Chapter 2 Flashcards by Charlotte Cummins

How is the chair of the Board of Directors typically appointed in a public company?

A. Elected by non-executive directors
B. Appointed by shareholders directly
C. Selected by the CEO
D. Elected by board members from among themselves

Answer: D

Explanation: The shareholders appoint the Board, and the Board elects a chair from among its members.

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Which of the following is not a main duty of the chair of the Board?

A. Running board meetings efficiently
B. Representing the company externally
C. Appointing executive directors
D. Ensuring good governance practice

Answer: C

Explanation: The chair leads the board and represents the company externally, but appointing executives is the CEO’s responsibility.

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What is the main function of executive directors?

A. Attend board meetings only
B. Provide independent oversight
C. Work full time and manage operations
D. Set shareholder policies

Answer: C
Explanation: Executive directors are full-time employees with direct management responsibility.

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Which of the following is not a main duty of the chair of the Board?

A. Running board meetings efficiently
B. Representing the company externally
C. Appointing executive directors
D. Ensuring good governance practice

Answer: C

Explanation: The chair leads the board and represents the company externally, but appointing executives is the CEO’s responsibility.

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Who typically appoints the CEO in an insurance company?

A. Shareholders
B. Non-executive directors
C. Chair of the Board
D. The Board of Directors

Answer: D

Explanation: The Board usually appoints one executive director (often called the CEO or managing director) to lead the company day to day.

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What is the primary purpose of non-executive directors?

A. Run daily operations
B. Approve insurance products
C. Provide independent views and governance oversight
D. Set staff training schedules

Answer: C

Explanation: Non-executive directors do not manage the business but provide independent scrutiny in areas like risk and remuneration.

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Which of the following is not a key responsibility of the Board of Directors?

A. Managing customer complaints
B. Approving strategy and budgets
C. Overseeing risk management
D. Selecting and evaluating the CEO

Answer: A

Explanation: The Board focuses on high-level governance, not day-to-day complaint handling.

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What is the Board responsible for ensuring in terms of corporate conduct?

A. Maximum executive pay
B. Shareholder tax returns
C. Ethical standards and legal compliance
D. Rapid market expansion

Answer: C

Explanation: A key Board responsibility is to uphold integrity through accurate reporting and ethical/legal compliance.

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What does ‘corporate governance’ refer to?

A. Government regulation of stock prices
B. Internal and external marketing strategy
C. Control of companies through the Board and management
D. Management of personal financial portfolios

Answer: C

Explanation: Corporate governance is how companies are controlled internally by their board and senior management.

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What is a requirement under the UK Corporate Governance Code for listed companies?

A. Follow the Code exactly, without exception
B. File a weekly compliance report
C. Either comply with the Code or explain any non-compliance
D. Appoint only non-executive directors to the board

Answer: C

Explanation: Listed companies must comply with the Code or clearly explain any areas where they don’t — the “comply or explain” principle.

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In bodies like the ABI or CII, what typically replaces the role of the board?

A. Shareholder committees
B. Elected government inspectors
C. Councils, committees and chairs
D. Senior marketing executives

Answer: C

Explanation: Organisations like the ABI or CII use councils and committees to carry out oversight functions similar to non-executive directors.

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What is a key strategic responsibility of the senior executive team?

A. Approving final strategy for the company
B. Developing the Solvency II framework
C. Proposing strategy developments for Board discussion
D. Setting executive salaries

Answer: C

Explanation: Senior executives have a “cabinet responsibility” to propose strategy developments, but the Board makes final decisions.

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Who is typically responsible for delegating authority from the CEO downward?

A. The chair of the board
B. The company’s shareholders
C. The finance director
D. The CEO

Answer: D

Explanation: The Board delegates authority to the CEO, who then delegates to associate directors and senior managers.

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Which of the following best describes the CEO’s role?

A. Solely attending Board meetings without operational responsibility
B. Leading day-to-day operations and linking Board with management
C. Auditing the financial reports and regulatory filings
D. Managing capital markets and investor relations

Answer: B

Explanation: The CEO connects the Board to management and oversees daily business operations and strategic implementation.

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What aspect of company leadership does the CEO typically influence?

A. Interest rate policy
B. Corporate taxation strategy
C. Organisation’s culture and management style
D. Recruitment of auditors

Answer: C

Explanation: The CEO plays a key role in shaping the organisation’s culture and style of management.

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Which area is the finance director primarily responsible for in relation to regulation?

A. Determining underwriting limits
B. Managing operational staff
C. Assessing regulatory capital requirements under Solvency II
D. Setting sales targets

Answer: C

Explanation: The finance director is key in managing and evaluating the business’s capital requirements, especially under Solvency II.

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What is one of the finance director’s key regulatory responsibilities?

A. Creating internal HR procedures
B. Preparing financial reports for the FCA only
C. Preparing financial information for the PRA
D. Drafting Board meeting minutes

Answer: C

Explanation: The finance director provides the PRA with required financial information and is one of their key contacts.

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Who does the finance director engage with regarding performance and company debt?

A. Corporate customers
B. Trade unions
C. Investment analysts and debt holders
D. Local council auditors

Answer: C

Explanation: The FD presents to and manages relations with analysts and debt investors.

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What is one way the finance director supports the Board?

A. Deciding the final dividend amount
B. Recommending dividend levels based on financial analysis
C. Voting on Board remuneration
D. Approving internal audit policies

Answer: B

Explanation: The finance director prepares materials and recommends suitable dividend levels to the Board for decision.

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What aspect of company leadership does the CEO typically influence?

A. Interest rate policy
B. Corporate taxation strategy
C. Organisation’s culture and management style
D. Recruitment of auditors

Answer: C

Explanation: The CEO plays a key role in shaping the organisation’s culture and style of management.

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Which of the following is under the finance director’s remit?

A. Negotiating reinsurance contracts
B. Reinsurance accounting process management
C. Underwriting new reinsurance schemes
D. Managing claims adjusters

Answer: B

Explanation: While underwriting may be separate, the FD manages the financial side of reinsurance including accounting.

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What financial planning functions is the finance director responsible for?

A. Staff training budgets only
B. Marketing budget approvals
C. The full financial planning, forecasting, and budgeting processes
D. Only the annual audit schedule

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Answer: C

Explanation: The finance director oversees the planning, budgeting, and forecast processes as a key executive responsibility.

What is the legal requirement regarding the appointment of a company secretary?

A. Only private companies must appoint one
B. All UK companies must appoint one
C. Public companies must appoint a company secretary
D. Listed companies must appoint one only if the board agrees

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Answer: C

Explanation: Public companies are legally required to have a company secretary. Private companies can opt out unless required by their articles of association.

Which of the following is a primary duty of a company secretary?

A. Preparing underwriting files
B. Filing annual returns at Companies House
C. Managing reinsurance accounts
D. Drafting claim settlement reports

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Answer: B

Explanation: One of the key administrative roles of the company secretary is to file statutory returns, including annual returns, with Companies House.

What role does the company secretary play regarding structural changes? A. Negotiates mergers and acquisitions B. Notifies Companies House of changes in structure or management C. Approves the new director appointments D. Changes the company’s capital structure

Answer: B Explanation: The company secretary must inform Companies House of significant changes to the company’s structure or management.

How does the company secretary support the board? A. By reviewing investment performance B. By setting the company’s audit schedule C. By advising directors on compliance with legal duties and company articles D. By preparing financial strategy documents

Answer: C Explanation: Company secretaries advise directors on their legal duties and ensure compliance with corporate legislation and internal governance rules.

What document is the company secretary responsible for securing? A. The board meeting minutes B. The company’s certificate of incorporation C. Individual performance reviews D. Employee grievance reports

Answer: B Explanation: One duty of the company secretary is to ensure the safekeeping of key legal documents such as the certificate of incorporation.

For which type of insurer is the chief actuary a statutory appointment in the UK? A. Non-life insurers B. Life insurers C. Reinsurers D. Brokers

Answer: B Explanation: The chief actuary is a statutory appointment for life insurers in the UK, often called the appointed actuary.

Which of the following is a key responsibility of the chief actuary? A. Marketing new insurance products B. Technical pricing of new and existing products C. Managing claims payments D. Setting investment portfolio strategy

Answer: B Explanation: The chief actuary is responsible for the technical pricing of insurance products, ensuring they are appropriately priced based on risk.

What financial calculation is the chief actuary responsible for? A. Calculating claims reserves B. Calculating underwriting commissions C. Preparing statutory accounts D. Managing payroll expenses

Answer: A Explanation: The chief actuary calculates claims reserves to ensure sufficient funds are set aside for future claim payments.

Which of the following capital-related tasks might the chief actuary perform? A. Allocating dividends to shareholders B. Calculation of risk-based capital requirements C. Setting executive remuneration D. Approving loan applications

Answer: B Explanation: The chief actuary calculates risk-based capital requirements to ensure the company holds adequate capital relative to its risks.

The chief actuary assesses investment risk for which purpose? A. To maximise short-term profits B. For funds supporting technical reserves C. For employee pension funds only D. To advise the marketing team

Answer: B Explanation: The chief actuary assesses investment risk for funds supporting technical reserves, ensuring assets back the liabilities correctly.

Which of the following best defines management? A. The process of hiring employees and negotiating contracts B. The process of planning, organising, leading, and controlling resources C. The process of marketing and selling insurance products D. The process of auditing and compliance reviews

Answer: B Explanation: Management involves planning, organising, leading, and controlling material, financial, and human resources to achieve organisational goals.

What is typically the result of the management planning process? A. A list of employee grievances B. An agreed general plan covering resources, responsibilities, timetables, and budgets C. A detailed marketing strategy only D. A regulatory compliance report

Answer: B Explanation: Planning results in an agreed plan that outlines how resources will be used, who is responsible for what, and sets timetables and budgets.

What is the role of organising in management? A. Scheduling meetings with shareholders B. Coordinating material and human resources to achieve business aims within a timeframe C. Creating advertising campaigns D. Conducting employee performance appraisals

Answer: B Explanation: Organising ensures resources are efficiently allocated and coordinated to meet business goals within set time frames.

Which is a key characteristic that differentiates managers from other employees? A. They work longer hours B. They lead their team and are accountable for performance C. They handle all customer complaints directly D. They set the company’s financial strategy alone

Answer: B Explanation: Managers are expected to lead their teams and are accountable for the performance and results of their departments or organisation.

What is the purpose of the controlling function in management? A. To ensure plans are monitored and progress evaluated B. To recruit new staff C. To design new insurance products D. To manage payroll and benefits

Answer: A Explanation: Controlling involves monitoring and evaluating progress to ensure that management plans are being properly implemented.

Which of the following best describes physical resources in an insurance company? A. Cash, bank loans, and share capital B. Office space, IT systems, telecoms, websites, and vehicles C. Employees working full-time and part-time D. Customer relationships and brand reputation

Answer: B Explanation: Physical resources refer to tangible assets such as office space, IT infrastructure, telecoms, websites, and vehicles that the business uses to meet its objectives

What are financial resources in an insurance business? A. Human capital and skills B. Cash, bank loans, share capital, and financial instruments C. Buildings, office equipment, and motor vehicles D. Legal contracts and policies

Answer: B Explanation: Financial resources are the funds available for day-to-day operations, including cash, loans, equity, and other financial instruments.

Human resources in an insurance company include: A. Outsourced workers, full-time, part-time, temporary and permanent employees B. Financial funds and capital investments C. Computer hardware and software D. Marketing strategies and customer databases

Answer: A Explanation: Human resources encompass all people working for the company in various employment arrangements, including outsourced roles.

Why has the ability to manage people become an increasingly important management skill? A. Because physical resources are becoming obsolete B. Due to democratic societies granting employees freedoms and protections at work C. Because financial resources are easy to obtain D. Because technology replaces the need for human input

Answer: B Explanation: Managing people well is crucial as employees in democratic societies have certain rights and freedoms that protect them from exploitation, making people management more complex and important.

Why is earning the respect of team members important for modern managers? A. Because respect allows managers to delegate all tasks B. Because employees expect to be treated fairly and as equals C. Because respect automatically increases the company’s profits D. Because respect allows managers to avoid customer feedback

Answer: B Explanation: Modern workforces expect fair treatment and equality, so managers need interpersonal skills and empathy to earn respect.

How must managers adapt their policies in today’s business environment? A. By focusing exclusively on internal company operations B. By ignoring customer feedback to avoid complaints C. By ensuring policies are customer-facing and responsive to feedback D. By limiting communication with clients to save resources

Answer: C Explanation: Managers must ensure that policies consider customer impact and actively respond to feedback to maintain customer satisfaction.

What skill is especially important for managers today due to advances in technology? A. Specializing only in one functional area B. Multitasking across IT, finance, HR, sales, and their own area C. Ignoring cross-functional knowledge to focus on management theory D. Avoiding the use of data storage and communications systems

Answer: B Explanation: Managers benefit from multitasking across different business functions using advanced technology and communication tools.

Why is having a global outlook important for managers? A. Because most companies only trade locally B. Because managers are expected to travel and operate in diverse economic and cultural environments C. Because globalization decreases the need to understand new markets D. Because managers should focus only on deregulated markets

Answer: B Explanation: Many organizations trade internationally, so managers must understand diverse environments and identify new market opportunities.

Which of the following is not considered an essential characteristic of effective internal communication? A. Accurate B. Clear C. Expensive D. Timely

Answer: C Explanation: Effective communication should be cost-effective, not expensive. Accuracy, clarity, and timeliness are essential characteristics.

Which barrier to communication refers to people withholding information because it gives them power? A. The language problem B. Knowledge is power C. Natural reserve/fear D. Failure to recognise the need to tell

Answer: B Explanation: "Knowledge is power" means some withhold information to preserve status or power, blocking effective communication.

What is not a benefit of efficient internal communication? A. Achieving low employee turnover B. Encouraging staff innovation C. Increasing grapevine rumors D. Facilitating better decision-making

Answer: C Explanation: Grapevine rumors are a communication problem, not a benefit. Efficient communication reduces rumors and misinformation.

What is not typically a primary responsibility of a team leader? A. Providing direction and guidance B. Organising tasks and setting goals C. Developing company-wide investment strategy D. Solving problems and resolving conflicts

Answer: C Explanation: Developing company-wide investment strategies is beyond a team leader’s scope, which focuses on managing and motivating their team.

When resolving conflict within a team, an effective team leader should: A. Ignore the conflict and hope it resolves itself B. Consider all viewpoints before making a decision C. Take sides immediately with the strongest personality D. Remove the conflicting members from the team

Answer: B Explanation: An effective team leader listens carefully and weighs all viewpoints to resolve conflicts fairly.

What does an organisation’s corporate culture primarily reflect? A) The way things are done in the organisation (“the way we do things around here”) B) The amount of physical assets owned by the organisation C) The organisation’s annual profits D) The geographical location of the organisation

Answer: A

Which management style involves decisions being made with input from as many staff members as possible? A) Democratic/consultative B) Autocratic C) Militaristic/hierarchical D) Paternalistic

Answer: A

Which style is described as structured with clear job demarcation and often used in crisis situations to get the job done quickly? A) Militaristic/hierarchical B) Open door C) Chaotic/laissez-faire D) Democratic/consultative

When might a chaotic/laissez-faire management style be most effective? A) When employees are encouraged to flourish with their own ideas and creativity B) When fast decisions are needed in a crisis C) When the organisation requires strict control and hierarchy D) When all decisions must be made solely by the chief executive

Chapter 2 Flashcards

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