Week 3

Question 1

Define what an insurance stakeholder is?

Answer 1

Someone who can contribute financially or create money for the company and whom bare the risk.

Question 2

Name 3 ways in which insurance across different countries are different, what factors might drive this?

Answer 2

The political system, regulatory laws and the demographic.

Question 3

Explain how risk is shared in insurance between primary insurers, what are the two most common methods?

Answer 3

Coininsurance where the insurance is split (maybe 30, 30, 30), meaning if there was a claim multiple insurance groups would contribute.

Insurance pools are when insurance groups pool together to insure risks which have a larger impact such as an earthquake spreading the cost.

Question 4

Who supports primary insurers?

Answer 4

Reinsurers support primary insurers rather than directly to the consumer. Composite insurers do both.

Question 5

When a group of shareholders make a pot of money in a separate for insurance rather than paying an external insurer what is this called?

Answer 5

Proprietary insurance.

Question 6

What might be an advantage of having a proprietary insurance?

Answer 6

If you do not claim, the profits are kept rather than paid out to insurers. You use what you need.

Question 7

What is mutual insurance?

Answer 7

When you buy a policy/ pay for the insurance you own a share. If Connor bought insurance he would also own a share.

Question 8

How might mutual insurance beat proprietary insurance?

Answer 8

Spreading risk as more people can buy into mutual insurance therefore raising the capital to which can be paid out during a claim and spreads the risk to multiple people rather than the lone shareholders of a proprietary.

Question 9

Who is the voice for insurance

Answer 9

The ABI (association of British insurers)

Question 10

What does the ABI do?

Answer 10

They inform the public of insurance debates, changes in regulations or insurance with politicians, they promote insurance and its benefits and promote the growth of insurance and information about insurance and its importance for an economy.

Question 11

What is the difference between a reinsurer and a composite reinsurer?

Answer 11

Reinsurer insures towards insurance, composite reinsurer does the same but offers a broader range of policies like health or damages etc…

Question 12

Whats a soft vs hard market

Question 13

Can a proprietary company be classified as life or general, composites or specialists

Answer 13

All of the above.

Question 14

How might you identify a mutual insurance company?

Answer 14

No capital stock, insurance is usually cheaper and profits are returned to shareholders.

Question 15

What are three reasons/ what do insurance agents do for insurance companies?

Answer 15

Sell their insurance products, sell insurance as part of a bundle, may be able to underwrite for the insurance and provide a platform for insurance to gain expert sales knowledge

Question 16

What are two risk sharing methods (not reinsurance)

Answer 16

Coinsurance (splitting premiums and risk 30% 30% 30%)

insurance pools

Question 17

Why are insurance markets important for an economy? (3)

Answer 17

Insurance build financial stability

Insurance increase and stabilise trade and commerce

It allows for more effective risk management

Question 18

What could you talk about in primary insurance? (3)

Answer 18

You could talk about that primary insurance usually take the risk themselves unless specalittty in which case they may use coinsurance (proportional sharing the loss) or insurance pool (insurance groups pull the money together and share resources such as in aviation or atomic energy)

Question 19

What might you mention about reinsurers? (4)

Answer 19

They take and spread risk from primary insurers, they are an insurance for primary insurers and do not directly insure primary consumers (composite insurer do both).

They can offer:
expertise
risk spreading
larger money capacity

Question 20

What could you talk about in proprietary insurance? (7)

Answer 20

They are made by a companies shareholders to have a self insurance, an own company insurance which is not shared.

They are characterised by being only for the main company they serve, the claims and premiums tend to be lower and allows self insurance picking there own risks.

Propritary can be known as life/ general, composite or specialist.

Question 21

How can a proprietary insurance be known as life/ general, composite and specialist?

Answer 21

Life and general because a company may use own health insurance to pay out lump sum for example if someone die, composite as in they can combine both general and health and specialist because they can pick there own risks.

Question 22

What might you talk about in mutual insurance?

Answer 22

Mutual insurance is when someone buys policy, they receive shares as well, this allows risk to be spread and enters them into the insurance pool with others.

It is characterised by: low capital stock, no earnings to shareholders and then insurance can cost a lot less/ reduced insurance cost.

Question 23

What are the 5 main types of insurance you could talk about?

Answer 23

Primary insurance, proprietary insurance, composite insurance, reinsurers and mutual insurers.

Question 24

What might you talk about in insurance intermediaries?

Answer 24

Insurance agents sell insurance products to consumers.

They have a great expertise on insurance, they earn commission from insurance, they have great sales and they have underwriting ability.