Section 1 - Executive and Financial Management Flashcards
What is strategic technology?
Technology that is intended for the insurance carrier individually. It is unique to the type of insurance, product sold, distribution methods use, another factors for what’s needed. It is a strategy to choose. The operating model needed.
Use different types of audits to explain the importance of regulatory compliance.
Financial solvency exam: conducted by the state of domicile to ensure companies financial position is sound inaccurate.
Market conduct exam : conducted in each state the company does business. To ensure the company is following its rules rates and forms and statutory market requirements.
Explain the difference between internal and external communication. How does communication impact strategic management?
Internal communications: information must flow up and down the chain of commands in the organization of employees to create efficiency and engagement
External communications: flow is naturally from internal communications, gray external communications are a direct result of internal communication communications.
Impact on strategic management : communications are the most effective way of creating visibility keeping employees informed and listening to feedback and suggestions creates company success
What are the three primary probability ratios?
- Loss ratio: measures the portion of each premium dollar that is used to pay losses.
- Underwriting expense ratio: measures the portion of each premium dollar used to pay for a company’s operating expenses
- Combined ratio: measures the probability of a book of business includes the last ratio and expense ratio combined.
Describe the impact that IBNR reserves have on Company financials
Represents the liability for unpaid claims, not shown in the case, reserve estimates, and must be calculated to determine the ultimate loss estimate. Making sure the assets are large enough to cover the liabilities, the company can ensure all reserves are sufficiently covered.
Describe the differences between STAT and GAAP accounting and in what situations each is the preferred system
STAT accounting: primary goal is to assist regulators and monitoring insurance company solvency. Consumers benefit from the transparency.
GAAP accounting : the purpose is to make the financial reporting transparent. Allow was easy comparison for companies to outside parties.
Alpha insurance serves a large clientele of commercial farmers. The company is moving to an agricultural state to be closer to clients and which has no state taxes and offers tax incentives. It also has a favorable regulatory and judicial system when choosing a city in that state for the main office, what are some other considerations the company might need to make? (Three answers)
- Cost of living.
- Availability of resources.
- Future expansion flexibility.
What is the relationship between a company’s risk tolerance and risk appetite and the EMT’s decision-making process?
Risk tolerance: the max amount of risk a person or organization is willing to assume.
Risk appetite : the max amount of risk the organization is willing to accept while striving to meet its strategic and tactical plans.
Describe the distinct purpose of each kind of statement, values, vision, and mission
Values statement: defines the “who” of the organization. Referred to as companies code of conduct.
Vision statement: hopes and ambitions for future development of a long-term strategic plan.
Mission statement: short but powerful statement why organization exists. Companies overall goal, answers the “why?” And the here and now.
Identify and describe the primary companies structures and characteristics
- Stock insurance company.
Owned by stockholders primary objective as profit - Mutual insurance company.
Owned by policyholders. Usually very stable. Mergers and acquisitions more difficult. Profits used to pay dividends or use to reduce future premiums. - Reciprocal insurance company.
Easier to capitalize. Subscribers insure one another. Stay regulation may be less strict. Difficult to raise additional.
What tools can the executive management team use to identify marketplace readiness, and value propositions to determine capital structure, surplus requirements and investment sources? (THREE)
- Strategy formulation.
- Strategy implementation.
- Strategy evaluation.
Explain the difference between strategy, strategic planning, and strategic plan. What are the questions that EMT must answer before it starts the strategic planning process? What sources of information will be needed to answer these questions?
Strategy: Thoughtful, deliberate plan of action. Answers the question “HOW?”
Strategic planning: the process used to create the strategic plan, conducts SWOT analysis.
Strategic plan: includes values, vision, and mission statements.
Three questions : where are we now? Where are we going? How will we get there?
