Chapter 5 - Common Functions Within Insurance Organisations

Question 1

Who does strategy team usually in head office report to?

Answer 1

Chief executive and finance director

Question 2

Planning tool used by a strategy team will include a what

Answer 2

SWOT analysis

Question 3

Why might also in regards to strategic focus, a company decide to do business in other countries?

Answer 3

Spread their risk, e.g if catastrophic losses all in once place then business totally gone, whereas if spread about then they have less exposure.

Question 4

The essential role of the underwriting department is to what?

Answer 4

Calculate the premiums to be charged for the risks to be insured.

Question 5

Explain the underwriting hierarchy

Answer 5

From top to bottom

• director of underwriting
• head of department (e.g marine)
• class underwriters
• section supervisors
• underwriters
• assistant and trainee underwriters

Question 6

What is a pure risk premium?

Answer 6

The estimated amount of premium required to pay claims before expenses and profit and sometimes brokerage is added.

Question 7

Why to insurers delegate underwriting authority to other organisations?

Answer 7

Acquire business and reduce mangement expenses

Question 8

The party to whom authority has been delegated is known as the …

Answer 8

Coverholder

Question 9

An agreement called a ??????? ???????? Is set up between the parties, which sets out the scope and extent of the authority delegated to the cover holder.

Answer 9

Binding authority

Question 10

An agreement between an individual broker and a group of two or more insurers whereby each insurer or underwriter agrees to accept a pre agreed proportion of a specified type of insurance is known as a what?

Answer 10

Line slip

Question 11

The role of the claims department is to ensure what?

Answer 11

When claims are made, the policyholder receives a fair and equitable settlement for their loss, in accordance with the contractual obligations of the insurance policy.

Question 12

The job of the claims department is often one of managing expectations and protecting what?

Answer 12

The good reputation of the company for fair dealing.

Question 13

Identify seven roles of the marketing team in an insurance company

Answer 13

Seven from:

• market research
• competitior research
• customer profiling, target markets or segmentation
• development of strategic marketting plans
• development of operational marketing plans
• advertising
• media relations
• public relations and sponsership
• product development
• relationship management including sales management and customer service

Question 14

What is the purpose of marketing plan?

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Answer 14

• Identify target markets
• Formulate marketing strategy
• Control marketing operations
• Monitor the successes of products of services

Question 15

The 4 types of actuaries are…?

Answer 15

1. Pricing actuaries
2. Reserving actuaries
3. Modelling specialists
4. Those who focus on solvency capital

Question 16

General pricing actuaries provide support to the underwriting team by doing what?

Answer 16

Predicting loss ratios within a stated range for a particular book of business,

Question 17

Reserving actuaries…

Answer 17

Undertake extensive reviews of the initial reserve set against a claim compared to the final costs in order to assess the trends in reserving movements.

Question 18

Under Solvency II internal model capital assessment, the programme that provides the capital estimate is known as what?

Answer 18

Calculation kernel

Question 19

Many organisations have created what role of take the lead of risk management activities?

Answer 19

Chief risk officer or head of risk mangement

Question 20

In regards to risk identification, what are some of the methods used?

Answer 20

• brainstorming and risk workshops
• site visits
• scenario analysis
• flow process analysis

Question 21

Risks that have been identified and analysed are then recorded in a…

Answer 21

Risk register.

Question 22

All insurance companies hold some form of asset in order to fund the business. What are three main types of asset….

Answer 22

1. Premiums
2. Claims reserves
3. Shareholders funs, retained profits and loans

Question 23

What is the responsibility of the investment department?

Answer 23

Best return possible, while at the same time keeping the assets readily available to meet the expenses of running the business and to pay claims.

Question 24

What isa an example of a short term investment available to pay short tail claims

Answer 24

Cash at the bank

Question 25

Where equities are held, this is usually regarded as a what type of investment

Answer 25

Medium to long term

Question 26

Many life and pension firms hold part of their investments in commercial property - this is what type of investment?

Answer 26

Long term

Question 27

Descions regarding the insurances to be transacted, management of costs and expenses, investment strategy and capital raising and solvency ratios are all under the direct influence what function

Answer 27

Finance

Question 28

The legal and company secretary function of a company looks after all documentation, filings and registrations required by whom?

Answer 28

Companies house

Question 29

A key feature of the company secretary role is the organisation and operation of…

Answer 29

Board meetings and the meetings of board committees.

Question 30

The solicitor heading the in house legal department is sometimes known as …

Answer 30

General counsel

Question 31

When the company is entering a contract with for example an outsourcing supplier, exceeding a stated amount, e,g £25,000 who will it be referred to…

Answer 31

Legal team

Question 32

What is the key role of the compliance department ?

Answer 32

Ensure as far as possible, that the operations of the firm are compliant with regulatory requirements.

Question 33

Compliance will audit current processes and practices to make sure they do what

Answer 33

Conform to regulations.

Question 34

While the internal audit department covers all areas of the business, the key focus is on what?

Answer 34

The financial statements in the firms annual reports and accounts.

Question 35

A core role of the internal audit is to ensure the financial resources of the firm are protected against what?

Answer 35

Fraud and errors.

Question 36

Why does head of internal audit report to chairman of audit committee?

Answer 36

Maintain independence from the operating divisions, also allows open discussions of any problems found in the auditing work.

Question 37

The central function of IT is to what?

Answer 37

Establish the hardware requirements, including servers, desktop PCs and printers and the whole of the system of connections.

Question 38

What must be stablished so that people’s personal data is not accessed?

Answer 38

Security framework

Question 39

What does the HR function do?

Answer 39

Resourcing of staff and ensures the best practice recruitment, employment and staff development techniques are used.

Question 40

What are insurers second biggest costs after claims

Answer 40

Staff costs

Question 41

Why would Human Resources carry out external research?

Answer 41

Gain a picture of salaries and benefits being offered to people employed in similar roles in order to set a competitive package and attract candidates.

Question 42

The role of facilities management includes what?

Answer 42

Procurement of an office of other property to meet the accommodation needs to the company. T

Question 43

What is a hot site location?

Answer 43

Where the IT runs parallel in real time and the building can be occupied at short notice.