chapter 2

Question 1

define a corporate governance

Answer 1

refers to a system of policies and processes for directing and controlling a corporations’ actives that emphasizes accountability and integrity in how the company fulfills its mission on behalf of all its stakeholders.

Question 2

name the corporate governance for UK, India and japan

Answer 2

UK= combined code on corporate governance
Indio= companies bill (2009 amendment) 
japan= financial instruments and exxhange law

Question 3

a good corporate governance requires what?

Answer 3

1. stretegic plans that focus on balancing the needs of all stakeholders
2. structure and process that is efficient and work together effectively
3. appropriate company resources
4. ethical organizational culture and leadership that balances risk and reward
5. control system at all levels of the company , transparency and accountability

Question 4

how do managers execute the management function known as directing, and name the 5 directing acitvities

Answer 4

they must ensure employees perform appropriate activites in the appropriate way by

1. leading
2. motivating
3. supervising
4. communicating
5. facilitating

Question 5

what activities impact how well managers are able to direct employees?

Answer 5

1. recruiting and hiring qualified individuals
2. providing opportunities for training and education
3. having a system for monitoring, evaluating and regulating employees
4. rewarding employees equitability
5. creating and maintaining an ethical work environment.

Question 6

define ethics

Answer 6

a system of accepted standards of conduct and moral judgment that combines the elements of honestly, integrity, and fair treatment.

Question 7

name 4 actions a company can take/establish to promote ethical behavior.

Answer 7

1. establish a code of conduct for employees and producers
2. establish an ethics office and an ombudsperson
3. promoting employee education and training
4. encouraging employee membership in industry associations.

Question 8

define a code of conduct

Answer 8

a formal statement of a company’s values and its expectations for how its employees should behave in the course of business.

Question 9

to be the most effective, a code of conduct should refer to what?

Answer 9

specific practices that may be encountered in the course of the company’s work, followed by explanations of what the company believes would be the proper response.

Question 10

what is an ethics office

Answer 10

a department in which employees can receive advise or counsel from qualified perfessional about how to handle ethical issues and also report ethical misconduct.

Question 11

define an ombudsperson

Answer 11

an independent, impartial and confidential professional who provides assistance to a company;s stakeholders.
-may address minor problem in the workplace before the problem escalates or becomes systemic.

Question 12

how does education improve ethics of the work place?

Answer 12

education programs specific to an employees particular fields can increase job knowledge while reinforcing proper business behavior.

Question 13

should ethics training be a process focused mainly at beginning of employment?

Answer 13

it should begin with the employees orientation but also continue regularly through the employees career.

Question 14

what are two important areas of compliance insurance companies address during ethics training?

Answer 14

insider trading

privacy and confidentially requirements.

Question 15

what is insider trading?

Answer 15

is buying or selling a companies securities based upon side information, which is a company’s nonpublic, material information that employees and other individuals associated with the company and are restricted from disclosing to a third party or using of their individual benefit.

Question 16

what is material information?

Answer 16

company’s information that might influence the market price of a company’s securities.

Question 17

name 5 kinds of inside information, which is considered non-public information

Answer 17

1. financial performances
2. marketing strategies
3. ongoing civil/criminal lawsuits
4. arbitration results
5. product design assumptions.

Question 18

Name 3 examples of customer-related information that must be kept confidential

Answer 18

financial informtation (income, assets, debts, credit hx)
health information (medical records, px records)
personal information (driving hx, hobbies, lifestyle choices)

Question 19

Give examples of PIIs (personally identifiable information)

Answer 19

name
Social security number
address
telephone number
email address
mothers maiden name

Question 20

how do associations influence industry professionalism?

Answer 20

by promoting high standards of ethical conduct in their chosen fields.
- these associations give individuals with similar traits, an oppertunity to meet, exchange info, and increase their knowledge about developments in their professions.

Question 21

name some professional associations that are important to the life insurance industry

Answer 21

SOA (society of actuaries)
NAIFA
ALIC 
CLU
ChFC
LOMA

Question 22

what does a CSR do (customer service representative)

Answer 22

provides customers with information,

Question 23

On an organization level, define control function

Answer 23

its consists of all management acitvites directed toward ensuring that an organizations mission and strategic plans are accomplished effectively, efficiently and in accordance with good governance.
- provides accountability

Question 24

on an operational level, define control fuction

Answer 24

refers to all of management;s actions to enure that specific department objectives are being achieved.
-reduce process variation, detect fraud and contribute to the attainment of corporate objectives.

Question 25

Name 3 primary types of control mechanisms used by insurance companies.

Answer 25

steering control concurrent controls feedback controls. companies apply these controls at the division, department and individual levels

Question 26

# define steering control, also known as feedforward control. give 2 examples

Answer 26

describes how a company intends to implement a process. - seek to establish most efficient method for using company resources. - anticipate problems in advance. ie: procedures, a code of conduct

Question 27

define concurrent controls. when are they applied? give 4 examples

Answer 27

- are check build into and applied during a process and allows comapnies to detect problems during a process and to take immediate corrective action. - applied during the business process ie: - activity logs, - error logs - pop-up error messaged., -supervisory approval on claim checks exceeding a set amount. - real-time monitoring for customer calls - elapsed time clocks - supervisors approval signature on a purchase request

Question 28

define feedback controls.

Answer 28

-gather information about completed processes and evaluate that information to improve similar activities in the future. They are checks and corrections applied to a process at the end of the process cycle.

Question 29

Name 7 examples of feedback controls commonly used in insurance companies

Answer 29

- audits - account reconciliations - performance appraisals - customers satisfactions surveys - supervisory review of recorded customer calls - supervisory approvals of expense reports - budget analyses

Question 30

to successfully operate an insurance company, management must use all 3 control mechanism in a control cycle. define this

Answer 30

its an ongoing repetition of procedures for steering, monitoring, assessing, and improving business process.

Question 31

what are performance standards?

Answer 31

is a previously established level of performance aagasint which actual performances can be measured.

Question 32

performance standards are often expressed in terms of ... (3)

Answer 32

1. units 2. time 3. money

Question 33

performance standards can be internal or external. Define each

Answer 33

internal- are based on a compnay's own planned or hx performances. external- are based on information obtained outside the company (think industry wide averages_

Question 34

what is benchmarking?

Answer 34

a process by which an insurer compared its own performances, products, or services with those of other organizations that are recongnized as the best in a particular caterory.

Question 35

when would an insurer use benchmarking?

Answer 35

for operational process that involve customers, such a NB processing or customer service.

Question 36

Name (only) the 3 control tools used throughout an insurance company to measure preformance

Answer 36

1. budget 2. audits 3. exception reports

Question 37

what is a budget?

Answer 37

a financial plan of action, expressed in monetary terms, that covers a specific period. - they contain performance standards: estimated that reflect managements expectations of future preformances.

Question 38

what does a budgeting process enable for a company?

Answer 38

- to monitor and evaluate ongoing operations - allocate scarece resources efficiently - control and reduce expenses - communicate information throughout the company - motivate employees

Question 39

what is the term given for the difference between an actual result and the expected result

Answer 39

variance

Question 40

What is an audit?

Answer 40

a systemic examination and evaluation of a company's records, procedures and controls.

Question 41

define exception report

Answer 41

its a report that is generated automatically when results deviate form an establish performance standard. -can be a concurrent and feedback control.