Chapter 7 Flashcards

1
Q

Which of the following is a reason for promoting program business?

A

Programs are a different way to package coverage.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Which of the following describes key differences between program business and group business?

A

a. Group business is like buying insurance à la carte.
b. Program business is like buying insurance from a set menu of coverage options.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What type of risk does program underwriting presume?

A

Homogeneous type risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Which of the following is not likely a candidate for program type coverage?

A

Oil and gas

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Before developing a particular program, what does an insurer research?

A

a. The prospective premium base
b. The competition in the marketplace
c. The producers with this class of business
d. All of the above
Rationale: Before developing a particular program, an insurer needs to research the prospective premium
base for the program, the competition the program would face, which producers have the business, and
where the business is located

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Which of the following is not a consideration in an analysis of a program’s chance of success?

A

d. Credibility analysis
Rationale: The analysis of a program’s chance of success is generally organized in three categories:
profitability analysis, coverage analysis, and cost-benefit analysis.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

The cost-benefit analysis widens the focus to determine whether a program makes good business
sense. Which of the following is not considered?

A

d. Social media access
Rationale: The wider focus extends beyond insurance to include staffing, computer systems, and program
management and maintenance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Which of the following is not considered an exception that requires a referral under a program?

A

d. The time it will take for an underwriter to respond
Rationale: Underwriting processes that deal with exceptions to the underwriting guidelines need to be put
in place for a program, such as the restrictions imposed both on risk selection and on the limits profile for
a risk, who will handle exceptions, whether there will be a referral underwriter for the program, and under
what circumstances exceptions will be approved.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Which of the following are reasons that an insurer would keep a specific program out of its treaty
reinsurance contract?

A

d. The main treaty may exclude business that is covered under the program.
Rationale: An insurer might carve the program out of the main treaty and seek other reinsurance for it if
the insurer does not want to have the same retentions or reinsurance structure imposed on the new
product or program as on the business subject to the main treaty; the insurer may want a reinsurer with
expertise in the business to be insured under the new program; and the main treaty may exclude
business of the sort covered or to be covered under the program.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

. When the insurer is managing an existing program, sharing information should include which of the
following departments?

A

a. Underwriting
b. Claims
c. Marketing
d. All of the above
Rationale: Formal arrangements for information-sharing should be in place among people in the
underwriting, claims, accounting, and marketing departments to provide early warning of potential
problems.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Describe five reasons why program business is popular in the insurance industry. (5 marks)

A

Depending on the target market and how attractive a program is to members of the target market,
program business can generate a large amount of premium.
* Program business is a different way to package coverage.
* Services and coverage can be tailored to the specific needs of policyholders.
* Reinsurance can be separately purchased and structured to meet the specific needs of the program.
* The underwriting guidelines can be more specific for a program than for classes of individual risks.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

List five things that an insurer arranging for an outside entity to underwrite risks on its behalf should
ensure. (5 marks)

A

Strategies and plans are effectively defined, communicated, and managed.
* Underwriting authority is clearly stated and the consequences of breach of authority have been put in
writing in the contract.
* Training is conducted where appropriate.
* System controls are in place to ensure that underwriting authority is not exceeded.
* Insurer has access to and use of underwriting information.
* Auditing is carried out on a regular basis to ensure compliance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

List five questions that should be answered regarding required underwriting processes for a program.
(5 marks)

A

What restrictions will be imposed both on risk selection and on the limits profile for a risk?
* How will exceptions be handled?
* Who will handle exceptions?
* Will there be a referral underwriter for the program, and where will this person be located?
* Who will have the authority to approve exceptions?
* Under what circumstances will exceptions be approved?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

List five areas where an insurer needs to perform market research before introducing a new program.
(5 marks)

A

Market research areas for a new program:
* The business engaged in by risks that might be insured under the program
* The premium base those risks might represent
* The exposures to loss they have in common
* The factors that will attract and retain the program members
* The variables that will mark a good risk for the program

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Name and describe the three categories of analysis for evaluating a program’s chance of success. (5
marks)

A

Categories of analysis to evaluate a program’s chance of success (any five of the following):
* Profitability analysis
o How much money the program will make when considering risks, premiums, loss ratio,
acquisition costs, and other expenses
* Coverage analysis
o If specific terms and conditions are needed in the new program, the insurer has to be
comfortable with those terms and conditions
* Cost-benefit analysis
o Extends beyond insurance to include staffing, computer systems, and program management and
maintenance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Areas needing effective planning and strategy to develop and launch a program:

A

The business impact of the proposed new program
* The insurer’s entrance and exit strategy
* The business plan
* The project plan and budget
* The underwriting guidelines