Overview of GI

Question 1

Uncertainty of risk

Answer 1

1. Whether an at risk event will happen

2. When it will happen

Question 2

Examples of short-tail GI

Answer 2

Aviation, Commercial motor vehicle, Construction, Consumer credit, Domestic motor vehicle, Extended warranty(manufacturer’s warranty liability), fire, House owner/householders, Industrial special risks, Marine cargo, Marine hull, Sickness and accident, Trade credit, Travel, other

Question 3

Example of Long-tail GI

Answer 3

compulsory CTP motor vehicle, Employer’s liability, loan,mortgage & lease, Product liability, Public liability, Professional indemnity

Question 4

Insurance cycle

Answer 4

1. Selling insurance
2. Underwriting
3. Collecting premium
4. Investing funds
5. Assessing and settling claims

Question 5

Agents vs. broker

Answer 5

Agents are employed by on (or more) insurance company and sell only that company’s products
Not registered with ASIC

Question 6

Role of underwriter

Answer 6

1. Accept or decline the risk
2. Set the policy terms and conditions (e.g. level of excess. or policy exclusion)
3. Set the level of the premium
4. Review the quality and spread of business
5. Arrange reinsurance where necessary

Question 7

Sources of revenue

Answer 7

1. Premium income
2. Investment income
3. Reinsurance commissions

Question 8

Main areas of expenditure

Answer 8

1. Claims
2. Commission and brokerage
3. Reinsurance premium
4. Business operation

Question 9

How are agents paid

Answer 9

Commissions are paid as a set percentage of premiums paid by the insured or on an agreed fee with the insured

Question 10

How are brokers paid?

Answer 10

Brokerage maybe paid by insured in addition to their premium on top of commissions paid by the insurer

Question 11

Two types of recoveries

Answer 11

1. Reinsurance claims recoveries

2. Third party claims recoveries

Question 12

Stakeholders in any business

Answer 12

Customer, Supplier, Owner, Staff, Community, Industry

Question 13

Community for the owner stakeholder

Answer 13

1. The government instrumentalities that regulate the industry in the interests of the community
2. The community as a consumer of insurance products
3. Members of the community who may be affected by the company without necessarily being a customer of it

Question 14

AASB 4 and AASB 2013

Answer 14

Standardize the accounting presentation of the industry for the benefit of analysis, regulators and the general public etc.

Question 15

IT2663 and Division 321

Answer 15

Tax ruling specific to the General insurance industry

Question 16

Nature of regulations and accounting standards governing GI

Answer 16

1. GI companies must be authorized by APRA
2. New prudential standards since 2002
3. Accounting standards: AASB 4 and AASB 1023
4. Taxation Legislation: IT2663 and Division 321
5. Financial Services Reform Act 2001

Question 17

Trade associations related to the insurance industry in Australia

Answer 17

ICA, IEC, FSAA, AII, NIBA

Question 18

Why does the insurance industry need to be regulated?

Answer 18

Its liability are large and uncertain, its product is intangible and it touches the lives of most people in the community

Question 19

the FSRA

Answer 19

The Financial Services Reform Act 2001 is the culmination of an extensive reform program examing regulatory requirements applying to the financial services industry

Question 20

Stakeholders within an insurance company who need information from the accounting department

Answer 20

1. Senior management
2. Other recipient of the monthly management accounts
3. Treasury or investment management
4. Product manager
5. The reinsurance department
6. Staff reasonable for statutory returns that involves financial data
7. Internal actuaries
8. Internal auditors

Question 21

Stakeholders providing information to the accounting department

Answer 21

1. Claims department
2. Underwriting department
3. Brokers and agents
4. Sales and marketing departments
5. The reinsurance department
6. The investment department
7. Human resources department

Question 22

Role of insurance accounting information

Answer 22

1. An indication of performance
2. A guide to achieving objectives
3. A basis for budgets and negotiations

Question 23

Why the insurance needs specific disclosure?

Answer 23

1. Duration of insurance contracts

2. Risks involved in insurance transactions

Question 24

Elements of premium income that need to be estimated

Answer 24

1. Earning patterns
2. Changing patterns of risk
3. Unclosed business

Question 25

Pattern of earned premium?

Answer 25

In accordance with the pattern of risk

Question 26

Unclosed business

Answer 26

means an insurer is “on risk”

Question 27

“On risk” claims

Answer 27

Claims which have been instigated, but not fully processed at the time the accounts balance is done

Question 28

Retrieve all the string before the first comma from COLUMN location

Answer 28

SUBSTRING_INDEX(location, ‘,’, 1)

Question 29

Retrieve part of string

Answer 29

SUBSTRING(your_string, start_position, length)

Question 30

change to uppercase or lowercase

Answer 30

UPPER() LOWER()

Question 31

reverse the order of letters

Answer 31

REVERSE(‘ ‘)

Question 32

Trim from left or right

Answer 32

LTRIM() RTRIM()

Question 33

Get LENGTH

Answer 33

LENGTH()