Study 2 - Insurance Company Structure

Question 1

Name five (5) operational structures of ANY company?

Answer 1

1. ) Administration
2. ) Marketing
3. ) Finance and Accounting
4. ) HR
5. ) IT

Question 2

Name three (3) responsibilities of the HR departments

Answer 2

1. ) Keeping employee records
2. ) Career development for employees
3. ) Oversee payroll
4. ) Hiring and recruiting
5. ) Ensure compliance with human rights legislation
6. ) Help to develop training, education and productivity improvement programs
7. ) Work with managers during performance reviews

Question 3

What are three (3) responsibilities of IT?

Answer 3

1. ) Maintain computer systems
2. ) Procure software and hardware
3. ) Prevent cyber attacks

Question 4

What are three (3) responsibilities of Accounting and Finance?

Answer 4

1. ) Maintain accounting records
2. ) Produce financial statements
3. ) Prepare income tax returns
4. ) Prepare reports for regulators
5. ) Ensure compliance with OSFI
6. ) Licensing for the company provincially and federally
7. ) Reinsurance management
8. ) Work with actuarial to share results

Question 5

What three (3) departments are unique to insurance companies?

Answer 5

1. ) Claims
2. ) Actuarial
3. ) Underwriting

Question 6

What are the two main types of actuaries used within insurance company operations?

Answer 6

Pricing Actuaries (how much money to charge) and Reserving Actuaries (how much money to hold in bulk claims reserves)

Question 7

What are four (4) strategies that a company can structure their underwriting departments?

Answer 7

1. ) Head office underwriters
2. ) Underwriting at the branch or Region
3. ) Organized by Line of Business (LOB)
4. ) Underwriting Specialty Lines

Question 8

What are several strategies companies use to organize their Claims Department

Answer 8

1. ) Organized by department (home/auto)
2. ) Organized by type of cover (AB, BI, Property, auto, business, business auto)
3. ) Special Investigation Unit
4. ) Staff adjusters
5. ) Independent Adjusters

Question 9

What is corporate governance?

Answer 9

How a company directs itself and how control of this process is managed.

Encompasses the process, structure, and information used to manage a company and means by which the board of directors and sr. management are held accountable.

Question 10

What is Management Structure?

Answer 10

Structure determines the rights and responsibilities amoung four (4) groups of participants -

1. ) The board of directors
2. ) managers
3. ) workers
4. ) shareholders

Encompasses the Business plan of the company
Encompasses the degree of hierarchy
Encompasses how the organization manages workflow

Question 11

What are the benefits of a DECENTRALIZED organization?

Answer 11

• personal contact with brokers / clients
• marketing can obtain feedback from frontline staff
• regional expertise from an underwriting perspective
• claims can be managed effectively if there is a large catastrophic loss (think Fort Mac and Co-operators response)
• Branding Opportunity

Question 12

What are the disadvantages to a Decentralized organization?

Answer 12

• Costly to provide buildings

- lack of control to maintain consistency to manage how guidelines audits and rules are followed

Question 13

What are the advantages to a CENTRALIZED organization?

Answer 13

• consistency in underwriting and claims
• IT changes are managed smoothy and there are fewer problems
• More cost effective

Question 14

What are the disadvantages of a CENTRALIZED organization?

Answer 14

• lack of personal contact between clients and brokers

- feedback not received from the frontline

Question 15

What are the responsibilities of the Board of Directors?

Answer 15

• Oversees the company’s internal controls to ensure objectives are met
• Ensure compliance with guiding legislation and corporate bylaws
• Resolve conflicts of interest

Question 16

What two (2) COMMITTEES does the Insurance Companies Act stipulate that federally regulated insurance companies have?

Answer 16

1. ) Audit Committee - to improve the company’s financial reporting process
2. ) Conduct Review Committee - concerned with conflict of Interest issues

Question 17

What are three (3) roles of the AUDIT COMMITTEE?

Answer 17

1. ) Improve financial reporting process
2. ) Report weaknesses in the control framework that could lead to theft
3. ) Review financial statements before they go to the board for approval
4. ) Review performance of investment portfolios to ensure they are adequately managed to earn profit

Question 18

What are three (3) roles of the CONDUCT REVIEW COMMITTEE?

Answer 18

1. ) Encourage Management to establish procedures to enable compliance with legislation
2. ) Reviews procedures and evaluates their effectiveness
3. ) Review board policies to address actual or perceived conflict of interest issues
4. ) Reviews related-party transactions for business relevance and appropriateness

Question 19

Name two (2) OTHER COMMITTEES that may be formed by company boards

Answer 19

1. ) Executive committee
2. ) management committee
3. ) Investment committee
4. ) compensation and pension committee
5. ) Mergers and Acquisition (M&A) committees

Question 20

Explain Goal-Setting Hierarchy

Answer 20

1. ) The Board sets the company goal
2. ) Each department has a goal to help the company meet its goal
3. ) Each unit within each department has its own goal
4. ) Each individual within each department has their own goal.