Chapter 1: Planning

Question 1

One of the greatest contributors to the failure of companies.

Answer 1

Inadequate planning

Question 2

In addition to proper management, an insurance brokerage must also do what? (8)

Answer 2

Be innovative.
Be price competitive.
Attract/reward ideal employees.
Manage risks effectively.
Market products to appropriate segments.
Develop, formulate, and implement intelligent business strategies.
Plan for the future.
Focus on profitability.

Question 3

Define a top-down management system.

Answer 3

Management makes decisions unilaterally on mission, strategies, and objectives for the brokerage.

Question 4

What is a bottom-up approach?

Answer 4

Where management provides the mission and broad strategies, but leaves development of goals, objectives, and activities to individual business units.

Question 5

Pro & con of top-down systems.

Answer 5

Management feels firmly in control/in charge of decision making.

Potential lack of “buy-in” by employees. “Management’s” plan, not theirs.

Question 6

Pro & con of bottom-up systems.

Answer 6

IBUs fully buy-in to “their” plan.

Management may feel a lack of control, and IBUs may not be appreciative if changes are made by management.

Question 7

Characteristics of a plan. (4)

Answer 7

Simplicity, practicability (realistic), severability (identifiable/separate parts), flexibility.

Question 8

What is a long-term (3-5 years) brokerage plan called?

Answer 8

Strategic Plan

Question 9

What do strategic plans do?

Answer 9

Give direction to action plans’ specific activities.

Question 10

What is an action plan?

Answer 10

A plan that (typically) applies to IBUs, with specific activities that support fulfilment of the strategic plan. Generally have a 1-year time horizon, and are much more detailed than the strategic plan.

Question 11

Components of a Strategic Plan (7)

Answer 11

Scanning the external environment

Analyzing internal environment & assessing current position

Matching strengths/weaknesses to opportunities/threats

Defining corporate focus

Developing strategies

Developing objectives

Setting goals

Question 12

What goes into scanning of the external environment?

Answer 12

Looks at competitive environment to identify threats & opportunities.

a. Distant environment
Factors that are critical to long-term survival, but are out of the brokerage’s control/influence. eg. legislation, insurers’ plans

b. Near environment
Factors over which the brokerage may have a degree of influence. eg. brokerage’s clients, prospects, targeted market segments, direct competitors

Question 13

What are the tools used to analyze the near environment?

Answer 13

Competitor profiling; size, financial condition, location of HQ, range of products, market share, service quality, public image

Market profiling; identification, analysis, forecasting of key marketplace factors that may pose threats or present opportunities

Client profiling; achieves understanding of the nature and characteristics of current clients. identifies the needs of clients

Question 14

What does a brokerage need to know when analyzing internal environments & assessing current positions? (7)

Answer 14

What it does better than competitors

Missed opportunities; strengths not being used effectively

Competitive weaknesses

Fiscal/financial strength of the firm

How competent/strong its human resources are (staff)

Strength of product lines

Efficiency, and how cost effective the firm is

Question 15

The matching of internal strengths & weaknesses to external opportunities & threats.

Answer 15

S.W.O.T. analysis

Question 16

Define ‘corporate focus’.

Answer 16

A brokerage’s vision, value statement, and mission statement.
‘Who are we?’ ‘What is our purpose?’

Question 17

What is ‘vision’, in a corporate focus?

Answer 17

a. What target are we aiming for?
b. What does the future look like for the firm?
c. What is special about the future vision of our firm?

Question 18

What do Value Statements answer?

Answer 18

a. What values have we used as the foundation of our business?
b. Are all our values fixed/long-term?
c. What words define our values?

Question 19

Mission Statements answer what questions?

Answer 19

a. What is the organization’s purpose of existence?
b. What is the organization’s long-term direction, and what is the point of reference for all employees?

Question 20

What are the differences between strategies, objectives, and goals?

Answer 20

Strategies - long term ‘battle plans
Objectives - refinements of portions of the strategies
Goals - specific/detailed, achievements and targets that bring one closer to completing objectives

Question 21

Purpose of strategy creation, regarding brokerages.

Answer 21

Describes how the brokerage intends to achieve its mission.

Question 22

It is essential that strategies a brokerage adopts be…

Answer 22

Explicit and communicated in writing.

This will:

Facilitate allocation of resources

Provide clear direction for all employees

Bridge transition from broad, conceptual mission to specific objectives, goals, and budgets

Question 23

What are objective?

Answer 23

Another step in translating broad, directional mission statements into concrete actions.

Objectives support the strategies, with multiple objectives for each strategy.

“Our objectives are to…”

Question 24

Goals vs Objectives vs Strategies

Answer 24

Goals express in specific terms what Objectives express in general terms and which the Strategies state conceptually.

Question 25

What is used to set goals?

Answer 25

SMART

Specific - clearly state what is to accomplished
Measurable
Action-oriented
Realistic - not so aggressive as to be unattainable
Timely - completion date/time frame

Question 26

What goes in to Implementing the Plan?

Answer 26

1. Controlling implementation
   - Implementation program - organizes brokerage resources for specific activities
   - Progress report - monitors to identify activities that are not on schedule, and to allow for necessary corrections
2. Linking budgets to strategies, objectives, and goals
   - Budget must support achievement of the plan
3. Motivating for implementation
   - Employees are often not aware of these objectives, resulting in challenges of accomplishing them
   - Increasing correlation between individual employee goals and brokerage goals results in greater success