Chapter 2 Flashcards
(22 cards)
What is the purpose of insurance
Peace of mind
Financial stability
Prevention of losses (risk management)
What are the factors that affect the structure of the organization
How power and control are distributed
How well the systems are integrated between departments and others
How communication works
How well services are coordinated
The size of the company
What common departments are in all business structures
Human Resources (HR)
Information Technology (IT)
Administration
Sales and marketing
Fianance and accounting
What departments are unique to insurance companies
Underwriting
Claims
Actuarial
What are Human Resources core functions?
Recruiting new staff- develop, on-boarding, training, education
Overseeing payroll
Monitors regulations
Ensuring human rights laws are followed
Employee records
Developing surveys
Salary administration
Whistleblowing
Managing exits
Designing employee benefits program/administrated pension plans
Counselling employees on career development
What are IT core functions?
Technical service
Procurement
Development and maintaining systems
What are administration core functions?
Premises, furniture, equipment, supplies
Inventory control
Document storage
Printing
Maintenance
Mail and telecommunications
What are sales and marketing core functions?
Needs of the customers
Researching customers needs
Designing products and services
Directing sales efforts
What are financing and accounting core functions?
Accounting records and financing statements
Income tax returns
Payable and receivables
Managing cash flow
Reinsurance management
Managing license
Ensuring compliance
What are the two types of actuaries
Pricing actuaries are responsible for analyzing data and performing calculations to determine pricing for insurance policies
Reserving actuaries determine the amount of money to be held in bulk claims reserves
Explain corporate governance
-Signifies how a corporation directs itself and how control of this process is managed
-encompasses the process, structure and information used to manage a company and the means by which the board of directors and senior management are held accountable for their actions
-includes determining the conditions whereby the firms directors and managers are obligated to act in the interest of a firm and its shareholders
Explain diversity, equity and inclusion
Every employee or potential employee should feel welcomed and included
DEI helps a company recruit top talent and improves employee engagement and retention
Attracts consumers
Improves competitive advantages
What does a 3 or 5 year business plan include
Reasons for taking a certain direction
Analysis of target markets and opportunities
Plans to address those market and opportunities
Lines and types of business the insurer plans to pursue
Analysis of competitors, showing both threats and opportunities and outlining plans to address them
Overall strategy for achieving success
Explain span of control managerial principle
Asserts that limiting the number of employees who report to the same manager or supervisor improves organizational performance
What are the advantages and disadvantages to decentralization
Advantages
- personal contact with brokers/clients, marketing can obtain valuable feedback, regional expertise from underwriting, promote consistent brand awareness, increased levels of employee motivation
Disadvantages
-costly to provide management employees and buildings, lack of control to maintain consistency to manage how guidelines audits and rules are followed
What are the advantages and disadvantages to centralization
Advantages
-consistency in underwriting and claim procedures, better change management implementation, more cost effective, effective catastrophic claims management as enterprise-wide resources to respond to the claims
Disadvantage
-lack of personal contact with clients/brokers, limited visibility and potential lack of feedback is not received from the front line, lower levels of employee motivation
Explain the difference between stock and mutual companies
Stock
-operates for profit of the shareholders, policyholders do not directly share in the profits or losses of the company, shareholders elect the board of directors, priority is profit for shareholders, raise capital for acquisitions
Mutual
-operates for the benefit of the policyholders, policyholders are either paid divided income or receive discount on premium, policyholders elect board, priority is policyholders safety, raise capital from members
Define internal control
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
Explain how insurance audit committees are unique
-Terminology used is quite distinct from that used in other industries
-operate in a highly regulated environment where meetings with regulators tend to be commonplace
-tend to rely heavily on actuaries to prepare estimates of future claim payments and produce premium rates
-understand policies are sold and revenues collected well before costs are incurred so the product is priced before the cost of claims is known
-consider that claims reserving practises have a significant effect on financial statements
-consider reserves adequacy concurrently with the risk of catastrophic loss
-consider liabilities and investments for the long term
What duties is the conduct review committee typically involved in
-Encouraging management to establish procedures to enable compliance with legislation on issues such as self dealing
-Reviewing procedures and evaluating their effectiveness
-Reviewing the boards policies and procedures to address actual or perceived conflict of interest situations
-Reviewing practices of the company to identify any transactions between the company itself and its related parties that may have a material effect on the organizations stability and solvency
-reviewing related party transactions for business relevancy and appropriateness
-reviewing the organizations business conduct policies and business policy initiativesto ensure that they are ethical
Explain multi-layered goal setting
SMART- specific, measurable, attainable, relevant, and timebound
Senior management sets goals that filter down to various departments, to the units within departments, and to each individual employees
Define fiduciary
Is a person who is entrusted with managing something for the good of another
