Section 1

Question 1

Insurance company structures

Answer 1

Stock insurance company-owned by stockholders who elect board members. Objective to make profit for stockholders
Mutual insurance company owned by policyholders providing insurance near actual cost of doing business
Reciprocal - subscribers ensure one another. One for all and all for one

Question 2

Board of directors

Answer 2

Central purpose is to make sure owners and investors interests are protected

Question 3

Company culture

Answer 3

Values statement- defined the company‘s culture and beliefs (principles and ethics, behavior a company leader ship and employees)
Vision statement- Company long-range goals where the company is going and how it’s going to get there
Mission statement- company’s overall purpose and goal

Question 4

Product constraints

Answer 4

Internal- size, expertise, financial resources branding, technology
External-regulation, competition, distribution, reading agencies, economic conditions, reinsurance, and distribution methods

Question 5

Why do companies choose a specific geographical location?

Answer 5

Market need, environment, cost, internal staff resources, skill set

Question 6

Methods of product distribution

Answer 6

Independent agency system - effective when entering a new territory/expanding. Maintains valuable relationships with policyholders
Exclusive agents- no competition with other companies
Direct marketing- Requires a product with broad appeal or means of preselecting customers
Online- Great at generating price quotes, customers may be uncomfortable purchasing fully online
Hybrid- multiple distribution channels

Question 7

Best practices used to establish indirect functions of an insurance company

Answer 7

Best practices =operating guidelines
Compliance-regulatory and statutory requirements in the territory they are located
Control- following internal policies practices and procedures
Conduct examinations
Financial solvency- Financial position being sound in accurate Financial position being sound in accurate
Market conduct-Insurance service underwriting and claims are following state regulations
Other reviews are internal or External actuaries, reinsurance audits, and filing processes