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ALU 202 > Chapter 14 - Managing the Underwriting Department > Flashcards

Chapter 14 - Managing the Underwriting Department Flashcards

1
Q

Good underwriting managers are proficient in the five classic managerial functions of

A
  1. Planning
  2. Organizing
  3. Staffing
  4. Directing
  5. Controlling
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2
Q

Due to the attention and conflict with other areas of the company, a manager must also demonstrate

A

Integrity
Empathy
Diplomacy

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3
Q

Planning

A

Corporate Goals and Department Goals
Expense and Mortality Planning
Prioritization

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4
Q

Planning - Corporate Goals and Department Goals - Effective management planning requires

A
  1. Setting goals
  2. Making decisions on the priority of goals
  3. Anticipating and planning for future events that might affect accomplishment of goals.
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5
Q

Planning - Corporate Goals and Department Goals - Underwriting management can set department goals in the areas of

A
  1. Mortality results to meet pricing assumptions
  2. Time service
  3. Accuracy of risk assessment by underwriters
  4. Productivity
  5. Research and development of risk selection policies and procedures.
  6. Participation in industry studies and activities
  7. Employee training and development
  8. Participation in systems development and enhancement
  9. Participation in company marketing objectives.
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6
Q

Planning - Corporate Goals and Department Goals - In the operational planning phases, the manager’s planning role will continue through:

A
  1. Estimating necessary resources
  2. Budgeting
  3. Developing and communicating the operational policies that direct activities toward the goals
  4. Establishing measureable methods for goal achievement.
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7
Q

Planning - Expense and Mortality Planning

A

For Expense

  1. determine which underwriting requirements should be obtained by the company.
  2. negotiate vendor agreements
  3. determine the cost of obtaining and handling underwriting requirements.
  4. Budget for payroll and salary increases
  5. Determine costs and budget for employee training and development
  6. Evaluate costs and benefits of allowing underwriters to work remotely.

For mortality

  1. Consult with pricing actuaries to determine the relative value of new underwriting requirements for pricing assumptions.
  2. Explain and negotiate changes in underwriting requirements with reinsurance partners
  3. Provide data on underwriting quality (i.e., % of cases with exception)
  4. Evaluate early claims results
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8
Q

Planning -Expense and Mortality Planning - Three types of expense/mortality analysis that can be done by today’s underwriting manager

A
  1. Protective Value Analysis
  2. Review of tele-underwriting (or other alternative underwriting models)
  3. Evaluation of outsourcing.
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9
Q

Planning -Expense and Mortality Planning - Protect Value Analysis

A

Aka - cost-benefit analysis - is the means by which the value of an A&A requirement to the company is determined. The cost of obtaining and handling the requirement is compared to the value of the requirement.

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10
Q

Planning -Expense and Mortality Planning - Tele-Underwriting Models

A

Drill down or f/up questions can ask question like duration of illness, recurrences or number of attacks, treatments or medications taken and names and address of all doctors that have been consulted.

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11
Q

Planning -Expense and Mortality Planning - Tele-Underwriting Models (Underwriting Managers Responsibilities)

A
  1. Creation and revision of application forms and “drill down” questions
  2. Collection and evaluation of protective value data on the tele-underwriting process
  3. Review and validation of the automated risk selection process
  4. Periodic updates to the form and process.

** if the done by company employees, underwriting managers could train on medical terminology, how to record answers and audit interviewers’ work. **

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12
Q

Planning -Expense and Mortality Planning - Outsourcing

A

Performance of a function by individuals not employed by the insurance company. These individuals could work independently or be employed by a vendor who contract with the insurance company. Can also provide software support or processing programs to perform functions.

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13
Q

Planning -Expense and Mortality Planning - Outsourcing - Benefits

A
  1. The company is able to handle additional work without hiring additional permanent staff
  2. Managers can more easily handle temporary increases in workloads
  3. Vendors can provide automated functions that the insurance company has not developed.
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14
Q

Planning -Expense and Mortality Planning - Outsourcing - Negative Factors

A
  1. Managers lose direct control over performance of function
  2. There can be a loss of skill set within the insurance company if entire functions are outsourced
  3. Outsourced functions can become more costly than if performed in-house.
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15
Q

Planning -Expense and Mortality Planning - Outsourcing - Manager can investigate

A
  1. Max production capacity of vendor; vendor capacity to handle increased demands
  2. Information security and compliance with confidentially requirements for medical information.
  3. Level of training and background of the outsourced workers.
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16
Q

Planning - Prioritization

A

The recognizing that the accomplishment of one goal is more important than another at a given point in time. Possible way to communicate priority

  1. New cases first
  2. Then cases with mail received
  3. Finally cases returning from referral to medical staff.
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17
Q

Organizing the Department

A
  1. Team Structure
  2. Department Resources - Staff Roles
  3. Remote Employees
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18
Q

Organizing the Department - Team Structure

A

Two basic designs: functional or integrated (cross-functional).
Functionally structured -> those who perform the same or very similar work are grouped together fro management and reporting purposes.
Integrated Structure -> Includes individuals from many functional areas who work together on business of a specific type or from a particular source.
Also MATRIX environment - a combination of the two.

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19
Q

Organizing the Department - Team Structure - Functional Team Advantages

A
  • Ready access to training and guidance from experienced works
  • Ability to handle volume fluctuations and re-distribution of work easily
  • Professional support and role models for advancement provided by the group
  • Development of expertise in a discipline or function
  • Easy monitoring or consistency between employees
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20
Q

Organizing the Department - Team Structure - Integrated Team Advantages

A
  • Exposure to a variety of disciplines and processes
  • Ability to address multi-faceted problems rapidly
  • Enhanced ability to focus on customer rather than the tasks
  • Facilitation of understanding of the entire business process by each team member
  • Representation of a variety of skill levels and abilities
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21
Q

Organizing the Department - Team Structure - Manager can assist with

A
  1. Company marketing strategy and the relationship between the sales and underwriting departments - integrated.
  2. Complexity of products sold and special underwriting programs offered - functional.
  3. Current mortality results and expected/desired mortality performance - functional
  4. Number of staff members and their expertise and availability of skilled employees within the company - functional
  5. Quality of communication within department and company - integrated
  6. Availability of training resources
  7. Appropriate time frame for transition
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22
Q

Organizing the Department - Department Resources - Staff Roles

A

Moderate to large size underwriting department can also include employees dedicated in whole or in part to providing staff support for the manager or line underwriters.

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23
Q

Organizing the Department - Department Resources - Staff Roles - Functions include

A
  1. Preparation of production or quantitative reports
  2. Create ad hoc reports for special projects
  3. Research of processing or system problems
  4. Training underwriters or new business staff
  5. Documentation of policies and procedures
  6. Participation in projects or on inter-departmental committees.
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24
Q

Organizing the Department -Remote employees

A

Benefits
Communication
Management Issues
** There employees can be:
a. remote underwriters - those who do not work on the company site.
b. Underwriter at multiple locations - manager is not physically located with all their employees

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25
Q

Organizing the Department -Remote employees - Benefits

A
  1. Attracting and retaining underwriters
  2. Increasing the potential talent pool if the manager is looking for some special skills
  3. Possible increase in productivity (results vary by organization.
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26
Q

Organizing the Department -Remote employees - Communication

A
  1. Face-to-face contact may never occur, and all communication between manager and employee will be either in writing (email, fax, or paper) or over the phone.
  2. Conference calls with employees at multiple locations can be used to share information with the group, but it can be difficult to determine whether everyone has understood the information to the same degree.
  3. More frequent team meeting/conference calls may be necessary in order to build team rapport and mutual support.
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27
Q

Organizing the Department -Remote employees - Management Issues

A
  1. Logistics difficulties of training at multiple location sites.
  2. Security and confidentiality
  3. Working conditions
  4. Quality and productivity
  5. Employee development
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28
Q

Executions

A

Productivity and Quantitative Measures

Quality Measures

29
Q

Executions - Productivity and Quantitative Measures - Productivity

A

Data gathered should provide information about achievement of the department’s goals and the performance of individuals relative to those goals and relative to their past performance. It should provide a framework of reference for the underwriting manager to explain progress and identify problems to upper management.

30
Q

Execution – Productivity and Quantitative Measures – Commonly Used Reports

A

Submitted Business – can be divided by FA. Reveals workload. Can be weekly, monthly, quarterly
Approval Percentage – preferred, std, substd. And data on “wastage” no business placed. Quarterly
Final Action Report – Final decision percentage. Quarterly
Final action by underwriter – uses final action report but divides out underwriters. Quarterly, semi annually.
Tobacco use ratio – approval by tobacco use classification. Quarterly
Requirements Ordered – Cost/Benefit decisions. Quarterly
Time Service – average length of time for submissions to decision. Monthly
Placement Ratio – Competitiveness of decisions. Quarterly or semi-annually.
Unit Cost -all explicit and allocated costs for underwriting can be reduced to a cost per unti of work performed. Annual
Informals processed - aka prelims. Quarterly or semi-annually.

31
Q

Executions - Quality Measures

A

Case Audits
Field and Client Feedback
Reinsurers and other external audits

32
Q

Executions - Quality Measures - Case audits

A

Obtaining information about the quality of work being done in the underwriting department.
Drawback is the amount of time required.

33
Q

Executions - Quality Measures - Field and Client Feedback

A

Communication and negotiation skills

34
Q

Executions - Quality Measures - Reinsurer and Other External Audits

A

Can be performed by

  1. Reinusrance companies
  2. Insurance regulatory agencies
  3. MIB
  4. Company’s internal accounting or finance
  5. Company’s external accounting firm
  6. internal affairs and fraud detection untis
  7. contracted consulting firms
35
Q

Risk Management

A 
Underwriting Guidelines
Company Risk Audits
Authority Levels and Second Signature
Documentation
Retention and Auto-binding management
Claims Review
36
Q

Risk Management - Underwriting Guidelines

A

The underwriting manager should be involved in the development and monitoring of underwriting guidelines such as

  1. A&A
  2. Preferred Criteria
  3. Choice of underwriting manual/medical underwriting guide
  4. Company philosophy on business decisions and preferred exceptions
  5. Financial underwriting g/l
  6. Application forms and questionnaires
37
Q

Risk Management - Company Risk Audits

A

Provides feedback on a select group of high risk cases to determine if the company is exposed to greater risk than planned. Usually only on cases that were placed and in force.
Can provide details on underwriting errors, reinsurance problems, or patterns of producer behaviour.

38
Q

Risk Management - Company Risk Audits - Cases that might be subject to a risk audit

A
  1. Very large risk cases ($$ or above max retention
  2. Certain type of case design (life settlement or premium financed)
  3. High mortality risk (old age, highly substd)
  4. Cases exceeding the company’s reinsurance jumbo limits.
39
Q

Risk Management - Authority Levels and Second Signatures

A

Proper case assignment and authority will meet 5 management needs

  1. Expedite the processing of cases
  2. Provide risk management control on underwriting quality for the business
  3. Provide max utilization of the skills of the underwriting staff
  4. Provide good service to the distribution sales force
  5. Provide growth and development opportunities for underwriters
40
Q

Risk Management - Documentation

A

Decisions and conflicts resolved
Underwriting notes
Underwriters performance

41
Q

Risk Management - Retention and Auto-binding limits

A

Underwriting department to ensure company retention limits are not violated and for auto-bind the correct amount of risk when ceding risk automatically to reinsurers.

42
Q

Risk Management - Claims Review

A

Typically provide risk assessment advice to the claims department. Other risk managements service could include:

  1. Regular review of recent (past 1-3 years) claims to categorize causes of death and identify trends in causes
  2. Review individual claims for a particular product or distribution source if claims results exceed the product assumptions, to identify any possible underwriting errors that may have occurred
  3. Analysis or testimony in case of claims litigation.
43
Q

Employee Selection and Training - Selection - Demonstration of the following skills

A
  1. Ability to study and learn technical information
  2. Ability to work under pressure or time constraints
  3. Familiarity with email, database, and other software
  4. Clear and fluent communications
  5. Ability to prioritize and organize multiple responsibilities
  6. Problem analysis and problem solving skill
  7. Ability to work independently
  8. Experience in making complicated decision on a timely basis.
44
Q

Employee Selection and Training - Training - A comprehensive training program should include

A
  1. Fundamentals of life insurance
  2. Types and uses of life insurance products
  3. Contract law, compliance, replacement, and other legal issues
  4. Medical impairments, anatomy, physiology and pathology
  5. Non-medical risks, such as aviation, avocations and foreign travel
  6. Financial and business underwriting topics
  7. Operational training on systems and work flow
  8. Case management and organization skills
  9. Communications and negotiations.
45
Q

Employee Selection and Training - Training

A 
Selecting a Trainer
Texts and Resources
Design of Training Programs
Industry Exam Programs
Training for Experienced Underwriters
Negotiation and Communication Training
46
Q

Employee Selection and Training - Training - Selecting a Trainer -> this person could be

A
  1. The trainee’s supervisor
  2. Other underwriting managers in the department
  3. Physicians or nurses from the medical staff
  4. Experienced underwriters
  5. Operations or administrative managers
47
Q

Employee Selection and Training - Training - Textbooks and Resources

A

1, Corporate Training Department

  1. Product and marketing department staff
  2. The sales force
  3. Outside courses and seminars
  4. Reinsurance manuals and reinsurance staff
  5. Life insurance and underwriting seminars
  6. Publications of the ALU
  7. Internet and webinar information.
48
Q

Employee Selection and Training - Training - Design of a Training Program

A

Usually 6 hours per week over a minimum of 3 months, followed by close one-on-one supervision for another 3 months.
At 12-24 months the underwriting can pursue some advance training work - often in financial underwriting topics.

49
Q

Employee Selection and Training - Training - Industry Exam Programs

A
  1. ALU programs leading to AALU and FALU designations
  2. LOMA leading to FLMI and advanced and specialized courses are offered
  3. CLU - specific attention to sale applications and financial underwriting.
50
Q

Employee Selection and Training - Training - Training for Experienced Underwriters

A

Continued education of current changing medical field
Travelling to meetings.
Mentoring of newer underwriters.

51
Q

Employee Selection and Training - Training - Negotiation and Communication Training

A

Some provide training on presentation skills or sponsor local chapters of Toastmasters or other speaking groups.

52
Q

Employee Selection and Training - Performance Evaluations

A 
Objectives
Identifying Skills and Expectations
Sources of Information
Responsibility and Authority for Performance Evaluations
Communication of Results
53
Q

Employee Selection and Training - Performance Evaluations - Objectives

A

Through an equitable system of performance and evaluation, the company obtains information to allow fair distribution of salary increase dollars and to identify individuals with particular abilities or potential for advancement.

54
Q

Employee Selection and Training - Performance Evaluations - Identifying Skill and Expectations (Effective performance evaluations System)

A
  1. Job Description - for each separate job
  2. Skill Set - a complete list of the skills that are essential for good performance of the job.
  3. Standard - defining poor, fair, good, excellent and outstanding.
  4. Case review/audit program - a method for regular review of cases on a on-going basis.
55
Q

Employee Selection and Training - Performance Evaluations - Sources of Information

A

Case audits should not be the sole information provided about an underwriters performance as it does not provide information about telephone communication, negotiation, and persuasion skill, and field rapport.
Self-evaluation is important

56
Q

Employee Selection and Training - Performance Evaluations - Responsibility and Authority for Performance Evaluations

A

Case audits should be performed by subject experts who have excellent underwriting skills. Desire to have multiple people asses cases to provide balance and objective feedback. Presented to the underwriter by their managers.

57
Q

Employee Selection and Training - Performance Evaluations - Communication of Results

A

Schedule and method of providing performance feedback to the underwriter

58
Q

Leadership and Department Direction

A

Relationships with Reinsurers
Distribution Relationships and Underwriting Expectations.
Relationship with Other Home Office Functional Areas
Competitive Information
Risk Selection Advocacy
Insurance Activities

59
Q

Leadership and Department Direction - Relationships with Reinsurers

A

A managers should be able to negotiate successfully on cases with ambiguous or less-than-optimum information.

60
Q

Leadership and Department Direction - Distributor Relationships and underwriting Expectations

A

Can be called upon to review the decision of a lower-ranking underwriter. Sometimes the decision is made for a reduced rating or better offer.

61
Q

Leadership and Department Direction - Relationship with Other Home Office Functional Areas

A

Underwriting representative is necessary to represent the risk selection function on corporate system projects that can affect the processing of applications.
Moving work easily between medical staff and underwriters.

62
Q

Leadership and Department Direction - Competitive Information

A

Many companies maintain a competitive department in which the products and services of competitors are analyzed and compared with the company’s own offerings. Product pricing, product features, and compensation are key aspects to be compared.

63
Q

Leadership and Department Direction - Risk Selection Advocacy

A

Actuarial, financial, and marketing areas may make assumptions about underwriting costs and benefits that are either obsolete or uniformed. Managers must seek way to share information with other areas.

64
Q

Leadership and Department Direction - Industry Activities

A

Aware of the trends and issues of concern in the life insurance industry. Participation on industry committees with colleagues from other companies is a valuable tool for managers to create relationships, develop a network of contacts, and continue his or her own education in the industry.

65
Q

Manager’s Self Development

A

Management Soft Skills and Attributes
Education Opportunities
Self Management

66
Q

Manager’s Self Development - Management Soft Skills and Attributes

A

Successful underwriting managers appear to have these attributes

  1. Problem analysis skills
  2. Good to excellent technical skills
  3. communication, persuasion, and negotiation skills
  4. Decisiveness
  5. Flexibility
67
Q

Manager’s Self Development - Education Opportunities

A

Suggested activities for on-going management education:

  1. participation in management outside the organization
  2. develop sales and negotiation skills
  3. have a regular reading program in the current management literature
  4. take option management courses if the company have a learning and development center
  5. practice and polish presentation and train skills
  6. create a study group to read and discuss current texts on management issues
68
Q

Manager’s Self Development - Self Management

A

Strengths and Weaknesses. Actions to following Drucker’s knowledge are:

  1. Concentration on strengths
  2. Work on Improving your strength
  3. Discover where you intellectual arrogance is causing ignorance and overcome it
  4. Remedy your bad habits
69
Q

Manager’s Self Development - Self management - Feedback Analysis

A

Peter Drucker in 1999 “Managing Oneself”.
For each of one’s key decisions and actions, one should write down his or her expectations of the outcome, and then, 9-12 months later, compare those expectations to actual results. Discover what ones true strengths are.

ALU 202 (15 decks)

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