chapter 2 Flashcards
define a corporate governance
refers to a system of policies and processes for directing and controlling a corporations’ actives that emphasizes accountability and integrity in how the company fulfills its mission on behalf of all its stakeholders.
name the corporate governance for UK, India and japan
UK= combined code on corporate governance Indio= companies bill (2009 amendment) japan= financial instruments and exxhange law
a good corporate governance requires what?
- stretegic plans that focus on balancing the needs of all stakeholders
- structure and process that is efficient and work together effectively
- appropriate company resources
- ethical organizational culture and leadership that balances risk and reward
- control system at all levels of the company , transparency and accountability
how do managers execute the management function known as directing, and name the 5 directing acitvities
they must ensure employees perform appropriate activites in the appropriate way by
- leading
- motivating
- supervising
- communicating
- facilitating
what activities impact how well managers are able to direct employees?
- recruiting and hiring qualified individuals
- providing opportunities for training and education
- having a system for monitoring, evaluating and regulating employees
- rewarding employees equitability
- creating and maintaining an ethical work environment.
define ethics
a system of accepted standards of conduct and moral judgment that combines the elements of honestly, integrity, and fair treatment.
name 4 actions a company can take/establish to promote ethical behavior.
- establish a code of conduct for employees and producers
- establish an ethics office and an ombudsperson
- promoting employee education and training
- encouraging employee membership in industry associations.
define a code of conduct
a formal statement of a company’s values and its expectations for how its employees should behave in the course of business.
to be the most effective, a code of conduct should refer to what?
specific practices that may be encountered in the course of the company’s work, followed by explanations of what the company believes would be the proper response.
what is an ethics office
a department in which employees can receive advise or counsel from qualified perfessional about how to handle ethical issues and also report ethical misconduct.
define an ombudsperson
an independent, impartial and confidential professional who provides assistance to a company;s stakeholders.
-may address minor problem in the workplace before the problem escalates or becomes systemic.
how does education improve ethics of the work place?
education programs specific to an employees particular fields can increase job knowledge while reinforcing proper business behavior.
should ethics training be a process focused mainly at beginning of employment?
it should begin with the employees orientation but also continue regularly through the employees career.
what are two important areas of compliance insurance companies address during ethics training?
insider trading
privacy and confidentially requirements.
what is insider trading?
is buying or selling a companies securities based upon side information, which is a company’s nonpublic, material information that employees and other individuals associated with the company and are restricted from disclosing to a third party or using of their individual benefit.
what is material information?
company’s information that might influence the market price of a company’s securities.
name 5 kinds of inside information, which is considered non-public information
- financial performances
- marketing strategies
- ongoing civil/criminal lawsuits
- arbitration results
- product design assumptions.
Name 3 examples of customer-related information that must be kept confidential
financial informtation (income, assets, debts, credit hx) health information (medical records, px records) personal information (driving hx, hobbies, lifestyle choices)
Give examples of PIIs (personally identifiable information)
name Social security number address telephone number email address mothers maiden name
how do associations influence industry professionalism?
by promoting high standards of ethical conduct in their chosen fields.
- these associations give individuals with similar traits, an oppertunity to meet, exchange info, and increase their knowledge about developments in their professions.
name some professional associations that are important to the life insurance industry
SOA (society of actuaries) NAIFA ALIC CLU ChFC LOMA
what does a CSR do (customer service representative)
provides customers with information,
On an organization level, define control function
its consists of all management acitvites directed toward ensuring that an organizations mission and strategic plans are accomplished effectively, efficiently and in accordance with good governance.
- provides accountability
on an operational level, define control fuction
refers to all of management;s actions to enure that specific department objectives are being achieved.
-reduce process variation, detect fraud and contribute to the attainment of corporate objectives.
Name 3 primary types of control mechanisms used by insurance companies.
steering control
concurrent controls
feedback controls.
companies apply these controls at the division, department and individual levels
define steering control, also known as feedforward control.
give 2 examples
describes how a company intends to implement a process.
- seek to establish most efficient method for using company resources.
- anticipate problems in advance.
ie: procedures, a code of conduct
define concurrent controls.
when are they applied?
give 4 examples
- are check build into and applied during a process and allows comapnies to detect problems during a process and to take immediate corrective action.
- applied during the business process
ie: - activity logs,
- error logs
- pop-up error messaged., -supervisory approval on claim checks exceeding a set amount.
- real-time monitoring for customer calls
- elapsed time clocks
- supervisors approval signature on a purchase request
define feedback controls.
-gather information about completed processes and evaluate that information to improve similar activities in the future. They are checks and corrections applied to a process at the end of the process cycle.
Name 7 examples of feedback controls commonly used in insurance companies
- audits
- account reconciliations
- performance appraisals
- customers satisfactions surveys
- supervisory review of recorded customer calls
- supervisory approvals of expense reports
- budget analyses
to successfully operate an insurance company, management must use all 3 control mechanism in a control cycle. define this
its an ongoing repetition of procedures for steering, monitoring, assessing, and improving business process.
what are performance standards?
is a previously established level of performance aagasint which actual performances can be measured.
performance standards are often expressed in terms of … (3)
- units
- time
- money
performance standards can be internal or external. Define each
internal- are based on a compnay’s own planned or hx performances.
external- are based on information obtained outside the company (think industry wide averages_
what is benchmarking?
a process by which an insurer compared its own performances, products, or services with those of other organizations that are recongnized as the best in a particular caterory.
when would an insurer use benchmarking?
for operational process that involve customers, such a NB processing or customer service.
Name (only) the 3 control tools used throughout an insurance company to measure preformance
- budget
- audits
- exception reports
what is a budget?
a financial plan of action, expressed in monetary terms, that covers a specific period.
- they contain performance standards: estimated that reflect managements expectations of future preformances.
what does a budgeting process enable for a company?
- to monitor and evaluate ongoing operations
- allocate scarece resources efficiently
- control and reduce expenses
- communicate information throughout the company
- motivate employees
what is the term given for the difference between an actual result and the expected result
variance
What is an audit?
a systemic examination and evaluation of a company’s records, procedures and controls.
define exception report
its a report that is generated automatically when results deviate form an establish performance standard.
-can be a concurrent and feedback control.
