5. Functions within insurance organisations Flashcards
What is the essential role of Underwriting?
To calculate the premiums to be charged for the risks to be insured and to create and control the extent of cover given under the policy.
What is an underwriting manual?
A guide used to control underwriting practices. It includes details on premiums categorised by risk factors.
In an underwriting a manual what does a ‘loading’ mean?
An additional charge added to an insurance premium to account for higher risk factors associated with the subject matter.
What is a ‘pure risk premium’?
The part of the premium necessary to pay for losses and
loss-related expenses only.
Give 4 examples of ‘loadings’
- Dangerous occupations
- Health conditions
- Whether or not the proposer is a smoker
- Proximity to a river or the coast
Give any example of why an underwriter may apply a discount to a property premium.
If building has a sprinkler system fitted.
What is the usual quotation process on the Internet?
The process is automated so there is no personal interaction with a broker or the proposer. The policyholder can print the policy wording and retain this for their records.
What is the usual quotation process over the telephone?
A call centre handles simple proposals by phone. The underwriting assistant collects details, provides a quote, and confirms cover if accepted. Complex cases go to a senior underwriter for review.
What is the quotation process for large commercial businesses?
The policyholder will be required to supply a comprehensive pack of information, usually to their broker, so that quotations can be obtained with full disclosure of material facts.
What are the 5 standard stages used by a risk management function?
- Identifying Strategic Objectives
- Risk Identification
- Risk Analysis
- Risk Reporting
- Monitoring and Iteration
What is a risk register?
A centralised record of identified risks is maintained by the risk management team, who update it and report key findings.
What is a risk matrix?
A quantified assessment used to assist in ranking risks according to materiality.
In risk assessment, what are inherent and residual risks?
Inherent risk is the risk before controls, while residual risk is the remaining risk after applying controls
In risk management, how is the RAG (Red Amber Green) rating system used?
A risk matrix provides a visual representation of severity, with red indicating high-risk areas requiring immediate action and green representing lower-risk concerns.
What is a claims philosophy?
Outlines the goals and targets for each stage of the claims process, setting key performance indicators for speed, efficiency, and service quality.
What are 7 stages in a claims process?
- Events Giving Rise to the Claim
- Claims Notification
- Claim Review
- Response to Claimant
- Claim Investigation
- Claim Negotiation and Settlement
- Claim Recoveries
What 6 points are involved in reviewing a claim?
- The Amounts Claimed
- The Information Provided at the Time the Insurance Was Purchased
- The Exact Terms of the Policy
- The Legal Requirements
- Market Practice
- The Insurance Company’s Claims Philosophy
What 3 choices does an insurer have in responding to a claim?
- Payment
- Negotiation
- Rejection
What 5 ways are claims negotiated?
- Negotiation with the customer
- Mediation
- Alterative dispute resolution
- Arbitration
5 Litigation
What is delegated authority?
When a higher authority grants another party the power to make decisions or take actions on its behalf, often within specific limits.
Give an example of a delegated authority agreement.
When an insurance company allows some form of
underwriting or policy administration to be carried out by outside entities
What is the name of the party to whom authority has been delegated?
The coverholder
What is the name of a delegated authority agreement?
A binding authority
What is the key role of a compliance department?
To ensure, as far as possible, that the operations of the firm are compliant with regulatory requirements.
Provide 5 compliance team tasks.
- Communicating regulatory requirements and updates to staff.
- Acting as the point of contact for regulators.
- Ensuring customer protection procedures, anti-money laundering, and fraud checks are carried out.
- Auditing processes for compliance and developing new procedures.
- Providing training and reporting compliance performance to the board.
How is the compliance department involved in the fair treatment of customers?
The compliance department monitors the firm’s performance and works closely with its customer service teams to ensure that intended outcomes are understood and embedded in operations.
Give 5 types of actuaries.
- Pricing Actuaries
- General Insurance Actuaries
- Reserving Actuaries
- Modelling Specialists
- Solvency Capital Actuaries
What is a pricing actuary?
Actuaries who take assessment of a risk and set premiums relative to the its factors.
What is a general insurance pricing actuary?
Actuaries who support the underwriting team by predicting loss ratios for a book of business, using historical performance and industry loss data.
What is the role of actuaries in reserving?
Actuaries review claim reserves, assess trends, and factor in changes like legal decisions and construction costs to help evaluate the year-end financial position.
How do actuaries and underwriters work together in complex risk scenarios?
Actuaries model potential losses, and underwriters set premiums, with underwriters responsible for performance.
What is CAT modelling?
A computerised process that simulates potential catastrophic events and estimates the amount of loss due to the events.
What is the role of actuaries in internal models in risk estimation?
Each category of risk is estimated and entered into a model to estimate the worst-case scenario, as required by the Solvency II Directive.
Give 5 reasons organisations rely on market research.
- Develop Marketing Plans
- Monitor the Success of Products or Services
- Identify Target Markets
- Control Marketing Operations
- Formulate Marketing Strategy
What is customer relationship marketing?
Customer relationship marketing builds long-term relationships by anticipating needs based on past purchases, aiming for increased sales and lower customer acquisition costs.
What are 3 activities of the customer service department?
- Pre-transactional – Customer service policies, staff training, complaints handling, and warranties.
- Transactional – Managing service demand, timing, and monitoring service delivery.
- Post-transactional – Handling claims, complaints, and cross-selling.
What are the 3 main assets of an insurance company?
- Premiums
- Claims reverves
- Shareholders’ funds, retained, profits and loans
What does the role of the inventment team in an insurance company include?
To align investments with claim durations:
Short-tail insurance - Short-term investments.
Long-tail insurance - Long-term investments.
Give an example of a long-tail insurance and a long-term investment.
Life and Pension
Property investments
Give an example of a short-tail insurance and a short-term investment.
Motor insurance
Corporate and Government bonds
What are 5 roles of the finance department of an insurance company?
- Accounting
- Credit control
- Raising capital
- Solvency capital
- Group consolidation and reporting
What is a typical period of credit for payment of premiums from the broker?
30 or 60 days
What is the aim of Solvency II?
Solvency II aims to implement solvency requirements that better reflect the risks that
companies face and deliver a consistent supervisory system.
Define strategy in the context of an insurance company.
A proposal for the longer-term deployment of resources to meet objectives against competition from rival organisations.
What is the purpose of strategic planning?
To set the business on a path to the best
performance
What are 8 activities of a strategy team of an insurance company?
- Mergers and acquisitions
- Classes of business
- Geographical spread
- Partnerships
- Outsourcing
- Advertising and marketing
- Broker or direct
- Time horizons
- Business planning
In the context of strategy, why is it meant by ‘geographical spread’?
To expand into new regions to:
- Grow beyond saturated markets.
- Diversify risk across different locations.
- Enter new markets via acquisitions.
What is a white-label insurer?
An insurer that provides insurance products under another company’s brand, while handling the underwriting and administration. Balancing efficient sales with reduced brand recognition.
What is the purpose of business planning in an insurance company?
To implement strategy through structured planning, ensuring alignment with financial, operational, and regulatory goals.
Who oversees the business planning process?
The strategy team or business planning specialists in group centres or operating divisions.
What are the 5 key components of an insurance business plan?
- Classes of business and maximum insured values
- Premium estimates and loss ratios
- Geographical spread and brokerage costs
- Expense profile and investment strategy
- Reinsurance strategy and key changes for the year
What financial factors are considered before finalising the business plan?
Solvency, operational capital, risk, regulatory requirements, and return on capital.
What are the key responsibilities of the company secretarial team?
Manage the share register, organize board meetings, and ensure timely filings with Companies House.
What does the company secretary do regarding board meetings?
Organises board and committee meetings, creating an annual timetable and ensuring reports flow between meetings.
What is the typical timeline for organising board meetings?
- Agenda Preparation
- Paper Distribution
- Meeting and Minutes
- Minute Review
When does a company engage external law firms?
Specialist matters such as mergers, litigation, property acquisition, international regulation, and insurance claims.
What are the responsibilities of an internal audit?
Business auditing and Accounting audits
What is the role of the internal audit (IA) department in business auditing?
The IA department reviews compliance with procedures and controls across all areas of the business, ensuring operations follow required standards.
How is the audit plan developed?
With input from senior management, the CEO, and the audit committee chairman, outlining projects, resources, and priorities for the year.
What are themed audits?
Audits that focus on specific activities across departments, such as IT security, underwriting controls, or customer complaints management.
What are the main hardware responsibilities of the IT department?
Managing servers, laptops, printers, system connections, and enabling remote work.
What are the two main approaches to hardware management strategy?
- In-house ownership and maintenance
- Outsourcing to a fully operational service
What factors influence the decision to outsource IT operations?
- Cost
- Availability of in-house specialist knowledge
- International operations considerations
What are the key responsibilities of the IT team in data management?
Capture, storage, security, and accessibility of data.
What are the 2 options for data storage in an insurance firm?
- On-premises servers
- External ‘server farms’
How does Facilities Management support business recovery planning?
It arranges alternative office locations in case of emergencies like floods or fires.
What is a warm site in business recovery planning?
A location pre-equipped with desks and IT, ready to be used when needed.
What is a hot site in business recovery planning?
A fully operational office where IT runs in real time, allowing immediate occupation if needed.
What are the main responsibilities of the HR team in an insurance firm?
Staff resourcing, development, remuneration, payroll, compliance, and health & safety.
What are the 5 main steps in the recruitment process?
- Sign-off
- Recruitment
- Interview
- Job offer
- Induction
What is a return on investment (ROI) report in L&D?
A report outlining the business and individual benefits of training programmes.
