all liens, encumbrances, and other charges on the property Signup and view all the answers

What kind of evidence is NOT considered proof of loss under Statutory Conditions?

Photographs of the damaged property Signup and view all the answers

Under Statutory Condition 7, what can the insurer do if they prove fraud?

They can deny the entire claim Signup and view all the answers

Which of the following is considered fraud under the statutory conditions?

Deliberately providing false statements to gain profit Signup and view all the answers

What is a requirement concerning the location of the insured property at the time of loss?

It must be included in the proof of loss documentation Signup and view all the answers

What must be demonstrated about any changes regarding the insured property since the contract was issued?

Changes in title, use, or possession Signup and view all the answers

What can an insurer require from the insured after a loss under Statutory Condition 6?

A complete inventory of both damaged and undamaged property Signup and view all the answers

In what scenario can an insured be exempt from the requirement of providing certain evidence?

If such evidence is not possible to obtain Signup and view all the answers

Study Notes

Regulation of Insurers

The general insurance industry is regulated by both federal and provincial statutes.
Federal government grants licenses to insurers that meet financial standards monitored by the Office of the Superintendent of Financial Institutions.
Each province has a Superintendent of Insurance to administer the Insurance Act, supervising insurance contracts and licensing.

Financial Monitoring

Government regulation ensures insurers are financially solvent to fulfill obligations.
Insurers must submit annual reports detailing assets, liabilities, and loss statistics.
Superintendents can suspend operations of insurers that are audited and found non-compliant.

Federal Insurance Company Act (1992 Amendment)

Federally licensed insurers are accountable to consumers for losses when insolvency occurs.
The Property and Casualty Insurance Compensation Corporation (PACICC) compensates valid claims in bankruptcy cases.
Maximum compensation per claim is 250,000,withupto70250,000, with up to 70% refund on unearned premiums capped at 250,000,withupto70700 per policy.

Insurance as a Fiduciary Responsibility

Insurers and brokers are fiduciaries, handling consumers’ premiums for claims.
Trust is crucial; brokers must forward premiums to insurers while insurers retain a portion for claims.

Policies Insuring Fire Peril

Standard exclusions are defined, such as damages from heat application directly applied to property, lightning damage to devices, and losses from radioactive materials.
Coverage details clarify that while the primary cause of damages may be excluded, resultant fire damages are typically covered.

Statutory Conditions Overview

Statutory Conditions define the rights and responsibilities of contract parties in fire insurance, mandated by provincial legislation without room for alteration.
Misrepresentation or significant omissions by applicants render the insurance contract void.
Contracts can be terminated by either party with stipulated notice periods.

Requirements After a Loss

Insured parties must notify insurers of losses in writing, providing proof and detailed inventories.
Additional documentation may be required to substantiate claims, such as evidence of ownership or liens on the property.

Fraud and Claims

Any fraudulent declaration nullifies the claim; honest mistakes are treated differently.
Insurers may deny claims entirely if fraud is proven.

Appraisal Process

Disputes regarding property value or loss assessment are resolved through appraisal conducted post-proof of loss submission.
Written demand is necessary before a claim can be appraised.

Payment and Replacement

Claims loss payments are due within 60 days after proof of loss, barring shorter contract terms.
Insurers may repair or replace property damaged within a defined time frame post-claim.

Action and Notification

Legal actions against insurers must commence within a year after loss occurrence.
Written notifications to insurers can be delivered personally or via registered mail, ensuring effective communication.

Studying That Suits You

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Description

Test your memory on Chapter 3, which discusses the role of government in the insurance industry. Students have three minutes to recall and write sentences about the regulation of insurers, focusing on both federal and provincial statutes. An example will enhance your responses and deepen understanding of the Forgetting Curve!