Understanding the APA Deductible Fund model
The APA Deductible Fund Trust allows the APA to build up sufficient cash reserves, which gives APA members the assurance of stable premiums, even when times are tough and other providers are not providing insurance in this specific market space. The Trust, which is funded from a portion of the premiums paid by APA E&O plan participants (known as a “Deductible Fund contribution”), is held by the APA to satisfy its agreement with the program underwriter to pay the first $100,000 of each insured claim.
The APA’s obligation to pay this part of each claim on behalf of plan participants is limited by an annual aggregate equivalent to the total of Deductible Fund contributions made by certificate holders. This aggregate is not related to any aggregate of insurance available to plan participants. Since the contributions fully fund the APA deductible, the APA and its members bear no financial risks. Once the individual claim deductible or annual aggregate is reached, the Insurer providing the Master Policy Coverage pays the balance of the claims.
The Deductible Fund contribution amounts have been agreed upon by the insurer, and serve to fund the difference between the certificate holder's individual policy deductible and the first $100,000 of each claim made under the policy, remitted by the APA on behalf of the certificate holder.
The Deductible Fund contribution forming part of each certificate holder's total payment for this insurance coverage is fixed, and will not increase for any reason other than increases in coverage granted to the participant. Please note that the APA has no obligation to refund contributions in whole or in part made by plan participants arising from favourable individual certificate holders' loss experience, nor as a consequence of terminating insurance coverage under the APA E&O plan at any time.
Historical claims experience under the APA E&O plan has shown that with the $100,000 deductible, a fund surplus can accumulate over time. The fund assets built up from member Deductible Fund contributions are expected to create a sustainable underwriting reserve, ultimately available to benefit plan participants in a number of ways such as rate reductions and enhanced coverage, and potentially allowing the APA to take on higher deductibles. As a result of the reserve, APA plan participants will be less vulnerable to insurance industry market cycles, which frequently result in insurers withdrawing from the market and, in the process, raising advisors' premium costs.
The APA sponsorship fee included in participants' insurance billings covers the costs of plan administration and management. The APA E&O plan is managed by Advocis Broker Services Inc. The broker fee charged by Advocis Broker Services Inc. for each certificate issued covers the costs of servicing the program by its client service representatives.
The APA and/or its claims committee may from time to time provide consultation to the plan insurers or to the plan's claims adjusting firm in the context of industry-related advice intended to facilitate fair and expedited claims management. Such consultation shall not include advice with respect to matters concerning policy coverage or potential claims denials.