Chapter 2 Flashcards
What are the two types of directors in an insurance company?
Executive Directors – Work full-time, manage day-to-day operations.
Non-Executive Directors – Work part-time, provide independent oversight.
What are the five main responsibilities of a Board of Directors?
Regulating executive directors and senior management.
Approving reports, budgets, and strategy.
Selecting, appraising, and rewarding the CEO.
Overseeing risk management.
Ensuring financial and regulatory compliance.
What are the key roles of a Chief Executive Officer (CEO)?
Responsible for overall business strategy.
Leads executive management team.
Reports to the Board.
What are the responsibilities of a Chief Actuary?
Pricing insurance products.
Reserving for claims.
Calculating risk-based capital requirements.
Assessing investment risks.
What are the four main functions of management?
Planning – Setting objectives and resource allocation.
Organising – Structuring teams and responsibilities.
Leading – Motivating and guiding employees.
Controlling – Monitoring performance and taking corrective actions.
How does management style affect company culture?
Open-door approach – Encourages communication and innovation.
Autocratic (militaristic) – Centralized decision-making, strict rules.
Paternalistic – Leaders take a “fatherly” role, prioritizing employee well-being.
What are the three types of business resources?
Physical resources – IT systems, offices, vehicles.
Financial resources – Cash flow, capital, loans.
Human resources – Employees, training, outsourced staff.
What are the key responsibilities of the company secretary?
Maintaining statutory records.
Filing annual returns.
Organizing Board meetings.
Advising directors on corporate governance.
What is the UK Corporate Governance Code?
A framework that sets best practices for company leadership, accountability, and shareholder relations.
What are the benefits of agile working in insurance?
Increases flexibility and productivity.
Reduces costs.
Improves work-life balance.
The Board of Directors at an insurance company is reviewing financial reports and approving risk management policies. What is their primary role in this scenario?
A) Day-to-day operations
B) Strategic oversight and governance
C) Managing individual claims
D) Sales and marketing decisions
B) Strategic oversight and governance
An insurance company’s CEO is implementing a new strategy to expand into international markets. Who is primarily responsible for ensuring this aligns with the company’s overall objectives?
A) The compliance team
B) The Board of Directors
C) The underwriting department
D) The sales team
B) The Board of Directors
A company is struggling with compliance issues due to frequent changes in financial regulations. Which senior executive should take the lead in addressing these challenges?
A) Chief Financial Officer (CFO)
B) Chief Compliance Officer (CCO)
C) Chief Marketing Officer (CMO)
D) Chief Technology Officer (CTO)
B) Chief Compliance Officer (CCO)
A new Chief Actuary is hired at an insurance firm. What is their most critical responsibility?
A) Managing the HR function
B) Ensuring accurate claims reserving
C) Approving all customer complaints
D) Handling company investments
B) Ensuring accurate claims reserving
A department manager notices a drop in productivity due to outdated claims processing software. What is the best first step to address this issue?
A) Wait for employee complaints before acting
B) Implement new software without consulting staff
C) Conduct an internal review and present findings to senior management
D) Ask employees to work overtime to compensate
C) Conduct an internal review and present findings to senior management
A regional manager wants to improve team performance but notices high staff turnover. What strategy is likely to be most effective?
A) Increase salaries immediately
B) Implement a structured training and development program
C) Fire underperforming staff
D) Reduce employee benefits to cut costs
B) Implement a structured training and development program
A company is setting financial targets for the next five years. What is the main purpose of this process?
A) To increase staff workload
B) To improve company reputation
C) To support long-term business planning
D) To reduce the need for audits
C) To support long-term business planning
A claims department supervisor is informed about a sharp rise in fraudulent claims. What should they do first?
A) Implement stricter policies without consulting management
B) Investigate trends and report findings to senior management
C) Reject all claims without review
D) Reduce staffing levels to cut costs
B) Investigate trends and report findings to senior management
An insurance company’s Board is discussing executive pay structures. What is the most important principle to follow?
A) Ensuring executives receive the highest possible bonuses
B) Keeping salaries confidential
C) Linking executive pay to company performance
D) Allowing executives to set their own salaries
C) Linking executive pay to company performance
A Board member is also a director at a competing insurance company. What should they do?
A) Share confidential information to benefit both companies
B) Declare a conflict of interest and abstain from relevant decisions
C) Use their position to influence decisions in favor of their other company
D) Keep their dual role secret
B) Declare a conflict of interest and abstain from relevant decisions
A financial analyst at an insurance company identifies a misleading report that overstates the company’s profits. What should they do?
A) Ignore it to avoid conflict
B) Report it to the compliance department
C) Publicly expose the issue without consulting management
D) Modify the numbers to make them accurate without telling anyone
B) Report it to the compliance department
A new data protection law requires stricter handling of customer information. How should the company respond?
A) Ignore the changes
B) Wait until a fine is issued before acting
C) Implement new policies and train staff on compliance
D) Delete all customer records to avoid penalties
C) Implement new policies and train staff on compliance
A policyholder files a complaint about an unfairly rejected claim. Which department should handle the complaint first?
A) The underwriting team
B) The claims department
C) The actuarial team
D) The investment department
B) The claims department
An insurance company is launching a new motor insurance product. Which team is responsible for pricing the policy?
A) The sales team
B) The marketing department
C) The actuarial team
D) The claims handling team
C) The actuarial team
A company’s HR department is reviewing remote working policies. What is the key factor to consider?
A) Employee well-being and productivity
B) Reducing salaries for remote workers
C) Limiting remote work to executives only
D) Discontinuing all remote work options
A) Employee well-being and productivity
An insurance company decides to outsource its IT support function. What is the main risk?
A) Losing control over service quality
B) Increased costs
C) Lower customer satisfaction
D) Increased staff workload
A) Losing control over service quality
A major insurer experiences a cyberattack that compromises customer data. What is the most immediate priority?
A) Informing affected customers and regulators
B) Deleting all customer records
C) Ignoring the issue to protect the company’s reputation
D) Blaming a third-party vendor
A) Informing affected customers and regulators
A new insurance company is struggling with cash flow issues. What strategy would help improve financial stability?
A) Increasing customer refunds
B) Implementing stricter claims reserving policies
C) Reducing sales efforts
D) Cutting all marketing expenses
B) Implementing stricter claims reserving policies
A multinational insurance company wants to expand into the Asian market. What is the biggest challenge they may face?
A) Understanding local regulations and business culture
B) Managing staff in different time zones
C) Developing online marketing campaigns
D) Hiring additional employees
A) Understanding local regulations and business culture
An insurance company’s internal audit finds that a department has been processing fraudulent claims. What should management do?
A) Ignore the findings to avoid reputational damage
B) Strengthen internal controls and take corrective action
C) Fire all employees in the department
D) Reduce compliance monitoring to cut costs
B) Strengthen internal controls and take corrective action
Identify and explain the role of the two different types of director.
- Executive directors work full time in the company and are given management
responsibility for running parts of the business. The Board usually appoints one of the executive directors to be accountable for the running of the company on a day-to-day basis and is known as either the chief executive officer (CEO) or managing director who in turn appoints the company management. - Non-executive directors work part time and are chosen for their particular area of
expertise and do not perform an executive management role in the company. They attend Board meetings and may be members of subcommittees in order to provide independent views on matters such as audit, management remuneration and risk
management.
What are the five main responsibilities of a Board?
- Regulation of the executive directors and other members of the senior
management team to ensure they uphold the shareholder interests and the laws governing the conduct of the business.
• Approving the report and accounts, annual budgets, strategy and other
important plans.
• Selecting, appraising and rewarding the CEO and ensuring succession planning is
actively addressed.
• Overseeing the risk management process and ensuring the necessary actions are adopted to mitigate against identified risks.
• Ensuring that the company’s integrity and principles are upheld on critical matters
such as financial reporting accuracy, legal and regulatory compliance, as well as adherence to the company’s stated ethical standards.
Describe three potential barriers to effective communication.
Any three from the following:
• The problem of size of the organisation.
• Natural reserve or lack of confidence.
• Knowledge is power.
• The language problem.
• The problem of time.
• Training.
• The grapevine.
• Failure to recognise the need to tell.
• Inability to listen.
Describe the ‘paternalistic’ management style.
The ‘paternalistic’ management style is where the company looks after its employees in a fatherly way and the employees respect the organisation’s managers in the same way that children respect their parents.
Identify and explain the three key resources of a business
-Physical resources – these include all the assets used by an insurance
organisation that are at the disposal of the business and can be used to help it to achieve its objectives. These include office space, IT, telecoms, websites and perhaps motor vehicles.
-Financial resources – these constitute the funds that are available to the managers of the business to allow it to carry out its day-to-day operations. These include cash, bank loans, share capital and other financial instruments against which it can raise money.
-Human resources – these are made up of the people who work for the
organisation on a permanent, temporary, full-time or part-time basis and those who work directly or indirectly for the company in an outsourced capacity.
Name the three factors that make up an organisation’s corporate culture.
An organisation’s corporate culture is made up of a number of related factors, the principal ones being:
• norms;
• beliefs and values; and
• management style.
