Chapter 3

Question 1

OSFI is responsible for administering the Insurance Company Act, which does which of the
following?

Answer 1

Regulates federal insurance companies

Question 2

To obtain a federal licence, which of the following ordered two-step processes must an insurer meet?

Answer 2

Obtain letters patent of incorporation and apply for an order to commence and carry on
business from OSFI

Question 3

Which of the following are areas that would be addressed in a risk management outline?

Answer 3

All of the above
Rationale: All of the above would be included in a risk management outline

Question 4

Which of the following is an example of government insurance?

Answer 4

Certain types of coverage relating to trade and export

Question 5

Which of the following may create the perception among distributers that a corporation is soliciting
business from them while directly competing against them?

Answer 5

Distributing product through a direct sales force
Rationale: If a company has a direct sales force and a broker channel, brokers may feel that the direct
sales force is competing directly against them.

Question 6

Which of the following is not a role of the board of directors?

Answer 6

The day-to-day management of staff

Question 7

Which of the following are ways that a company can be organized?

Answer 7

A stock company or some form of cooperative

Question 8

What does the degree of hierarchy in an underwriting department refer to?

Answer 8

The distribution of authority

Question 9

Which of the following is not a consideration in managing workflow?

Answer 9

What the underwriting appetite for submissions is
Rationale: Underwriting appetite is a question of underwriting guidelines or corporate guidelines, not a
question of workflow.

Question 10

Which of the following is not a reason to implement restricted authority levels?

Answer 10

To create efficiency
Rationale: Implementing restricted authority levels can reduce efficiency as it requires multiple people
touching the same transaction.

Question 11

List the five elements that make up the broad policy of an insurance company. (5 marks)

Answer 11

Answers:
1. Elements of the broad policy of an insurance company:
* The types of insurance and extent of coverage to be sold
* The territory in which the company will operate
* The underwriting policy the company will follow
* The agency policy
* The investment policy

Question 12

List five questions that can affect the business procedures put in place to manage workflow. (5
marks)

Answer 12

How business procedures for managing workflow can be affected (any five or the following or other
appropriate answers):
* How will submissions be received? For example, they may be received by email, company portal,
smartphone, or some combination of methods.
* How will submissions be monitored? For example, they may be recorded in a tracking system as
they are received.
* Will a submission need to be cleared before it is assigned to an underwriter? Such a procedure
helps to ensure that another office or unit within the company is not working on the same account.
* Will each piece of business be rated before being assigned to an underwriter?
* Should accounts pass a preliminary assessment before being worked on in earnest?
* Who will be responsible for each step of the process?

Question 13

What are five steps to promoting a team environment through communication? (5 marks)

Answer 13

Steps for promoting a team environment through communication:
 Share information
 Share sensitive information as appropriate
 Circulate reports
 Let staff contribute
 Watch for training opportunities

Question 14

What are five factors OSFI considers when deciding how much detail a new insurer must put into
their submission? (5 marks)

Answer 14

Dependencies for amount of detail in a prospective insurer’s submission to OSFI (any five of the
following):
* Size of the insurer
* Corporate group
* Ownership structure
* Nature of risks
* Complexity of risks
* Inherent risks

Question 15

Give five examples of the type of information that should be included in a new insurer’s submission to
OSFI. (5 marks)

Answer 15

Elements included in an insurer’s submission to OSFI (any five of the following):
* Organizational structure
* Financial information
* Business plan
* Risk management controlsBoard of directors and committees
* Internal audit
* Compliance management
* Systems and business continuity

Question 16

Define five elements that should be included in the data and privacy management section of risk
management controls. (5 marks)

Answer 16

How policyholders, customers, employees, and vendors will be authenticated and authorized to
prevent repudiation and fraud
* The security of computer systems, including the website, company portals, or other systems that
store customer and employee data—system security encompasses both physical access to
hardware (computers and servers) and the use of software (codes, passwords, and applications and
other programs)
* The security of policyholder and customer information
* How systems capacity is managed
* The encryption of communications
* How audits of electronic data processing will be provided for
* The continuing and contingency costs to develop and maintain information management and
information technology plans