Study 2 - Commercial Insurance Stakeholders Flashcards
What are the two most common classification systems used by Canadian insurers?
NAICS
North American Industry Classification System
SIC
Standard Industrial Classification
What are some things that affect the exposure of a business?
Size, location, expertise, claims history and regulatory requirements
What roles are essential in commercial insurance?
- Brokers/agents
- Underwriters
- Commercial claims professionals
- Risk analysts
- Managing general agents (MGAs)
Define captive agent
Place all their business with one insurer
Define agent
Represent one insurer and operate according to agreements with that insurer; can be independent or exclusive
Briefly outline the various levels of licenses and what business can be managed
1 - Sale of home, auto & travel; some commercial only if supervised by a level 2 or level 3
2 - Personal, farm and commercial; cannot manage an agency
3 - With required years of experience, can manage an agency and sell all personal/commercial insurance
How do personal and commercial insurance risks vary?
Commercial is more varied and complex; many different industries typically
Define rate manual
Manual containing rates and underwriting rules for use by staff, agents, and/or brokers
What 4 areas must commercial brokers be proficient in?
Communication
Research
Negotiation
Time Management
Explain how a commercial broker must use communication
Ability to use the right questions to effectively gather info to determine loss exposures and present an accurate & comprehensive picture of a risk to the insurer
Ability to help clients understand coverage and restrictions or excluded coverage
Explain how a commercial broker must use research
Ability to find coverage best suited to needs and budget
Ability to provide innovative and cost effective solutions
Explain how a commercial broker must use negotiation
Ability to arrive at a satisfactory arrangement for both insurer and insured
Explain how a commercial broker must use time management
Ability to remain organized, prioritize tasks, and ensure accurate documentation is maintained
Ability to demonstrate reliability by being on time
Define line guide
A listing of the maximum amounts of exposure an insurance company is prepared to accept on various classes of risk
What three conditions would cause an underwriter to decline a risk?
- It is not permitted by the line guide
- Market conditions make the risk unacceptable
- It is too flawed to be accepted
What are four tools available to make a risk more desireable?
- Higher deductibles
- Higher premium rates
- Modifications of coverage
- Implementation of recommendations by the loss control department
What are some unique characteristics of commercial underwriters?
Analytical and critical thinking
- Ability to work through the info provided and organize it to determine whether any further details are needed
- Ability to compare the risk to the guidelines and philosophy of the company to ascertain whether it can be accepted or altered/rejected
Math and statistics
- Ability to apply actuarial rates based on risk and application of differentials, loading and any other applicable changes
Communication
- Ability to communication with brokers and other professionals to obtain a clear picture
- Ability to tactfully decline a risk
Attention to Detail
- Ability to keep notes and correspondence organized and files up to date, and to follow up on requests or process documents correctly and in a timely manner
Define loading
An additional charge included in an insurance rate to reflect a hazard not contemplated
What do claims professionals do?
- Investigate claims
- Make recommendations
- Negotiate payments and settlements
What are the typical responsibilities of a claims professional?
- Confirming their authority with regard to the handling of a claim
- Checking policy coverage to ascertain relevant info
- Supplying the insurer with relevant documentation such as preliminary notice of loss or accident report
- Investigating the claim
- Keeping the insurer and insured informed of development
Define managing general agent (MGA)
Independent business operation given authority by a number of insurance companies to solicit business on behalf of such companies. Responsibilities include recruiting, training and supervising agents
“The brokers’ brokers”
What are the typical duties of a risk analyst?
- Identifying loss exposures
- Preventing loss
- Reducing loss
- Loss financing
- Educating other corporate managers
- Acting as a resource to other managers
What activities do classification systems make easier?
- Business analysis
- Marketing
- Business listing
- Data mining
- Investment decisions
What three countries did the NAICS collect data from?
Canada, United States, Mexico
Explain the breakdown of a NAICS code
First two digits - largest business sector
Third digit - company subsector
Fourth digit - industry group company belongs to
Fifth digit - company’s particular industry of operation
Sixth digit - national industries
What is the difference between SIC codes and NAICS codes?
SIC
4 digits
mainly older industries (manufacturing & agriculture)
NAICS
6 digits
more comprehensive and newer industries (tech)
What are the top 10 Canadian industries as a percentage?
1) Real estate and rental and leasing (13%)
2) Manufacturing (10%)
3) Mining, quarrying and oil and gas extraction (9%)
4) Construction (7%)
5) Finance and Insurance (7%)
6) Health care and social assistance (6)
7) Public administration (6%)
8) Wholesale trade (6%)
9) Professional, scientific and technical services (5%)
10) Retail trade (5%)
What are the important considerations of “real estate, renting and leasing” as it pertains to insurance?
- Type, size, value and category of properties being managed (commercial buildings, residential, strip malls, high rise complexes, and so on)
- Procedures and expertise of staff and any contractors handling maintenance and repairs
- Leasing and tenancy procedures
What are the important considerations of “manufacturing” as it pertains to insurance?
- Process for assembly of products
- Specialty machinery or equipment used
- Specialized training or certification requirements
- Safety protocols
- Hazardous or dangerous chemicals or parts utilized
- Pollution protocols
- Product liability
What are the important considerations of “mining, quarrying, and oil and gas extraction” as it pertains to insurance?
- Processes and specialized equipment
- Geographic locations
- Safety protocols
- Environmental pollution prevention
- Skilled or certified labour requirements
What are the important considerations of “construction” as it pertains to insurance?
- Type and size of projects
- Specialized coverage for designer buildings
- Experience of builders, designers, and engineers; are they contracted or employees?
- Professional liability for errors
- Bonding
What are the important considerations of “finance and insurance” as it pertains to insurance?
- Online exposures
- Cyber/hacking exposures
- Geographic exposures (many finance and insurance companies operate in multiple countries)
What are the most common considerations for a business?
- Size
- Location
- Expertise
- Claims history
- Regulatory requirements
What are some ways you could assess the size of a commercial risk?
- Annual revenue
- Number of employees
- Place of business
- Equipment
What are some ways you could assess the location of a commercial risk?
- Geographic location
- Urban versus rural properties
- Environmental factors
What are some ways you could assess the expertise of a commercial risk?
- Business owner’s training and history
- Length of time in business
- Stability
- Credability
What are some ways you could assess the claims history of a commercial risk?
- Patterns
- Frequency of losses
- Potential for future losses
What are some ways you could assess the regulatory requirements of a commercial risk?
- Eating establishments
- Childcare/education
- Financial services
- Agricultural products
- Drugs and cosmetics
What are the four essential skills for the workplace?
- Collaboration
- Active listening
- Asking effective questions
- Delivering difficult messages
What are some standard actions that can lead to effective collaboration?
- Agree on roles and responsibilities
- Be clear about expectations
- Establish communication protocols
- Create shared objectives
- Identify obstacles and challenges
- Address issues as soon as possible
- Give credit to others
- Be open to constructive conflict
What are some standard actions that can lead to effective active listening?
- Physically demonstrate listening to the speaker
- Concentrate on the other person’s position
- Observe non verbal communication
- Allow the speaker to finish
- Respond with short phrases
- Repeat the speaker’s exact words
- Clarify the speaker’s meaning
- Summarize the conversation
- Reflect on the conversation
What are some standard actions that can lead to effective questioning?
- Ask open ended questions
- Listen actively
- Encourage questions
- Ask follow up questions
- Be tone conscious
What are some types of questions you could use?
- Open ended questions
- Hypothetical questions
- Probing questions
- Reflective questions
What are some helpful strategies for questioning techniques?
- Avoid questions that focus on why someone didn’t succeed
- Avoid leading questions
- Think about how assumptions may be embedded within a question
What are some reasons you may need to deliver a difficult message?
- An unanticipated development
- A failure to achieve a task
- A change in strategy
- An unexpected result
- A surprising disclosure
What are some general skills for delivering a difficult message?
- Be timely
- Be specific
- Be honest
- Focus on facts, not feelings
- Stay positive
What could you do before and during a difficult conversation?
BEFORE:
- Anticipate reactions
- Plan for the conversation
DURING:
- Frame the conversation
- State the decision
- Provide context and supporting facts
- Discuss what happens next
What are the two components of active listening?
Listening and engaging
Identify and explain the purpose of the two industry classification systems used by Canadian insurers.
• The purpose of classification systems is to make business analysis, marketing, business listing, data mining, and investment decisions easier.
• The North American Industry Classification System (NAICS) was created after NAFTA.
o NAICS has a six-digit coding system with 1,000 distinct codes
o 20 sectors: 5 for goods production, 15 for service industries
• Standard Industrial Classification (SIC) was created by the US government in 1937.
o SIC codes are four-digit and can be used in tandem with NAICS
• NAICS is more flexible and includes newer industries; SIC is mostly manufacturing and agriculture.
• Canadian insurers use a mix of SIC and NAICS codes.
Why should commercial insurance underwriters review a client’s claims history?
• The underwriter should be looking for certain patterns.
• Frequent claims can indicate the following:
o Carelessness by the client
o Property that is in disrepair
o Poor storage or security procedures
o Financial difficulties
• Small claims that eventually become large claims may indicate fraudulent claims.
