Chapter 1 Flashcards
Difference between composite, life and general insurance companies
- A composite Company
○ Transacts both long-term business (life) and general business- A life company
○ Life insurance and pensions company, only able to transact long-term business - A general insurance
○ An insurance company only able to transact general business
- A life company
What is a Proprietary Company? And give 4 examples?
Authorised and issues share capital to which the original shareholders subscribed and it is to the shareholders that any profits belong after provision for expenses, reserves and with-profit.
- Accident/Health
- Motor
- Aviation
- Liability
Mutual Companies? 2 examples?
- Supplies financial services products and is owned by its customers or members
- Many companies that were originally formed as mutual organisations, have been registered under the companies act as a proprietary company (Demutualisation)
- Life
- General insurance
What is the Lloyd’s Structure?
- Members underwrite for their own profit and loss in administrative groups called syndicates.
- Underwriting Membes appoint independent companies known as managing agents to carry out the underwriting business
Captive Insurance Companies?
Parent company forms a subsidiary company to underwrite certain of its own.
Tax Efficient
Takaful Insurance Companies?
Islamic Financial Services industry
Guaranteeing each other
- Embrace:
- Mutalitiy and cooperation
- Shared Responsibility
- Joint Indemnity
State?
Pool Re, Flood Risk, made by the UK government
What is made up in the London Market?
IUA
P&I Clubs
Pools
Lloyd’s of London
Insurance Brokers
Daring Individuals Always Integrate Amazingly Brilliant Results
What are the different sellers of insurance?
Direct Insurers
Independent Intermediaries
Agents
Internet
Aggregators/Price Comparison websites
Banks and Buildings Societies
Retailers and Affinity Groups (White Labeling)
What system uses information about individual customers to build stronger relationships between a business and its clients?
Customer Relationship Management (CRM)
Different Stakeholders?
Customers
Shareholders
Government
Regulators
Intermediaries
Public
Employees
Consumer Advocates
What is Organic Growth?
A company develops and expands by increasing its sales, revenue and output through its own current business, activities and effort rather than through mergers or acquisitions.
Positives of organic growth
- Encourages a company to be innovative and build a good reputation
- Company merger will expect staff reductions and cost savings
- Organic growth:
○ Involves less risk than 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
Disadvantages of organic growth
- Needs more time to grow
- Enormous commitment of time and resources as personnel
- Longer to achieve than a purchase of an existing book of business
What are the two ways of merging?
Horizontal - Two companies within the same market
Vertical - Control a stage closer to the source
Positives of M & A’s
- Business to achieve growth
- Gaining access to new distribution channels
- Efficiency and improved performance can be gained through synergy of processes
- Overcoming the cost of IT by being large enough
- Investment opportunities - Spare Capital
- Spreading the risk - Greater diversification
- Overall increase in shareholder value
Disadvantages of M & A’s
- Reduced customer choice through reduction in the number of organisations
- Impact on staff affected and cost of redundancies
- Reduced Customer Service
- Clash of corporate cultures
What is Outsourcing?
- Use of a skilled resource outside the company to handle work that was previously performed by in house staff
- Working relationships is governed by a legal contract, whereby for an agreed fee the outsourced company promises to deliver an agreed service over an agreed period
- Business has effective controls of the outsourcing relationship to manage the regulatory, operational and reputational risks inherent in these arrangements
Positives of Outsourcing
- Business is guaranteed a certain level of service
- Business can budget for a pre-agreed fixed cost
- Bring new skills and working methods to a company
- Outsourcing contracts lead to new partnership opportunities between the business and the outsourced company
Negatives of outsourcing
- Certain control and direction will be lost
- Event of poor service, the business will lose customers and the firm’s reputation will suffer
- Extreme care should be taken with customers confidential information and data should be protected equally well at outsourced suppliers as it is within the firm
What is self-insurance?
- Organisations feel they are large enough financially to carry such losses and because the cost to them, by way of transfer to their reserve fund is lower than commercial premium levels
What are multi-national companies?
Operate in a number of different countries but may still have a home base
What are BRICS Countries?
Brazil, Russia, India, China, South Africa,
Developing Countries….
What are Global Companies?
They see the whole world as one potential market and are a common global brand
What are the regulatory requirements linked to outsourcing?
- No undue additional operational risk in outsourcing an activity
- Quality of internal control is not impaired - Ability of the regulators to monitor the firm’s regulatory is not hampered
