CIC - INSURANCE COMPANY OPERATIONS ACTUAL FINAL EXAM QUESTIONS WITH CORRECT AND UPDATED ANSWERS

CIC - INSURANCE COMPANY OPERATIONS ACTUAL FINAL EXAM QUESTIONS WITH CORRECT AND UPDATED ANSWERS Three types of Insurance Company and Management Stuctures - CORRECT ANSWER-1. Stock Insurance Company 2. Mutual Insurance Company 3. Reciprocal Stock Insurance Company - CORRECT ANSWER-an incorporated insurance company owned by STOCKHOLDERS the stockholders elect the corporation's board of directors stockholders may or may not be policy holders What is the objective of a Stock Insurance Company? - CORRECT ANSWER-To make a profit for its stockholders Profits may be shared by forms of stock dividends or increase in stock value Characteristics of a Stock Insurance Company - CORRECT ANSWER-1. Capitalization 2. Reach is greater with regard to brand 3. Primary responsibility is to stockholders not policy holders 4. Pressure on top line growth at the expense of profit Mutual Insurance Company - CORRECT ANSWER-incorporated insurance company OWNED by its POLICYHOLDERS Board of Directors is voted on by the policy holders What is the objective of a Mutual Insurance Company? - CORRECT ANSWER-to provide insurance at or near the actual cost of doing business if there is money left over in the form of profits it may be returned to policy holders as a dividend or used to reduce future premiums Characteristics of a Mutual Insurance Company - CORRECT ANSWER-1. No Stockholders 2. Stable 3. Longevity in the market 4. Less pressure on the day-to-day results Reciprocal - CORRECT ANSWER-is a group of individuals or organizations called subscribers who join together into an association for the purpose of insuring one another What is the objective of a Reciprocal? - CORRECT ANSWER-Subscribers insure one another in an insurance application of "one for all, and all for one" Characteristics of a Reciprocal - CORRECT ANSWER-1. Insureds are also the insurers 2. Specific to a niche or a single line of business 3. Less profit less pressure 4. May be more difficult to raise capital Purpose of Establishing the Board of Directors - CORRECT ANSWER-to make certain the investors and/or owners interests are protected What are the three Primary Obligations of Board Members? - CORRECT ANSWER-1. Duty of Care - being prudent and using due diligence (focusing on the facts) 2. Duty of Loyalty - keeping the interests of the company ahead of one's own interest 3. Duty of Obedience - Following by laws, state purpose of company, laws (may include disclosure of conflict of interest, as required) Company Culture - CORRECT ANSWER-is the distinctive ethos of the organization - its the companies "personality" Values Statement - CORRECT ANSWER-Commonly held values that define the company's culture and beliefs Mission Statement - CORRECT ANSWER-Short statment of the company's core and overall goal - why does the company do what it does The mission statement does: - CORRECT ANSWER-1. Identifies the goal of its operations 2. Communicates purpose and direction to employees, customers, etc. Two types of Company Culture - CORRECT ANSWER-1. Active Approach - leadership makes it happen - intentional actions, clearly defined values 2. Passive Approach - happens overtime by employees observing behavior and values, based on the behavior of management which doesn't always reflect written values Types of Human Resources Considerations - CORRECT ANSWER-1. Insurance Company Employees 2. Vendors or Third-Party Agreements 3. Blend of Emloypees and Third-Party Agreements Insurance Company Employees - CORRECT ANSWER-- Offers the greatest degree of control with employee status -Highest fixed cost for salaries and benefits They key consideration for human resources is - CORRECT ANSWER-the trade off of the degree of control VS costs to hire talented employees Vendors or Third-Party Agreements - CORRECT ANSWER--Functions Performed -Economically, the most efficient way when starting an insurance company or adding lines of business -Difficult to control the operating philosophy if the insurance company is only one of the several insurance companies being served Blend of Employees and Third-Party Agreements - CORRECT ANSWER-- Can create greater flexibility in utilizing existing insurance company expertise and "hiring" where lacking skills -If multiple third-party agreements are used, the task of managing their activities become more complex -Some of the duties normally performed by employees may be performed by a MGA Effective communication is a dialogue - CORRECT ANSWER-not a monologue Internal Communication is - CORRECT ANSWER-communication among members of the same organization External Communication - CORRECT ANSWER-communication between the organization and other organizations or individuals Internal communication - CORRECT ANSWER-- strategic mgmt of information flows to ensure the optimal level of engagement by all employees -Communications from mgmt to employees, employees to mgmt, and employees to employees are harnessed as a means of delivering messages, listening to concerns and motivating employees -it reinforces the company's mission, vision, values, and culture among employees