CAIB 4 Chapter 1
Identify any five activities, in addition to planning, that the professional insurance brokerage will need to capitalize on in order to take advantages of these opportunities. correct answers1. Be innovative
2. Be price competitive
3. Attract and reward ideal employees
4. Market products to appropriate segments
5. Focus on profitability
The key to success and profitability for any insurance brokerage is planning. The best plans involve a combination of top-down and bottom-up approaches. Briefly explain the top-down approach. correct answersManagement decides on the mission, strategies, and objectives for the brokerage and instructs the individual business units to achieve the established objectives
Identify an advantage of the top-down approach. correct answersManagement feels firmly in control and in charge of the decision-making.
Identify a disadvantage of the top-down approach. correct answersThe lack of buy-in by employees, who
had no part in developing the plan. It is "managements" plan, not theirs.
Briefly explain the bottom-up approach. correct answersThe management still provides the mission and broad strategies, but leaves the development of objectives, goals and activities to the individual business
units.
Identify an advantage of the bottom-up approach. correct answersThe employees will have fully bought-
in to "their" plan.
Identify a disadvantage of the bottom-up approach. correct answersManagement may feel that they lack
control, that the planning process is out of their hands and that the employees may not be accepting of changes made by management if the plan is not what management expected. Briefly explain why a combination of both approaches is the best approach. correct answersThe combination of both approaches, with open communication throughout the process, is the key to effective and successful planning. The plan should be developed as a joint effort with both management and the business units participating, with ample dialogue between them at all stages of the planning process.
Identify the four characteristics of any plan to ensure it is understood and accepted by all concerned. correct answers1. Simplicity
2. Practicality
3. Severability
4. Flexibility
Explain what is meant by the simplicity of a plan. correct answersThe plan must be kept simple and the outcome should be capable of being communicated in a simple way. It should also be capable of being implemented by employees without extensive training while they continue to do their day-to-day responsibilities.
Explain what is meant by the practicality of a plan. correct answersA plan must be realistic in order for it to work. Even a well constructed plan will be doomed to failure if it is impossible to implement.
Explain what is meant by the severability of a plan. correct answersThe finished plan is the collection of its parts. These parts must be separate and identifiable so that each business unit can see how they apply to their specific area of responsibility to enable them to create goals and activities to help achieve the plan.
Explain what is meant by the flexibility of a plan. correct answersA good plan must allow for modification, as it is not realistic to assume that the environment in which the brokerage competes will not change. changing business conditions, loss of key employees, or change to insurance regulations can affect implementation. Planners should provide flexibility so that mid-plan corrections can be made.
Strategic plans applying to the brokerage as a whole and extend to a period of 3 to 5 years. Identifying the purpose of the strategic plan. correct answers• Consider alternative courses of action in response to changing environmental conditions
• Assess the future impact of the current decision and actions
• Provide a structure for dealing with business risk and uncertainty
Identify any five activities, in addition to planning, that the professional insurance brokerage will need to capitalize on in order to take advantages of these opportunities. correct answers1. Be innovative
2. Be price competitive
3. Attract and reward ideal employees
4. Market products to appropriate segments
5. Focus on profitability
The key to success and profitability for any insurance brokerage is planning. The best plans involve a combination of top-down and bottom-up approaches. Briefly explain the top-down approach. correct answersManagement decides on the mission, strategies, and objectives for the brokerage and instructs the individual business units to achieve the established objectives
Identify an advantage of the top-down approach. correct answersManagement feels firmly in control and in charge of the decision-making.
Identify a disadvantage of the top-down approach. correct answersThe lack of buy-in by employees, who
had no part in developing the plan. It is "managements" plan, not theirs.
Briefly explain the bottom-up approach. correct answersThe management still provides the mission and broad strategies, but leaves the development of objectives, goals and activities to the individual business
units.
Identify an advantage of the bottom-up approach. correct answersThe employees will have fully bought-
in to "their" plan.
Identify a disadvantage of the bottom-up approach. correct answersManagement may feel that they lack
control, that the planning process is out of their hands and that the employees may not be accepting of changes made by management if the plan is not what management expected. Briefly explain why a combination of both approaches is the best approach. correct answersThe combination of both approaches, with open communication throughout the process, is the key to effective and successful planning. The plan should be developed as a joint effort with both management and the business units participating, with ample dialogue between them at all stages of the planning process.
Identify the four characteristics of any plan to ensure it is understood and accepted by all concerned. correct answers1. Simplicity
2. Practicality
3. Severability
4. Flexibility
Explain what is meant by the simplicity of a plan. correct answersThe plan must be kept simple and the outcome should be capable of being communicated in a simple way. It should also be capable of being implemented by employees without extensive training while they continue to do their day-to-day responsibilities.
Explain what is meant by the practicality of a plan. correct answersA plan must be realistic in order for it to work. Even a well constructed plan will be doomed to failure if it is impossible to implement.
Explain what is meant by the severability of a plan. correct answersThe finished plan is the collection of its parts. These parts must be separate and identifiable so that each business unit can see how they apply to their specific area of responsibility to enable them to create goals and activities to help achieve the plan.
Explain what is meant by the flexibility of a plan. correct answersA good plan must allow for modification, as it is not realistic to assume that the environment in which the brokerage competes will not change. changing business conditions, loss of key employees, or change to insurance regulations can affect implementation. Planners should provide flexibility so that mid-plan corrections can be made.
Strategic plans applying to the brokerage as a whole and extend to a period of 3 to 5 years. Identifying the purpose of the strategic plan. correct answers• Consider alternative courses of action in response to changing environmental conditions
• Assess the future impact of the current decision and actions
• Provide a structure for dealing with business risk and uncertainty
