Study 2: Insurance Company Structure Flashcards
What is the term for the managerial principle which asserts that limiting the number of employees who report to the same manager or supervisor improves organizational performance?
A) Span of control
B) Law of large numbers
C) Internal control
D) Fiducuiary
A) Span of control
Span of control is a managerial principle that asserts that limiting the number of employees who report to the same manager or supervisor improves organizational performance.
Which department in a company is responsible for ensuring that PIPEDA is followed?
A) Marketing
B) Human resources
C) Accounting and finance
D) Information technology
C) Accounting and finance
One of the many functions of the finance and accounting departments is to ensure that PIPEDA is followed.
Which kind of actuary is responsible for analyzing data and performing calculations to determine pricing?
A) Reserving actuary
B) Statistical actuary
C) Pricing actuary
D) Economic actuary
C) Pricing actuary
Pricing actuaries are responsible for analyzing data and performing calculations to determine pricing for insurance policies.
Which of the following is a purpose of insurance?
A) Peace of mind
B) Financial insecurity
C) Selling policies
D) Determining the actual value of an item
A) Peace of mind.
The threefold purpose of insurance is peace of mind, financial security, and risk management.
What term is used to define the amount of stock sold by a corporation?
A) Subscribed capital
B) Paid-up capital
C) Shares for sale
D) Investment income
A) Subscribed capital
Subscribed capital is the amount of stock sold by a corporation.
What is the term that is defined as that part of subscribed capital that has been paid in full by shareholders?
A) Subscribed capital
B) Paid-up capital
C) Shares for sale
D) Investment income
B) Paid-up capital
Paid-up capital represents that part of subscribed capital that has been paid in full by shareholders.
What is the name given to a form of cooperative enterprise owned by its policyholders?
A) Stock company
B) Cooperative company
C) Mutual company
D) Non-profit company
C) Mutual company
A mutual insurer is a form of cooperative enterprise owners by its policy holders (also known as members). The association is formed for the purpose of insuring one another against the possibility of certain types of loss. It operates on a premium assessment plan or premium note plan.
Which of the following statements is a disadvantage to decentralization?
A) Personal contact with brokers/ clients in location
B) Marketing can obtain excellent feedback from each branch
C) Lack of personal contact with clients/brokers in geographical location
D) Very costly to provide buildings, whether leased or owned, for the branches
D) Very costly to provide buildings, whether leased or owned, for the branches.
The disadvantages to decentralization include the high cost of providing buildings, whether leased or owned, for branches and the difficulty in maintaining consistency when managing how guidelines, audits, and rules are followed.
What does self-dealing refer to?
A) The conduct of people in power who take advantage of their position to use their influence for personal gain
B) Taking your own direction in all decisions
C) Consulting with your peers when deciding on where to take the company
D) Deciding what happens in all aspects of the business without consultation with others
A) The conduct of people in power who take advantage of their position to use their influence for personal gain.
Self dealing refers to the conduct of board members or other persons of power who take advantage of their position to use their influence or knowledge illegally to gain a personal advantage.
What is the definition of internal control?
A) Being in control of your personal feelings
B) Initiating a system of checks and balances to improve workflow
C) Including over-site and review in every process before giving the ok to a project
D) Initiating a process to assure stakeholders that corporate objectives are being met.
D) Initiating a process to assure stakeholders that corporate objectives are being met.
It is a process put into effect by a company’s board of directors, management, and other personnel that is designed to reasonably assure stakeholders that corporate objectives are being met.
Narrative: The Chairperson and the board prepare rules and guidelines for the operation of the company. Identify five areas likely to be involved. (5 marks)
1) Finance, investments, and audits
2) Operations
3) Underwriting
4) Claims
5) Human Resources
Narrative: Define corporate governance (5 marks)
Corporate governance:
1) How a corporation directs itself and how control of this process is managed
2) Encompasses the process, structure, and information used to manage a company
2. 1) and the means by which the board of directors and senior management are held accountable for their actions
3) Includes determining the conditions whereby a firm’s directors and managers are obligated to act in the interests of a firm and its shareholders
4) Determines the means by which managers are accountable to capital providers for the use of assets
Narrative: Outline 5 advantages of an insurance company that is centralized. (5 marks)
Advantages to centralization:
1) There is consistency in underwriting and claims procedures
1. 1) -All are controlled from head office and audited on a regular basis
2) Because of consistency when changes are done in IT, they are integrated smoothly and there are few problems.
3) It is more cost effective
3. 1) Cost savings arise because of lower overhead (fewer buildings, property management of branches)
3. 2) and savings in salaries because there are fewer managers
4) control of underwriting and claims is improved immensely
