Study 2 - Commercial Insurance Stakeholders

Question 1

What are the two most common classification systems used by Canadian insurers?

Answer 1

NAICS
North American Industry Classification System

SIC
Standard Industrial Classification

Question 2

What are some things that affect the exposure of a business?

Answer 2

Size, location, expertise, claims history and regulatory requirements

Question 3

What roles are essential in commercial insurance?

Answer 3

• Brokers/agents
• Underwriters
• Commercial claims professionals
• Risk analysts
• Managing general agents (MGAs)

Question 4

Define captive agent

Answer 4

Place all their business with one insurer

Question 5

Define agent

Answer 5

Represent one insurer and operate according to agreements with that insurer; can be independent or exclusive

Question 6

Briefly outline the various levels of licenses and what business can be managed

Answer 6

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

Question 7

How do personal and commercial insurance risks vary?

Answer 7

Commercial is more varied and complex; many different industries typically

Question 8

Define rate manual

Answer 8

Manual containing rates and underwriting rules for use by staff, agents, and/or brokers

Question 9

What 4 areas must commercial brokers be proficient in?

Answer 9

Communication
Research
Negotiation
Time Management

Question 10

Explain how a commercial broker must use communication

Answer 10

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

Question 11

Explain how a commercial broker must use research

Answer 11

Ability to find coverage best suited to needs and budget

Ability to provide innovative and cost effective solutions

Question 12

Explain how a commercial broker must use negotiation

Answer 12

Ability to arrive at a satisfactory arrangement for both insurer and insured

Question 13

Explain how a commercial broker must use time management

Answer 13

Ability to remain organized, prioritize tasks, and ensure accurate documentation is maintained
Ability to demonstrate reliability by being on time

Question 14

Define line guide

Answer 14

A listing of the maximum amounts of exposure an insurance company is prepared to accept on various classes of risk

Question 15

What three conditions would cause an underwriter to decline a risk?

Answer 15

• It is not permitted by the line guide
• Market conditions make the risk unacceptable
• It is too flawed to be accepted

Question 16

What are four tools available to make a risk more desireable?

Answer 16

• Higher deductibles
• Higher premium rates
• Modifications of coverage
• Implementation of recommendations by the loss control department

Question 17

What are some unique characteristics of commercial underwriters?

Answer 17

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

Question 18

Define loading

Answer 18

An additional charge included in an insurance rate to reflect a hazard not contemplated

Question 19

What do claims professionals do?

Answer 19

• Investigate claims
• Make recommendations
• Negotiate payments and settlements

Question 20

What are the typical responsibilities of a claims professional?

Answer 20

• 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

Question 21

Define managing general agent (MGA)

Answer 21

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”

Question 22

What are the typical duties of a risk analyst?

Answer 22

• Identifying loss exposures
• Preventing loss
• Reducing loss
• Loss financing
• Educating other corporate managers
• Acting as a resource to other managers

Question 23

What activities do classification systems make easier?

Answer 23

• Business analysis
• Marketing
• Business listing
• Data mining
• Investment decisions

Question 24

What three countries did the NAICS collect data from?

Answer 24

Canada, United States, Mexico

Question 25

Explain the breakdown of a NAICS code

Answer 25

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

Question 26

What is the difference between SIC codes and NAICS codes?

Answer 26

SIC 4 digits mainly older industries (manufacturing & agriculture) NAICS 6 digits more comprehensive and newer industries (tech)

Question 27

What are the top 10 Canadian industries as a percentage?

Answer 27

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%)

Question 28

What are the important considerations of "real estate, renting and leasing" as it pertains to insurance?

Answer 28

- 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

Question 29

What are the important considerations of "manufacturing" as it pertains to insurance?

Answer 29

- 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

Question 30

What are the important considerations of "mining, quarrying, and oil and gas extraction" as it pertains to insurance?

Answer 30

- Processes and specialized equipment - Geographic locations - Safety protocols - Environmental pollution prevention - Skilled or certified labour requirements

Question 31

What are the important considerations of "construction" as it pertains to insurance?

Answer 31

- 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

Question 32

What are the important considerations of "finance and insurance" as it pertains to insurance?

Answer 32

- Online exposures - Cyber/hacking exposures - Geographic exposures (many finance and insurance companies operate in multiple countries)

Question 33

What are the most common considerations for a business?

Answer 33

- Size - Location - Expertise - Claims history - Regulatory requirements

Question 34

What are some ways you could assess the size of a commercial risk?

Answer 34

- Annual revenue - Number of employees - Place of business - Equipment

Question 35

What are some ways you could assess the location of a commercial risk?

Answer 35

- Geographic location - Urban versus rural properties - Environmental factors

Question 36

What are some ways you could assess the expertise of a commercial risk?

Answer 36

- Business owner's training and history - Length of time in business - Stability - Credability

Question 37

What are some ways you could assess the claims history of a commercial risk?

Answer 37

- Patterns - Frequency of losses - Potential for future losses

Question 38

What are some ways you could assess the regulatory requirements of a commercial risk?

Answer 38

- Eating establishments - Childcare/education - Financial services - Agricultural products - Drugs and cosmetics

Question 39

What are the four essential skills for the workplace?

Answer 39

- Collaboration - Active listening - Asking effective questions - Delivering difficult messages

Question 40

What are some standard actions that can lead to effective collaboration?

Answer 40

- 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

Question 41

What are some standard actions that can lead to effective active listening?

Answer 41

- 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

Question 42

What are some standard actions that can lead to effective questioning?

Answer 42

- Ask open ended questions - Listen actively - Encourage questions - Ask follow up questions - Be tone conscious

Question 43

What are some types of questions you could use?

Answer 43

- Open ended questions - Hypothetical questions - Probing questions - Reflective questions

Question 44

What are some helpful strategies for questioning techniques?

Answer 44

- Avoid questions that focus on why someone didn't succeed - Avoid leading questions - Think about how assumptions may be embedded within a question

Question 45

What are some reasons you may need to deliver a difficult message?

Answer 45

- An unanticipated development - A failure to achieve a task - A change in strategy - An unexpected result - A surprising disclosure

Question 46

What are some general skills for delivering a difficult message?

Answer 46

- Be timely - Be specific - Be honest - Focus on facts, not feelings - Stay positive

Question 47

What could you do before and during a difficult conversation?

Answer 47

BEFORE: - Anticipate reactions - Plan for the conversation DURING: - Frame the conversation - State the decision - Provide context and supporting facts - Discuss what happens next

Question 48

What are the two components of active listening?

Answer 48

Listening and engaging

Question 49

Identify and explain the purpose of the two industry classification systems used by Canadian insurers.

Answer 49

• 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.

Question 50

Why should commercial insurance underwriters review a client’s claims history?

Answer 50

• 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.