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M92 - andy > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

What is a proprietary company

A

Company owned by shareholders- most insurers

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2
Q

What is a mutual company

A

A policyholder owned and any surplus is reinvested in a company to reduce the premiums. Think NFUM

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3
Q

In Lloyds what does a franchisor do

A

Approved business plans and make sure members are compliant

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4
Q

What is captive insurance

A

One policyholder only. This is self insurance/ the policy holder is the company owner

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5
Q

What is takaful insurance companies

A

Based on the rulings of sharia law. Muslim insurance. Main market place in some part of the world

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6
Q

What does takaful mean in Arabic

A

Guaranteeing each other

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7
Q

What do reinsurers do

A

Extend the risk transfer mechanism

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8
Q

What is the difference between facultative and treaty

A

Treaty can be divided into proportional and non proportional

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9
Q

What are the two main types of treaty

A

Proportional and non proportional

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10
Q

What is a proportional treaty

A

Where the insurer and reinsurance take a state proportion of each risk and share the premium/ claims on the same basis

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11
Q

What is non proportional treaty

A

Allows an insurer to retain the first part of cover and transfer the balance to the reinsurers

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12
Q

Is the government a policyholder when taking risk

A

Both policyholder and owner. Do you get an inputs but not that much

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13
Q

Where does the pool re sit

A

Acts as a reinsurers and insurers add 100% reinsured back to the pool re

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14
Q

Can everyone access reinsurance for flood re

A

Everyone in the applicable post code. Houses built after 2010 can’t as deemed as a known issue

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15
Q

What is self insurance

A

A business has taken the decision to create a budget line tor a risk instead of using a captive or an insurer

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16
Q

What is the difference between a captive insurer and non insurer when self insuring

A

With captive it costs money to set up
A captive sets aside money for long time reserves and must be run like an insurer
Non insures have no provision of the risk and no budget set for it

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17
Q

What does the London market comprise off

A

Insurance and reinsurance
Lloyds of London syndicates
Marine protection
Indemnity club
Brokers

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18
Q

What are the seven participants in the London market

A

1 . Insurance companies that are member of the IUA including branches or subsidiaries of foreign companies
2. Insurance complained within London underwriting offices
3. P & I clubs
4. Pools - international oil insurers and the British insurance committee
5. Lloyds of London
6. Contact offices of foreign companies not allowed to transact business in the U.K.
7. Insurance brokers

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19
Q

What are the different distribution channels used by insurers

A

Direct insurance
Independent intermediaries
Banks and building societies
Retailers and affinity groups
Travel agents and tour operators
Aggregators

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20
Q

What is an example of a direct insurer

A

Aggregators are not direct. Churchill would be an example or Hiscox

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21
Q

What is an example of independent intermediaries

A

Hettle andrews

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22
Q

What is an agent

A

Agent can only put forward their insurers terms not independent. Tied to one insurer

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23
Q

Can banks become intermediaries

A

Yes. They can set up partnerships with selected insurance or Lloyds syndicates of the provision of household, motor and travel insurance

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24
Q

What is white labelling

A

Where an organisation offers insurance products branded with their own name but under written by insurance company with a Lloyds syndicate

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25
Q

What do customer relationship management do

A

Use information about individual customers to build strong relationships between a business and its clients

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26
Q

Why is customer relationship management so important

A

It is less expensive than running the new customers as information is used to pre-empt the customers future buying needs

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27
Q

What Are the six outcomes of treating customers fairly under the FCA

A

One. They can be confident by dealing with firms with a fair treatment of customers is central to the corporate culture
2. Services and products are designed to meet the needs of identified consumer groups
3. Consumers are provided with clear information and are kept informed
4 . All advice is suitable
5. Customers are provided with products perform as firms have led them to expect
6. Consumers do not Face unreasonable post sale barriers imposed by firms to change product or switch providers et cetera

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28
Q

What are stakeholders

A

People or groups of people who have an interest in a way a company act

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29
Q

Why are stakeholders important

A

They have a vested interest in the organisation such as investment or employment. They will want something from the company I will often want to apply some influence in one way or another

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30
Q

What type of interest would a customer have as a stakeholder

A

Quality, value for money, service standards and fairness

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31
Q

What kind of interest does a shareholder have as a stakeholder

A

Return and performance

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32
Q

What kind of interest does a government regulators have as a stakeholder

A

Text, VAT, legal and regulatory compliance

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33
Q

What type of interest does a public have as a stakeholder

A

Social responsibility and responsible environmental considerat

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34
Q

What type of interest as employees have as a stakeholder

A

Rewards, training, career progression

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35
Q

What type of interest to intermediaries has a stakeholder

A

Commission and service standards

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36
Q

What factors do strategic planners have to take into account when trying to truly reflect the Interest of its stakeholders

A

Composition and significance of each group
Power that each group can exert
Legitimate claims each group may have
Degree to which these claims conflict at significant areas of concern
Extent to which the organisation is satisfying claims
Overall mission of the organisation

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37
Q

What are business ethics

A

Standards and moral conduct the company says its self with its dealings within the organisation and outside

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38
Q

What are the reasons that ethical issues now playing an important role in management

A
  1. Large companies operate in small nations and have a large revenue income so their wealth cAm have implications
  2. responsibility and power are closely interlinked
  3. Consumers now increasingly judge organisations
  4. Strategic business decisions are partly determined by the cultural influence of society
    
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39
Q

What are the 10 factors of Lloyd’s of London to develop into a successful International Centre for insurance and insurance

A
  1. Political and economic stability
  2. Geographical location
  3. Quality transport system
  4. Hi qualified personnel
  5. Office space at competitive prices
  6. English is a business language
  7. Stable legal and regulatory environment
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40
Q

What is the impact of a company growing by merger or acquisition

A

It is fast and achieve the economies of scale needed in insurance but has more risk

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41
Q

Why can organic growth be negative

A

As it shows a business is contracting

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42
Q

What is the definition of organic growth

A

The rate of business expansion for increasing output and sales

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43
Q

What regions are there in a company would want to grow

A

Increasing consuming incomes
Ready availability of finance
Low interest rates
Buoyant market
Opportunities for product developments
Export opportunities
Economies of scale for lower operating costs
The opportunity of increased revenue, profit and shareholder value

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44
Q

What are the benefits of growing organically

A

It is less expensive and can offer improved returns and also forces a company to build a strong base for further growth

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45
Q

What are the disadvantages of growing organically

A

Have to examine closely own resources, assets and finances
Heavy demands of management as creativity and innovation will be essential to achieve a high level of grave

46
Q

What are the key examples of organic growth drivers

A
  1. Provides a sound means to measure progress and success
  2. More profitable route with a better investment return
  3. Demonstrates a long-term commitment to a business by building it for the effective use of internal resources
  4. Management company focus on growing the business and achievement of goals
47
Q

What is organic growth more difficult for an insurer

A

The lag between putting business on the books and emergence of a true pattern of claims it disguised as a true underline profitability of the business being written

48
Q

What is a disadvantage of mergers or acquisitions

A

Employees expect staff reductions and cost savings which would introduce certainty among staff

49
Q

What is a merger

A

Where to companies agreed to join forces on a strategic basis

50
Q

What is an acquisition

A

Where companies gained control of another company by purchasing a majority shareholding

51
Q

What are the benefits of horizontal integration 

A

Where the two companies are in the same market and integration is aimed at:
improving a mediocre performance
Achieving economies of scale
Improving competitiveness
Possible opportunities for diversification

52
Q

What is a vertical integration

A

Where are company is attempting to control a stage even closer to the source of a manufacturer or closer to source a customer

53
Q

What are the disadvantages of mergers and acquisitions

A
  1. Reduces customer choice
  2. Impact on staff affected and cost of redundancies
  3. Clash of corporate cultures
  4. Energies may be directed towards to change process if there is a growing the business
  5. Reduce customer services
  6.  Expected merger and acquisition savings not actually being realised
54
Q

What do outsourcing services include

A

IT and data processing, employee benefits, administration and payroll processing, actuarial , risk management, audit, accounting, place management, Customer enquiries and customer helpline

55
Q

What should be insurance basis for selecting an outsourcer

A

Can you outsource I do a better job than you? Price is a secondary decision

56
Q

What do the FCA and PRA state on outsourcing

A

Brokers regulated by the FCA only. When we outsource you don’t outsource your regulatory responsibility

57
Q

What are the advantages of outsourcing

A

Focuses on what you are good at
Don’t worry about staffing issues and service level agreements
Specialist so will be likely to be more efficient and cheaper
Can operate from cheaper offices

58
Q

What are the disadvantages of outsourcing

A

The poor service will reflect on your brand
Control and direction may be lost
Extra care need to be taken with confidential information
If he outsourced company gets into financial problems you will need to source an alternative provider

59
Q

What is treaty reinsurance

A

Where the reinsurer agreed to take a part of all the insurance that the direct insurer underwrites

60
Q

What is usually the contract for treaty reinsurance

A

An annual contract agreed in advance and its terms are fixed so the insurer and reinsurer have certainty

61
Q

When is facultative reinsurance used

A

When insurer wishes to transfer cover that is outside of the treaty arrangements such as when an individual building value is very high

62
Q

Why would organisations decide to self insure

A

They are large enough financially to carry the losses and because the cost of any potential losses would be lower than commercial premium levels

63
Q

What is a multi national company

A

Operate in a number of different countries but still have a Homebase

64
Q

What is a global company

A

Where a company see the whole world as one potential market the sun is to be regarded as a global singular brand

65
Q

What sort of business is traded at the London market

A

Exclusively nonlife (general insurance) and reinsurance with an increasing emphasis on high exposure risk

66
Q

Why would you become a direct insurance

A

Can be set up anywhere in the world, so it saves on accommodation and proximity of a suitable workforce

67
Q

What are the three distribution channels for travel insurance

A

1 - threw them as package holidays
2 - through an agent scheme so they can earn commission
3 - at the point of departure

68
Q

What are intermediary affinity schemes

A

Where intermediaries offer a broader cover and are responsible for both policy issue and claims handling so will receive a higher rate of commission

69
Q

What is he impact of a company growing organically

A

It is often more profitable and less risky but slow

70
Q

What are the benefits of organic growth

A

Involves less risk that external growth
Can be financed through internal funds
Builds on a business existing strengths
Allows the business to grow at a more sensible rate in the long run
Can be more economic compared with acquisitions

71
Q

What are the disadvantages of organic growth

A

It takes longer and an enormous commitment of time and resources

72
Q

What are the benefits of vertical integration

A

Reduce costs
Gain more control of the market
Add greater value to the whole customer proposition

73
Q

What are the reasons for merger and acquisitions

A

Gain access to new distribution channels
Acquire advanced IT systems
Employee know how
Licensing in an overseas country

74
Q

Under the senior management arrangements, this is systems and control what three reasonable steps should firms take when outsourcing

A

1- there is no into additional operations risk in outsourcing
2- the quality of internal control is not impaired
3- the ability of the regulators to monitor the firms regulatory compliance is not hampered

75
Q

What is the stakeholder theory

A

CEO has to be the juggler stakeholder interests don’t work in harmony CEO/board to work out the main requirements and try and satisfy the better ones

76
Q

What is a difficultly of being a mutual company

A

Raising capital

77
Q

What are the three main types of insurance companies

A

Composite company - transact long term business and general
Life company - long term business
General - only general

78
Q

What are proprietary companies

A

Owned by their shareholders
Limited liability - to the nominal values of their shares
Most composite of general insurance companies

79
Q

What are the two main reasons you’d purchase reinsurance

A

To limit annual fluctuations in the loss of their underwriting account
To be protected in the case of a catastrophe

80
Q

What are mutual companies

A

Owned by their policyholder or members - share any profits made
Life of general insurance companies

81
Q

Who forms syndicates at Lloyd’s

A

Members

82
Q

Who employ managing agents at Lloyds’

A

The syndicates

83
Q

Who is the franchisor at Lloyds

A

lloyds

84
Q

Who are the managing agents at Lloyds

A

Franchisees

85
Q

What are captives insurance

A

Subsidiary formed by a parent company to underwrite its insurable risks - keeps premiums and control within the group.

86
Q

Where do captive insurances operate

A

Mostly offshore locations to have tax benefits

87
Q

What are the main incentives of having a captive insurance

A
  • obtain the full benefits of the groups risk control techniques
  • avoidance of the direct insurance overhead
  • ability to obtain a lower premium
  • achieve risk financing objectives
88
Q

Why can’t muslims use general insurance

A

Because of uncertainty, gambling and interest - making money

89
Q

What is the takaful principal

A

Any profit should be shared between the participants

90
Q

What is treaty reinsurance

A

Where a reinsurer agrees to take part in all insurances that the direct insurer underwrites

91
Q

What is a proportional treaty

A

where the insurer and reinsurer take a stated proportion of each risk and share the premium and claims on the same basis

92
Q

What is a non proportional treaty

A

Allows an insurer to take the first part of cover and transfer the balance to the reinsurer

93
Q

What is faculitive insurance

A

Where each requirement is negotiated individually

94
Q

What is an affinity group

A

Formed around a common interest

95
Q

What are market disruptors

A

They deliver substantial innovation and in the products and experiences they offer

96
Q

What is customer relationship management (CRM)

A

Uses information about individual customers in order to prevent their buying needs

97
Q

What are the two types of growth for a company

A

Organic nad no organic

98
Q

What is organic growth

A

Increase output and sales through own effort

99
Q

What is non organic growth

A

Merger and aquisitions

100
Q

What are the benefits of organic growth

A

Less risky and allows the business to grow at a sensible rate

101
Q

What are the disadvantages of organic growth

A

takes longer and pulls resources

102
Q

What is a horizontal M & A

A

Where two companies share the same space in the market

103
Q

What is a vertical M & A

A

Where a company wants to control a part of the market they aren’t currently part of

104
Q

Why would you undertake a M & A

A

rapid way to achieve growth, improved performance, provide opportunities and spread risk

105
Q

What are disadvantages of M & A

A

Reduced customer choice, impact on staff, clash of cultures

106
Q

What are advantages of outsourcing

A

More expertise, guaranteed a level of service

107
Q

What are disadvantages of outsourcing

A

Loses control and direction, poor service will result in bad reputation

108
Q

What is Fintech

A

In insurance , uses computer technology to improve the efficiency of financial systems

109
Q

What is BigData

A

massive data sets, for when traditional data processing methods are inadequate

110
Q

What is data analytics

A

Statistical techniques used to analyze data

111
Q

What is artificial intelligence

A

Allows computer systems to act rationally to display some form of human intelligence

M92 - andy (27 decks)

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