Chapter 1 Flashcards
What is a proprietary company
Company owned by shareholders- most insurers
What is a mutual company
A policyholder owned and any surplus is reinvested in a company to reduce the premiums. Think NFUM
In Lloyds what does a franchisor do
Approved business plans and make sure members are compliant
What is captive insurance
One policyholder only. This is self insurance/ the policy holder is the company owner
What is takaful insurance companies
Based on the rulings of sharia law. Muslim insurance. Main market place in some part of the world
What does takaful mean in Arabic
Guaranteeing each other
What do reinsurers do
Extend the risk transfer mechanism
What is the difference between facultative and treaty
Treaty can be divided into proportional and non proportional
What are the two main types of treaty
Proportional and non proportional
What is a proportional treaty
Where the insurer and reinsurance take a state proportion of each risk and share the premium/ claims on the same basis
What is non proportional treaty
Allows an insurer to retain the first part of cover and transfer the balance to the reinsurers
Is the government a policyholder when taking risk
Both policyholder and owner. Do you get an inputs but not that much
Where does the pool re sit
Acts as a reinsurers and insurers add 100% reinsured back to the pool re
Can everyone access reinsurance for flood re
Everyone in the applicable post code. Houses built after 2010 can’t as deemed as a known issue
What is self insurance
A business has taken the decision to create a budget line tor a risk instead of using a captive or an insurer
What is the difference between a captive insurer and non insurer when self insuring
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
What does the London market comprise off
Insurance and reinsurance
Lloyds of London syndicates
Marine protection
Indemnity club
Brokers
What are the seven participants in the London market
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
What are the different distribution channels used by insurers
Direct insurance
Independent intermediaries
Banks and building societies
Retailers and affinity groups
Travel agents and tour operators
Aggregators
What is an example of a direct insurer
Aggregators are not direct. Churchill would be an example or Hiscox
What is an example of independent intermediaries
Hettle andrews
What is an agent
Agent can only put forward their insurers terms not independent. Tied to one insurer
Can banks become intermediaries
Yes. They can set up partnerships with selected insurance or Lloyds syndicates of the provision of household, motor and travel insurance
What is white labelling
Where an organisation offers insurance products branded with their own name but under written by insurance company with a Lloyds syndicate
What do customer relationship management do
Use information about individual customers to build strong relationships between a business and its clients
Why is customer relationship management so important
It is less expensive than running the new customers as information is used to pre-empt the customers future buying needs
What Are the six outcomes of treating customers fairly under the FCA
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
What are stakeholders
People or groups of people who have an interest in a way a company act
Why are stakeholders important
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
What type of interest would a customer have as a stakeholder
Quality, value for money, service standards and fairness
What kind of interest does a shareholder have as a stakeholder
Return and performance
What kind of interest does a government regulators have as a stakeholder
Text, VAT, legal and regulatory compliance
What type of interest does a public have as a stakeholder
Social responsibility and responsible environmental considerat
What type of interest as employees have as a stakeholder
Rewards, training, career progression
What type of interest to intermediaries has a stakeholder
Commission and service standards
What factors do strategic planners have to take into account when trying to truly reflect the Interest of its stakeholders
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
What are business ethics
Standards and moral conduct the company says its self with its dealings within the organisation and outside
What are the reasons that ethical issues now playing an important role in management
- Large companies operate in small nations and have a large revenue income so their wealth cAm have implications
- responsibility and power are closely interlinked
- Consumers now increasingly judge organisations
- Strategic business decisions are partly determined by the cultural influence of society

What are the 10 factors of Lloyd’s of London to develop into a successful International Centre for insurance and insurance
- Political and economic stability
- Geographical location
- Quality transport system
- Hi qualified personnel
- Office space at competitive prices
- English is a business language
- Stable legal and regulatory environment
What is the impact of a company growing by merger or acquisition
It is fast and achieve the economies of scale needed in insurance but has more risk
Why can organic growth be negative
As it shows a business is contracting
What is the definition of organic growth
The rate of business expansion for increasing output and sales
What regions are there in a company would want to grow
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
What are the benefits of growing organically
It is less expensive and can offer improved returns and also forces a company to build a strong base for further growth
What are the disadvantages of growing organically
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
What are the key examples of organic growth drivers
- Provides a sound means to measure progress and success
- More profitable route with a better investment return
- Demonstrates a long-term commitment to a business by building it for the effective use of internal resources
- Management company focus on growing the business and achievement of goals
What is organic growth more difficult for an insurer
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
What is a disadvantage of mergers or acquisitions
Employees expect staff reductions and cost savings which would introduce certainty among staff
What is a merger
Where to companies agreed to join forces on a strategic basis
What is an acquisition
Where companies gained control of another company by purchasing a majority shareholding
What are the benefits of horizontal integration 
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
What is a vertical integration
Where are company is attempting to control a stage even closer to the source of a manufacturer or closer to source a customer
What are the disadvantages of mergers and acquisitions
- Reduces customer choice
- Impact on staff affected and cost of redundancies
- Clash of corporate cultures
- Energies may be directed towards to change process if there is a growing the business
- Reduce customer services
-  Expected merger and acquisition savings not actually being realised
What do outsourcing services include
IT and data processing, employee benefits, administration and payroll processing, actuarial , risk management, audit, accounting, place management, Customer enquiries and customer helpline
What should be insurance basis for selecting an outsourcer
Can you outsource I do a better job than you? Price is a secondary decision
What do the FCA and PRA state on outsourcing
Brokers regulated by the FCA only. When we outsource you don’t outsource your regulatory responsibility
What are the advantages of outsourcing
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
What are the disadvantages of outsourcing
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
What is treaty reinsurance
Where the reinsurer agreed to take a part of all the insurance that the direct insurer underwrites
What is usually the contract for treaty reinsurance
An annual contract agreed in advance and its terms are fixed so the insurer and reinsurer have certainty
When is facultative reinsurance used
When insurer wishes to transfer cover that is outside of the treaty arrangements such as when an individual building value is very high
Why would organisations decide to self insure
They are large enough financially to carry the losses and because the cost of any potential losses would be lower than commercial premium levels
What is a multi national company
Operate in a number of different countries but still have a Homebase
What is a global company
Where a company see the whole world as one potential market the sun is to be regarded as a global singular brand
What sort of business is traded at the London market
Exclusively nonlife (general insurance) and reinsurance with an increasing emphasis on high exposure risk
Why would you become a direct insurance
Can be set up anywhere in the world, so it saves on accommodation and proximity of a suitable workforce
What are the three distribution channels for travel insurance
1 - threw them as package holidays
2 - through an agent scheme so they can earn commission
3 - at the point of departure
What are intermediary affinity schemes
Where intermediaries offer a broader cover and are responsible for both policy issue and claims handling so will receive a higher rate of commission
What is he impact of a company growing organically
It is often more profitable and less risky but slow
What are the benefits of organic growth
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
What are the disadvantages of organic growth
It takes longer and an enormous commitment of time and resources
What are the benefits of vertical integration
Reduce costs
Gain more control of the market
Add greater value to the whole customer proposition
What are the reasons for merger and acquisitions
Gain access to new distribution channels
Acquire advanced IT systems
Employee know how
Licensing in an overseas country
Under the senior management arrangements, this is systems and control what three reasonable steps should firms take when outsourcing
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
What is the stakeholder theory
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
What is a difficultly of being a mutual company
Raising capital
What are the three main types of insurance companies
Composite company - transact long term business and general
Life company - long term business
General - only general
What are proprietary companies
Owned by their shareholders
Limited liability - to the nominal values of their shares
Most composite of general insurance companies
What are the two main reasons you’d purchase reinsurance
To limit annual fluctuations in the loss of their underwriting account
To be protected in the case of a catastrophe
What are mutual companies
Owned by their policyholder or members - share any profits made
Life of general insurance companies
Who forms syndicates at Lloyd’s
Members
Who employ managing agents at Lloyds’
The syndicates
Who is the franchisor at Lloyds
lloyds
Who are the managing agents at Lloyds
Franchisees
What are captives insurance
Subsidiary formed by a parent company to underwrite its insurable risks - keeps premiums and control within the group.
Where do captive insurances operate
Mostly offshore locations to have tax benefits
What are the main incentives of having a captive insurance
- 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
Why can’t muslims use general insurance
Because of uncertainty, gambling and interest - making money
What is the takaful principal
Any profit should be shared between the participants
What is treaty reinsurance
Where a reinsurer agrees to take part in all insurances that the direct insurer underwrites
What is a proportional treaty
where the insurer and reinsurer take a stated proportion of each risk and share the premium and claims on the same basis
What is a non proportional treaty
Allows an insurer to take the first part of cover and transfer the balance to the reinsurer
What is faculitive insurance
Where each requirement is negotiated individually
What is an affinity group
Formed around a common interest
What are market disruptors
They deliver substantial innovation and in the products and experiences they offer
What is customer relationship management (CRM)
Uses information about individual customers in order to prevent their buying needs
What are the two types of growth for a company
Organic nad no organic
What is organic growth
Increase output and sales through own effort
What is non organic growth
Merger and aquisitions
What are the benefits of organic growth
Less risky and allows the business to grow at a sensible rate
What are the disadvantages of organic growth
takes longer and pulls resources
What is a horizontal M & A
Where two companies share the same space in the market
What is a vertical M & A
Where a company wants to control a part of the market they aren’t currently part of
Why would you undertake a M & A
rapid way to achieve growth, improved performance, provide opportunities and spread risk
What are disadvantages of M & A
Reduced customer choice, impact on staff, clash of cultures
What are advantages of outsourcing
More expertise, guaranteed a level of service
What are disadvantages of outsourcing
Loses control and direction, poor service will result in bad reputation
What is Fintech
In insurance , uses computer technology to improve the efficiency of financial systems
What is BigData
massive data sets, for when traditional data processing methods are inadequate
What is data analytics
Statistical techniques used to analyze data
What is artificial intelligence
Allows computer systems to act rationally to display some form of human intelligence
