Chapter 10 Flashcards
Which of the following need to be created to be able to measure the performance of a book?
a. Benchmarks
Which of the following is true regarding receiving information about a book of business?
Senior management receives information about the insurer’s total book of business; unit
managers receive information on the performance of their individual books of business;
underwriters receive information about their own portfolio.
Which of the following are not outsiders who would help to identify and deal with any trends in
frequency or severity of loss or other issues that have a direct impact on the book of business?
Loss control
Rationale: Inter- and intradepartmental meetings—the former including such functional areas as the
claims, loss control, premium audit, accounting, and actuarial departments—help to identify and deal with
any trends in frequency or severity of loss or other issues that have a direct impact on the book of
business.
To measure client satisfaction, to whom do insurers send surveys?
Both internal and external clients
Activity-based underwriting is most appropriate for which of the following lines of business?
Personal-lines business
Underinsurance leads to which of the following?
Inadequate premium for the insurer and the possibility of a coinsurance penalty for the
insured in the event of a partial loss
Which of the following would a manager not expect to see on a report?
Rate increase amounts of competitors
Which of the following reports are most widely used for book management?
Profit and loss
What is the distribution of accounts between varying levels of premium known as?
Premium stratification
An insurer may automatically renew risks that fall within given parameters unless changes in risk
require an underwriter’s review. What is this known as?
Activity-based underwriting
Rationale: Some insurers see certain lines of business as too expensive to justify underwriting risks
individually, so they automatically renew risks that fall within given parameters unless changes in risk
require an underwriter’s review (that is, activity-based underwriting).
List five steps in the planning process for book management. (5 marks)
Book management planning process:
* Goals are set out at the executive level in a strategic plan.
* Strategic plan includes targets for premium growth, underwriting profit, and return on investment.
* Objectives to help attain goals are set at the operational level.
* Objectives include the budgets for premium and expenses, the lines of business to be written, and
the territories and producers from which business will be solicited.
* Benchmarks are created against which to measure the performance of the book.
What typical information might an insurer hire an outside firm to gather about competitors? (5 marks)
Typical industry information gathering (any five of the following):
* Products and services
* Pricing
* Underwriting guidelines (risk appetite)
* Commissions and incentives
* Strategy
* Objectives
* Tactics
List five positive outcomes from recommendations and implementations of loss control actions. (5
marks)
Positive outcomes from loss control actions:
* Insurer can avoid adjusting and paying claims for losses that would occur in the absence of loss
control measures.
* Loss control can help acquire new accounts and manage existing accounts.
* Policyholder often finds that costly downtime caused by losses is avoided by following the insurer’s
loss control recommendations.
* Comprehensive pre-quote inspections can offer effective recommendations to the underwriter.
* Loss control service plans, if well developed and executed, can have a substantive impact on book
management.
Before she can prepare a report, what questions does Taylor need answered regarding the
information for an analysis? (5 marks)
a. Information needs prior to analysis (any five of the following):
* What information will be needed for the analysis?
* Where can information needed for the analysis be found?
* Is the information available from the insurer itself and, thus, easily retrieved?
* Is the information from an outside source and, thus, not easily retrieved?
* At what level should the information be presented?
* How detailed should the information be?
* What should be done with the information to create the analysis?
* Can the information be pulled automatically or must it be assembled by hand?
What common pieces of information would a manager want to see on a report? (5 marks)
Commonly requested report information (any five of the following):
* Premium by territory (if the objective is to grow in a certain area)
* Lines of business
* New submissions received
* Business quoted and business bound
* Renewal retention
* Cancellations
