Chapter 5 - Functions

Question 1

What is the role of underwriting?

Answer 1

Calculate premiums

control of the extent of cover given

Question 2

What is peer review in underwriting?

Answer 2

when an underwriter’s quotations are discussed and reviewed by a colleague and possibly by a superior if the underwriter’s authority requires it.

Question 3

What is a delegated authority?

Answer 3

some form of underwriting or policy administration to be carried out by outside entities. The aim is to acquire business and reduce management expenses.

Question 4

What is defined as a coverholder?

Answer 4

The party to whom authority has been delegated

Question 5

What is binding authority?

Answer 5

sets out the scope and extent of the authority delegated to the coverholder

Question 6

What is a managing general agent?

Answer 6

a type of delegated authority arrangement whereby the MGA organisation not only ‘holds the underwriting pen’ of the insurer, it also undertakes all the other activities of an insurer such as marketing, selling, and administration.

Question 7

Does an MGA fund claims?

Answer 7

No - it may undertake claims payments from a fund provided by the
insurer.

Question 8

What is the role of the claims department?

Answer 8

to ensure that 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 9

What is the role of the compliance department?

Answer 9

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

Question 10

What are the 4 types of actuary?

Answer 10

pricing
reserving
modeling
those who focus on solvency capital

Question 11

Whats the role of a pricing actuary?

Answer 11

• To provide support on pricing and risk structure, predicting loss ratios based on historical performance of the book

Question 12

What is the role of a reserving actuary?

Answer 12

• To calculate technical reserves for claims and review reserve data, compare losses against reserves and look for trends

Question 13

What’s the role of a modeling actuary?

Answer 13

• To predict likelihood of future losses and severity of losses against the portfolio of business.

Question 14

What is the role of an actuary who deals with solvency capital?

Answer 14

• Looks at the business as a whole and the risks its exposed to, to make sure the business doesn’t become insolvent and estimate worse case scenario of all risks.

Question 15

What are the three main types of assets?

Answer 15

Premiums
claims reserves
shareholder funds /retained profit and loans

Question 16

What does an investment return consist of?

Answer 16

interest
dividends payments
capital growth

Question 17

What is the role of the investment department?

Answer 17

• Look at the business as a whole and the nature of business the company plans to write to make sure the company can get a better investment return rather than a loss.

Question 18

What is the role of the finance director?

Answer 18

Make decisions 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 of the finance director.

Question 19

What does the strategy team focus on?

Answer 19

M&A’S
Financial records
sales
claims profile
staff numbers
service contracts
costs
regulatory status

Question 20

What does penetration mean in the insurance market?

Answer 20

The purchase of insurance relative to the number of potential buyers may have reached near saturation in the countries where operations presently exist.

Question 21

What is meant by the term ‘white label insurer’?

Answer 21

A ‘white label insurer’ is one that provides insurance policies through a partner
company, under whose name the policies are branded. The insurer may also offer
products under their own brand through different distribution channels

Question 22

What is outsourcing?

Answer 22

subcontracting of a business activity with the aim of improving the overall efficiency and/or effectiveness of the company.

Question 23

What does a TPA do?

Answer 23

The TPA manages all aspects of claims, including
appointment of adjusters, engineers, surveyors etc., manages the claims file and records, establishes reserves, settles claims and pursues recovery and subrogation rights.

Question 24

What is meant by time horizons?

Answer 24

Times stamps for a planning period - for example, The starting position will be a one-year plan for the
financial year ahead, supplemented with three-, five- or ten-year plans.

Question 25

What is the secretarial team responsible for?

Answer 25

The secretarial team is responsible for managing the share register, although this is likely to be outsourced to an external registrar.

Question 26

Role of the internal audit team?

Answer 26

the key focus is on the financial statements in the firm’s annual report and accounts.

Question 27

What do themed audits cover?

Answer 27

• IT security management.
• Underwriting controls.
• Banking reconciliation.
• Health and safety training.
• Customer complaints management.

Question 28

What are the possible advantages of a merger or acquisition?

Answer 28

The possible advantages include cost efficiency through a greater scale or access to new areas of business

Question 29

Explain the meaning of flow process analysis in the context of risk management

Answer 29

Risk managers review the reliance on the various stages of insurance processing such as sales/advice, administration (particularly with outsourced services), claims
investigation and settlement and financial management. The purpose is to identify potential bottlenecks or dependencies on every aspect of business processing

Question 30

Explain the meaning of time horizons in the context of strategic planning

Answer 30

The strategy development process will consider various time horizons in order to match the planning period with strategic objectives. The starting position will be a
one-year plan for the financial year ahead, supplemented with three-, five- or ten-year plans