Spring 2016 8
When asked to describe why residual market programs for auto insurance are necessary one of the sample answers is "Automobile insurance is compulsory (mandatory, required)" but in the examiners report it states that candidates were not given full credit for incomplete answers such as “auto insurance is mandatory”. This seems to be a restatement of the sample answer and it is saying that you will not receive full credit for such an answer, what should a sample answer look like?
Comments
In this question (part c), it looks like the examiners defined a correct answer as one which includes an aspect of insurance distribution and a way in which residual market helps achieve that aspect. The answer key says "at least one item from each of group A and B," but I imagine they'd be looking for specific pairings of those items.
In that vein, "auto insurance is compulsory" should be paired with "high risk drivers may not find insurance in the voluntary market." They mean to say that giving one of these items alone does not complete the thought.
Furthermore, part B asks how RF profit and loss are shared. The examiners report states it is based on a formula and the common errors include stating that a RF is shared by market share... but the battlecards and readings state that it is shared by market share in the voluntary market for a RF... is the examiners report wrong?
Yes, examiner's report seems to be wrong in this case.
Hi, also for part b), does that mean the other sample solution for RF is wrong too, it states "Periodically losses and operating expenses ..." I found this part confusing, what's periodically losses? Also, there is no direct reimbursement of losses to the insurers, right?
That phrase means that the RF "assesses" insurers for the pool's losses, i.e. they require payment from insurers for these losses according to their voluntary market share.
Insurers don't get reimbursed for losses; RF pays losses and then assesses the insurers.
This discussion may help you with some of the fine points of this topic:
https://battleacts6us.ca/vanillaforum6us/discussion/27/jua-and-rf#latest
Reinsurance Facility: Insurers accept the risk and cede premium to the reinsurance facility.
• Reinsurance Facility: Insurer writes risk and transfers premium to reinsurance facility.
Insured does not know they are in the Reinsurance Facility.
Joint Underwriting Association: Insurers reject risk and are forwarded to the JUA
• Joint Underwriting Association: Insured applies to insurer, who finds risk unacceptable and
insured then applies to the JUA
In part a this answer is different than the Wiki. Wiki says both were forwarded by insurer to the program and insured would not know they are in the residual market. But here is looks like for JUA the insured would apply to JUA...
The examiner answer to part a JUA is wrong.
Curious, how often do "wrong answers" show up in examiner's reports here. Given we have no transparency for Exam 6-U this seems like a massive issue on an exam like this. How do we know when we've submitted "correct answers" that are graded by "wrong answers" in an examiner report when there is no transparency and no examiner's report after taking an exam. It doesn't make any sense to me why this is the standard for a professional examination process.
Through the history until 2019, examiner's reports occasionally have wrong answers. We cannot tell whether papers were graded based on these wrong answers, or the wrong answer appeared as an error in the examiner's report alone.