INSR 310 FINAL EXAM ACTUAL QUESTIONS AND
SOLUTIONS GRADED A+
✔✔identification - ✔✔- values/combinations exposed "MPL"
- potential perils AND hazards
- full financial consequences
- coordinate with goals/ objectives
✔✔evaluate alternatives - ✔✔- avoid?
- loss financing; retention? transfer?
-loss control; frequency and severity dimensions; cost effectiveness / efficiency
✔✔select alternatives - ✔✔-budgetary/ resource constraints
- rational/ impartial
✔✔implement/ administer - ✔✔- managerial commitment
- organizational culture
- benchmarking/ measurement
✔✔monitor/ feedback - ✔✔- it's an information game
- dynamic process!!
✔✔the retention decision - ✔✔retain ONLY when it is more cost effective than transfer
OR if transfer is not available
✔✔key elements for effective "self insurance" (retention) - ✔✔- sufficient number of
exposures
- capable admin./ planning/ staffing; premiums and claims
- firm management MUST be willing/ able to pay claims/ losses
✔✔advantages of "professional" INSCOs to businesses - ✔✔- tax deductibility of
premiums paid
- prior organizational expertise
- disinterested "third party" administration
- transfer of risk = less risk to firm
✔✔the insurance purchase decision - ✔✔- select: agent/ broker
- select: insurance compnay
- select: appropriate policy/ policies that meet your needs
- select: appropriate policy options/ features
✔✔rating organizations - ✔✔- AM Best
-S&P
- Moody's
-D&B
, ✔✔captive - ✔✔wholly-owned insurance subsidiary of a non insurance parent company
✔✔risk retention group (RRG) - ✔✔- owner controlled INSCO authorize under the
Federal Liability Risk Retention Act (1986) allowing group members engaged in similar/
related business activities to write liability insurance for any/ all portion of a member's
exposures
✔✔the insurance industry common classifications: - ✔✔- life/ health vs. property/ liability
- personal vs. comercial lines
- private vs. public insurers
- voluntary vs. involuntary
- "admitted" markets vs. "excess/ surpluss" lines
✔✔types of private INSCOs - ✔✔- stock companies
- mutuals
- reciprocals
- Lloyd's Associations
✔✔stock companies - ✔✔owned by stockholders (who do NOT have to buy policies)
✔✔mutuals - ✔✔owned by policy holders
✔✔types of mutuals - ✔✔- class mutual
- general writing mutual
- fraternal
✔✔types of Lloyd's associations - ✔✔- london (1688)
- american
✔✔major lines of business for Lloyd's assocations - ✔✔- marine risks
- reinsurance
- "excess/ surplus" lines
✔✔"guaranty" mechanism - ✔✔state controlled mechanism to protect policy holders in
major lines
✔✔property/ casualty industry - ✔✔most by 1960s
typical limits: $100,000
✔✔life/ health industry - ✔✔most during late 1980s
typical limits: $300,000 max subject to; $100,000 max life, $100,000 max health, and
$100,000 max annuity
SOLUTIONS GRADED A+
✔✔identification - ✔✔- values/combinations exposed "MPL"
- potential perils AND hazards
- full financial consequences
- coordinate with goals/ objectives
✔✔evaluate alternatives - ✔✔- avoid?
- loss financing; retention? transfer?
-loss control; frequency and severity dimensions; cost effectiveness / efficiency
✔✔select alternatives - ✔✔-budgetary/ resource constraints
- rational/ impartial
✔✔implement/ administer - ✔✔- managerial commitment
- organizational culture
- benchmarking/ measurement
✔✔monitor/ feedback - ✔✔- it's an information game
- dynamic process!!
✔✔the retention decision - ✔✔retain ONLY when it is more cost effective than transfer
OR if transfer is not available
✔✔key elements for effective "self insurance" (retention) - ✔✔- sufficient number of
exposures
- capable admin./ planning/ staffing; premiums and claims
- firm management MUST be willing/ able to pay claims/ losses
✔✔advantages of "professional" INSCOs to businesses - ✔✔- tax deductibility of
premiums paid
- prior organizational expertise
- disinterested "third party" administration
- transfer of risk = less risk to firm
✔✔the insurance purchase decision - ✔✔- select: agent/ broker
- select: insurance compnay
- select: appropriate policy/ policies that meet your needs
- select: appropriate policy options/ features
✔✔rating organizations - ✔✔- AM Best
-S&P
- Moody's
-D&B
, ✔✔captive - ✔✔wholly-owned insurance subsidiary of a non insurance parent company
✔✔risk retention group (RRG) - ✔✔- owner controlled INSCO authorize under the
Federal Liability Risk Retention Act (1986) allowing group members engaged in similar/
related business activities to write liability insurance for any/ all portion of a member's
exposures
✔✔the insurance industry common classifications: - ✔✔- life/ health vs. property/ liability
- personal vs. comercial lines
- private vs. public insurers
- voluntary vs. involuntary
- "admitted" markets vs. "excess/ surpluss" lines
✔✔types of private INSCOs - ✔✔- stock companies
- mutuals
- reciprocals
- Lloyd's Associations
✔✔stock companies - ✔✔owned by stockholders (who do NOT have to buy policies)
✔✔mutuals - ✔✔owned by policy holders
✔✔types of mutuals - ✔✔- class mutual
- general writing mutual
- fraternal
✔✔types of Lloyd's associations - ✔✔- london (1688)
- american
✔✔major lines of business for Lloyd's assocations - ✔✔- marine risks
- reinsurance
- "excess/ surplus" lines
✔✔"guaranty" mechanism - ✔✔state controlled mechanism to protect policy holders in
major lines
✔✔property/ casualty industry - ✔✔most by 1960s
typical limits: $100,000
✔✔life/ health industry - ✔✔most during late 1980s
typical limits: $300,000 max subject to; $100,000 max life, $100,000 max health, and
$100,000 max annuity
